QuickLinks -- Click here to rapidly navigate through this document

Exhibit 10.1

REAL ESTATE PURCHASE AND SALE AGREEMENT

by and between

Pope Resources

and

HCV Pacific Partners LLC

(Port Ludlow and Peacock Hill)

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

TABLE OF CONTENTS

 
   
  Page

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

ARTICLE I. PROPERTY
 
1  
1.1
 
Land and Improvements
 
1   1.2   Appurtenances   2   1.3   Tenant Leases   2   1.4   Equipment and
Inventory   2   1.5   Contracts   2   1.6   Intellectual Property Rights   3  
1.7   DNR Lease   3   1.8   Additional Defined Terms   3
ARTICLE II. PURCHASE PRICE
 
3  
2.1
 
Purchase Price
 
3   2.2   Adjustments to Purchase Price   3   2.3   Escrow Officer   3   2.4  
Earnest Money   3
ARTICLE III. CONDITION AND CONVEYANCE OF TITLE
 
4  
3.1
 
Preliminary Commitment
 
4   3.2   Survey   5   3.3   Permitted Exceptions   5   3.4   Title Policy   5  
3.5   Conveyance of Real Property   5   3.6   Assignment of DNR Lease   5   3.7
  Assignment of Tenant Leases   5   3.8   Assignment of Contracts   5   3.9  
Bill of Sale   5   3.10   Assignment of Intellectual Property   6
ARTICLE IV. INSPECTION OF DOCUMENTS AND REAL PROPERTY
 
6  
4.1
 
Inspection Period
 
6   4.2   Seller's Documents   6   4.3   Inspection of Real Property   7   4.4  
Approval of Property Condition   8   4.5   Certification   8
ARTICLE V. CONDITIONS PRECEDENT TO CLOSING
 
9  
5.1
 
Performance by Seller
 
9   5.2   Approval of Property Condition   9   5.3   Title Policy   9   5.4  
Representations and Warranties True   9   5.5   No Damage or Destruction   9  
5.6   Tenant Estoppels   9   5.7   OWSI Stock Purchase Closing   9   5.8   Heron
Beach Inn   9   5.9   Consents and Notices   9   5.10   Liquor License   10

i

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

  5.11   Payment Certification   10   5.12   Performance by Buyer   10   5.13  
Representations and Warranties True   10   5.14   OWSI Stock Purchase Closing  
10   5.15   Consents and Notices   10   5.16   Board Approval   10
ARTICLE VI. OPERATIONS PENDING CLOSING
 
11  
6.1
 
Operations Pending Closing
 
11   6.2   Conditions of Title to Real Property   11   6.3   Special Conditions
Applicable to Heron Beach Inn, Marina and Golf Course   11   6.4   Updating of
Schedules   11   6.5   Liquor Licenses   11
ARTICLE VII. CLOSING AND ESCROW
 
12  
7.1
 
Closing
 
12   7.2   Seller's Deliveries   12   7.3   Buyer's Deliveries   12   7.4  
Title Policy; Other Instruments   13   7.5   Prorations.   13   7.6   Closing
Costs and Expenses   14   7.7   Closing Statements   15   7.8   Delivery Outside
of Escrow   15   7.9   Guest Property   15
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES
 
15  
8.1
 
Seller's Representations
 
15   8.2   Buyer's Representations   21
ARTICLE IX. EMPLOYEES
 
21
ARTICLE X. CASUALTY AND CONDEMNATION
 
22
ARTICLE XI. DISCLOSURE, INDEMNITY, AND RELEASE RELATING TO CONDITION OF PROPERTY
 
22  
11.1
 
Disclosures
 
22   11.2   Seller's Indemnification Liabilities   23   11.3   Limitations on
Seller's Indemnification Liabilities   24   11.4   Buyer's Indemnification
Liabilities and Release   25   11.5   Survival   26
ARTICLE XII. POSSESSION
 
27
ARTICLE XIII. DOCUMENT RETENTION
 
27
ARTICLE XIV. OBLIGATIONS TO PORT LUDLOW COMMUNITY
 
27
ARTICLE XV. DEFAULT; REMEDIES
 
27  
15.1
 
Default by Buyer
 
27   15.2   Default by Seller   27   15.3   Attorneys' Fees   28

ii

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

ARTICLE XVI. MISCELLANEOUS
 
28  
16.1
 
Brokers and Finders
 
28   16.2   Notices   28   16.3   Amendment, Waiver   29   16.4   Survival   29
  16.5   Captions   30   16.6   Merger of Prior Agreements   30   16.7   No
Joint Venture   30   16.8   Governing Law; Time   30   16.9   Schedules   30  
16.10   Severability   30   16.11   Counterparts   30   16.12   Assignment   30
  16.13   Tax Deferred Exchange   30   16.14   Confidentiality   31   16.15  
Continuing Forest Land Obligations   31   16.16   Cooperation   31

iii

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

REAL ESTATE PURCHASE AND SALE AGREEMENT
(Pope Resources and HCV Pacific Partners LLC)
(Port Ludlow and Peacock Hill)

    THIS REAL ESTATE PURCHASE AND SALE AGREEMENT (this "Agreement") is made and
entered into as of January 12, 2001, by and between HCV PACIFIC PARTNERS LLC, a
California limited liability company (or its assigns as permitted herein)
("Buyer"), and Pope Resources, a Delaware limited partnership, its wholly owned
subsidiary Olympic Property Group LLC, a Washington limited liability company,
and its wholly owned subsidiaries Olympic Real Estate Development LLC, a
Washington limited liability company, Olympic Real Estate Management, Inc., a
Washington corporation, and Olympic Resorts LLC, a Washington limited liability
company (collectively, "Seller"). It is understood that Pope & Talbot, Inc. is
not a Seller under this Agreement nor an affiliate of Seller, and that any
reference in this Agreement to Seller's "affiliates" does not include Pope &
Talbot, Inc. or any other predecessor-in-title of any portion of the Property
(as defined below), other than a party named as Seller herein.

    Seller is the owner of certain real property (a) known herein as the MPR
Properties and located within the unincorporated master planned resort area
commonly known as Port Ludlow, Jefferson County, Washington, and (b) known
herein as the Peacock Hill Property and located within the City of Gig Harbor,
Pierce County, Washington. Buyer desires to purchase from Seller and Seller
desires to sell to Buyer such property and related assets on the terms and
conditions set forth below.

    In consideration of the mutual covenants and promises contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, Seller and Buyer agree as follows:

ARTICLE I.  PROPERTY

    Seller hereby agrees to sell, assign, and convey to Buyer, and Buyer hereby
agrees to purchase, assume, and acquire from Seller, the following property
subject to the terms and conditions set forth herein:

    1.1  Land and Improvements.  The following lots and parcels of real property
(the "Land"), together with the buildings, structures, fixtures, and
improvements owned by Seller and located thereon (the "Improvements"):

    1.1.1  The real property located within the unincorporated master planned
resort area commonly known as Port Ludlow, Jefferson County, Washington,
comprising the following properties (collectively, the "MPR Properties"):

    (a) MPR Operating Properties, defined as the aggregate of the following:

     (i) Heron Beach Inn as described on Schedule 1.1.1(a)(i);

    (ii) Marina as described on Schedule 1.1.1(a)(ii);

    (iii) Golf Course as described on Schedule 1.1.1(a)(iii);

    (iv) Village Center as described on Schedule 1.1.1(a)(iv);

    (v) RV Park as described on Schedule 1.1.1(a)(v);

    (vi) Harbormaster Restaurant as described on Schedule 1.1.1(a)(vi);

   (vii) Conference Center as described on Schedule 1.1.1(a)(vii);

   (viii) Miscellaneous MPR Operating Properties as described on
Schedule 1.1.1(a)(viii); and

    (ix) Sales Office as described on Schedule 1.1.1(a)(ix).

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

    (b) MPR Land Properties, defined as the aggregate of the following:

     (i) MPR Platted Lots as described on Schedule 1.1.1(b)(i);

    (ii) MPR Unplatted Parcels as described on Schedule 1.1.1(b)(ii); and

    (iii) MPR Outparcels as described on Schedule 1.1.1(b)(iii).

    Certain of the MPR Platted Lots are subject to presently existing executory
purchase and sale agreements and to potential new purchase and sale agreements
that may be entered into by Seller prior to Closing as provided in Section 6.2.
Schedule 1.1.1(b)(i) shall be revised if closing under any such agreement occurs
prior to the Closing Date under this Agreement.

    1.1.2  The real property located within the City of Gig Harbor, Pierce
County, Washington, legally described on Schedule 1.1.2 (the "Peacock Hill
Property").

    1.2  Appurtenances.  All rights, obligations, privileges, and easements
owned by Seller, including without limitation all minerals, oil, and gas on and
under the Land, all development rights, air rights, water rights, and all
easements, rights-of-way, permits, licenses, entitlements of any nature, plat,
and permit applications, all rights under any warranties or guaranties relating
to the Improvements, and other rights and obligations appurtenant to or used in
connection with the Land and Improvements subject to matters of record and
matters specifically excepted under this Agreement (the "Appurtenances"),
including without limitation those rights, obligations, privileges, and
easements described on Schedule 1.2.

    Seller shall also grant to Buyer at Closing, by an instrument in the form of
Schedule 7.2(h), non-exclusive easements over Seller's lands within one-half
(1/2) mile of the MPR Properties for water, electricity, sewer and other
utilities, for drilling and maintenance of wells and related pipelines, and for
trails (all of which easements shall be floating but shall be located and used
so as not to interfere unreasonably with use, occupancy or development of
Seller's lands); and by an instrument in the form of Schedule 7.2(i), the right
to continue (for a period of ten (10) years after the Closing Date, as defined
below) to dispose of sludge from the Olympic Water and Sewer, Inc., system on
Seller's lands in a location reasonably designated by Seller.

    1.3  Tenant Leases.  The interest of Seller as landlord under the leases
relating to the Marina, Village Center, RV Park, Harbormaster Restaurant, and
Conference Center, which are described on Schedule 1.3 (the "Tenant Leases"),
and the security deposits, if any, collected and held by Seller thereunder.

    1.4  Equipment and Inventory.  The equipment and inventory, including
without limitation cars, trucks, other motor vehicles, construction equipment
and small tools, office equipment, construction materials, spare parts and
materials, computer hardware and software, security systems, files, and records,
owned by Seller and located on and used in connection with the Land and
Improvements (the "Equipment and Inventory"), including without limitation the
equipment and inventory described on Schedule 1.4.

    1.5  Contracts.  The contractual obligations and rights of Seller that are
described in the development agreements, land use entitlement agreements,
management agreements, service contracts, supply contracts, vendor agreements,
equipment leases, maintenance agreements, executory purchase and sale agreements
for MPR Platted Lots, construction contracts, brokerage agreements, and other
agreements and contracts of record and as described on Schedule 1.5 (the
"Contracts"). Upon Buyer's satisfaction or written waiver of all of Buyer's
conditions precedent to Closing, Seller shall also terminate at Closing any
Contracts that Seller has the right to terminate without material penalty that
are specified by Buyer within ten (10) days prior to Closing (except that as to
any Contracts that can only be terminated with not more than thirty (30) days
prior written notice, Seller's obligation shall be to give notice of termination
at or before Closing).

2

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

    1.6  Intellectual Property Rights.  All copyrights, trademarks, trade names,
marketing materials, web sites (including rights to domain names), and other
intellectual property rights owned by Seller and relating exclusively to the
Property (the "Intellectual Property"), including without limitation those
rights described on Schedule 1.6.

    1.7  DNR Lease.  The interest of Seller under the aquatic lands lease
between the Washington State Department of Natural Resources ("DNR") as landlord
and Seller as tenant as described on Schedule 1.7 (the "DNR Lease").

    1.8  Additional Defined Terms.  The Land, Improvements, Appurtenances, the
Tenant Leases and DNR Lease are referred to collectively herein as the "Real
Property." The Equipment and Inventory, Contracts, and Intellectual Property are
referred to collectively herein as the "Personal Property." The Real Property
and Personal Property, comprising all of the items described in Sections 1.1
through 1.7 above, are herein collectively referred to as the "Property."

ARTICLE II.  PURCHASE PRICE

    2.1  Purchase Price.  The purchase price for the Property (the "Purchase
Price") shall be Twenty-three Million Five Hundred Thousand Dollars
(US$23,500,000.00) subject to adjustments as provided for under Section 2.2
below and subject to an allocation of a portion of the Purchase Price to the
stock of Olympic Water and Sewer, Inc. ("OWSI"), as agreed by Buyer and Seller
in an amendment to this Agreement and in the OWSI Stock Purchase Agreement (the
"OWSI Stock Purchase Agreement") presently being negotiated by Buyer and Seller.
The Purchase Price is allocated among the Real Property and between the Real
Property and Personal Property as set forth in Schedule 2.1. The Purchase Price
shall be paid by Buyer in immediately available United States funds pursuant to
Seller's instructions on the Closing Date.

    2.2  Adjustments to Purchase Price.  The Purchase Price has been determined
as of September 1, 2000. Therefore, the Purchase Price shall be adjusted on the
Closing Date for Seller's capital expenditures relating to the Property, closed
sales of MPR Platted Lots between September 1, 2000, and the Closing Date, and
Inventory increases and reductions between September 1, 2000, and the Closing
Date, in accordance with United States generally accepted accounting principles
and practices as in effect from time to time and applied consistently throughout
the periods involved. The sum of Eight Million Seven Hundred Twenty-four Dollars
(US$8,724,000.00) shall be the value allocated to Seller "s work in progress as
of September 1, 2000. Notwithstanding the foregoing, the Purchase Price shall
not be adjusted under this section by more than Three Hundred Thousand Dollars
(US$300,000.00) without the prior written consent of Buyer and Seller.

    2.3  Escrow Officer.  Transnation Title Insurance Company, Seattle
Washington ("Escrow Officer" in its capacity as escrow officer and "Title
Company" in its capacity as title insurer), has been designated as Escrow
Officer hereunder by mutual agreement of Seller and Buyer. Upon mutual execution
and delivery of this Agreement, Escrow Officer shall open a closing escrow in
accordance with the terms of this Agreement.

    2.4  Earnest Money.  Within one (1) business day following mutual execution
and delivery of this Agreement, Buyer shall deposit with Escrow Officer the sum
of One Hundred Thousand Dollars (US$100,000) in cash as the earnest money
deposit (such sum, together with interest earned thereon, the "Earnest Money").
In addition, within one (1) business day after the condition set forth in
Section 5.2 has been satisfied or waived and the condition of title and survey
matters (including Exceptions, as defined in Section 3.1) has been approved or
deemed approved by Buyer pursuant to Section 3.1 (whichever is later), Buyer
shall deposit with Escrow Officer the additional sum of Nine Hundred Thousand
Dollars ($900,000), which sum shall be deemed part of the Earnest Money. Upon
closing of this transaction, the Earnest Money shall be credited against the
Purchase Price. In the event this transaction fails to close as a result of
Seller's default, the failure of any condition precedent to

3

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

Buyer's obligations, or any reason other than Buyer's default, the Earnest Money
shall be returned to Buyer. In the event Buyer fails, without legal excuse, to
complete the purchase of the Property, the Earnest Money shall be forfeited by
Escrow Officer to Seller as the sole and exclusive remedy available to Seller
for such failure. Escrow Agent shall deposit the Earnest Money in an interest
bearing account at a financial institution designated by Seller, subject to
Buyer's approval, which shall not unreasonably be withheld.

ARTICLE III.  CONDITION AND CONVEYANCE OF TITLE

    3.1  Preliminary Commitment.  Within ten (10) days after mutual execution
and delivery of this Agreement, Seller shall provide Buyer with a preliminary
commitment to issue an ALTA Extended Owner's Policy of title insurance insuring
Buyer's interest in the Real Property (the "Preliminary Commitment"), together
with complete and legible copies of all exceptions and encumbrances noted
thereon. The Preliminary Commitment shall be issued by Transnation Title
Insurance Company or its local affiliates in Jefferson County, Washington, and
Pierce County, Washington ("Title Company"). The Preliminary Commitment may be
to issue an ALTA Standard Owner's Policy of title insurance as to those portions
of the Real Property for which Title Company will not issue an ALTA Extended
Owner's Policy for lack of an ALTA survey prior to Closing, subject to Buyer's
approval during the Title and Survey Review Period defined below. Buyer shall
have until expiration of the Inspection Period described in Section 4.1 or ten
(10) days after receipt of the ESM Survey described at Section 3.2, whichever is
later (the "Title and Survey Review Period"), to advise Seller in writing of any
encumbrances, restrictions, easements, or other matters shown in the Preliminary
Commitment or ESM Survey (collectively, "Exceptions") to which Buyer objects.
Except as otherwise provided below, all Exceptions to which Buyer does not
object in writing prior to expiration of the Title and Survey Review Period
shall be deemed accepted by Buyer, provided, however, that if Buyer does not
deliver any written notice to Seller regarding its objection to Exceptions prior
to expiration of the Title and Survey Review Period, then Buyer shall be deemed
to have and disapproved the condition of title to the Real Property, in which
event this Agreement shall terminate and the Earnest Money shall be returned to
Buyer. If Buyer does not receive complete and legible copies of all exceptions
and encumbrances noted in the Preliminary Commitment within ten (10) days after
mutual execution and delivery of this Agreement, then Seller shall cooperate
with Buyer and assist Buyer in obtaining such copies from the Title Company as
soon as possible.

    If Buyer timely objects to any Exceptions, then Seller shall advise Buyer in
writing within ten (10) days after receipt of Buyer's written objections:
(a) which Exceptions Seller will remove at Closing, (b) which Exceptions the
Title Company has agreed to remove from the title policy to be issued at
Closing, and (c) which Exceptions will not be removed by Seller or Title
Company. If Seller does not otherwise give an adequate, complete, timely, and
written notice to Buyer regarding any Exception to which Seller has timely
objected, then Seller shall be deemed to have given notice Buyer that such
Exception will not be removed by Seller or Title Company prior to Closing.

    Within twenty (20) days after Seller's receipt of Buyer's written
objections, if Seller has not agreed to remove all Exceptions to which Buyer
objects, Buyer shall notify Seller in writing of Buyer's election to either:
(a) terminate this Agreement, in which event the Earnest Money shall be returned
to Buyer, or (b) waive its objections to the Exceptions that Seller will not
remove or cause Title Company to insure around, in which event such Exceptions
shall be deemed accepted by Buyer. If Buyer does not terminate this Agreement in
writing within the twenty (20) day period, then Buyer shall be deemed to have
waived its objections to the Exceptions that Seller will not remove or cause
Title Company to insure around.

    Notwithstanding the foregoing, Seller shall cause, at Seller's sole expense,
all mortgages, deeds of trust, and other monetary liens except non-delinquent
assessment liens (e.g., liens for local improvement district assessments),
including liens for delinquent taxes, mechanics, materialman's or

4

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

service provider liens, and judgment liens, to be fully satisfied, released, and
discharged of record on or prior to the Closing Date without necessity of
Buyer's objection. All such mortgages, deeds of trust and other monetary liens
shall automatically be deemed unacceptable to Buyer (without any need for Buyer
to object to them expressly) and shall be removed by Seller as provided above.

    3.2  Survey.  Within five (5) days after mutual execution and delivery of
this Agreement, Seller shall engage ESM Consulting Engineers, L.L.C. ("ESM"), to
prepare a survey of portions of the Land by letter proposal dated January      ,
2001 (the "ESM Survey"). The parties shall cooperate to cause the ESM Survey to
be completed and delivered to Buyer as soon as practicable, and acknowledge that
they desire to have the completed ESM Survey delivered no later than March 7,
2001, if feasible. The parties acknowledge that Seller is solely responsible for
the cost of the ESM Survey if this transaction fails to close but that if this
transaction does close, then at Closing Buyer shall pay all ESM Survey costs.

    3.3  Permitted Exceptions.  The term "Permitted Exceptions" means: (a) the
Exceptions accepted or deemed accepted by Buyer as provided above; (b) the lien
of non-delinquent real estate taxes for the current calendar year, subject to
pro-ration as provided herein; (c) the Tenant Leases; (d) non-delinquent
assessment liens, subject to pro-ration as provided herein; and (e) matters that
would be disclosed by an accurate ALTA survey of the Real Property.

    3.4  Title Policy.  At Closing, Seller shall cause Title Company to deliver
to Buyer an ALTA Extended Owner's Policy of title insurance (or, at Buyer's
option, a binder therefor) issued by Title Company in the amount of the Purchase
Price, dated the Closing Date, insuring Buyer's title subject to no exceptions
other than the general exceptions and the Permitted Exceptions (the "Title
Policy"). The Title Policy may be for an ALTA Standard Owner's Policy of title
insurance as to those portions of the Real Property for which Title Company will
not issue an ALTA Extended Owner's Policy for lack of an ALTA survey prior to
Closing, subject to Buyer's approval during the Title and Survey Review Period.
The Title Policy shall be consistent with the Preliminary Commitment and
otherwise in form and substance reasonably satisfactory to Buyer and shall
contain such coverages and endorsements issued by Title Company as Buyer may
specify, provided that Buyer shall pay the cost of all endorsements.

    3.5  Conveyance of Real Property.  At Closing, Seller shall convey to Buyer
fee simple title to the Real Property by execution and delivery of statutory
warranty deeds in the form of Schedule 3.4(a) hereto as to the MPR Property (the
"MPR Deed") and in the form of Schedule 3.4(b) hereto as to the Peacock Hill
Property (the "Peacock Hill Deed"), subject only to the Permitted Exceptions.
Seller shall also execute and deliver at Closing instruments granting the
additional easement and rights described in the last sentence of Section 1.2
above in the forms of Schedules 7.2(h) and 7.2(i).

    3.6  Assignment of DNR Lease.  At Closing, subject to the prior written
approval of the DNR, Seller shall assign to Buyer the interest of Seller in and
to the DNR Lease by execution and delivery of an Assignment and Assumption of
DNR Lease in the form of Schedule 3.5 hereto (the "Assignment of DNR Lease").

    3.7  Assignment of Tenant Leases.  At Closing, Seller shall assign to Buyer
the interest of Seller in and to the Tenant Leases by execution and delivery of
an Assignment and Assumption of Leases in the form of Schedule 3.6 hereto (the
"Assignment of Tenant Leases").

    3.8  Assignment of Contracts.  At Closing, Seller shall assign to Buyer the
interest of Seller in and to the Contracts that Buyer has elected not to cancel
and terminate prior to Closing in accordance with Section 1.5 by execution and
delivery of an Assignment and Assumption of Contracts in the form of
Schedule 3.7 hereto (the "Assignment of Contracts").

    3.9  Bill of Sale.  At Closing, Seller shall convey to Buyer the interest of
Seller in and to the Equipment and Inventory by execution and delivery of a Bill
of Sale in the form of Schedule 3.8 hereto (the "Bill of Sale").

5

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

    3.10  Assignment of Intellectual Property.  At Closing, Seller shall convey
to Buyer the interest of Seller in and to the Intellectual Property by execution
and delivery of an Assignment of Intellectual Property in the form of
Schedule 3.9 hereto (the "Assignment of Intellectual Property").

ARTICLE IV.  INSPECTION OF DOCUMENTS AND REAL PROPERTY

    4.1  Inspection Period.  The period beginning on the day this Agreement has
been executed and delivered by all parties and ending on January 31, 2001, shall
be the "Inspection Period." The Inspection Period shall be extended one (1) day
for each day after January 21, 2001, that all schedules hereto are not approved
by the parties in the amendment to this Agreement described at Section 16.9,
provided, however, that if all schedules hereto are not approved by the parties
in an amendment to this Agreement mutually executed and delivered on or before
February 9, 2001, then this Agreement shall terminate, the Earnest Money shall
be returned to Buyer, and the parties shall have no further obligations
hereunder except under those provisions intended to survive the termination of
this Agreement..

    4.2  Seller's Documents.  During the Inspection Period, Buyer and its agents
and consultants, subject to their strict compliance with the confidentiality
requirements of this Agreement, shall have the right to review and photocopy at
Buyer's expense all documents in the possession of Seller relating to the
Property ("Seller's Documents") except Seller's internal financial analysis and,
subject to the terms and conditions set forth below, (i) communications with
other prospective buyers of all or any portion of the Property, and
(ii) materials and communications relating to currently pending or threatened
litigation, as listed on Schedule 8.1.1(b), that are subject to attorney-client
privilege. The review and photocopying of Seller's Documents shall be conducted
at a location in Kitsap County, Washington, to be designated by Seller. "In the
possession of Seller" shall include documents relating to the Property in the
possession of Seller's consultants and prepared at Seller's expense, provided
that Buyer shall make arrangements with such consultants for the review and
photocopying of such documents at Buyer's expense (and provided further, that
Seller shall cooperate with Buyer's efforts to obtain access to all such
Seller's Documents in the possession of Seller's consultants). Except as
otherwise expressly provided herein, Seller makes no representations or
warranties, express or implied, as to the accuracy or completeness of Seller's
Documents except those prepared by Seller for Buyer (such as financial
information and also including, without limitation, all schedules and exhibits
attached to this Agreement). Seller expressly disclaims any and all liability
for representations or warranties, expressed or implied, contained in or for
omissions from Seller's Documents, except those prepared by Seller for Buyer and
except as otherwise expressly provided in this Agreement. Buyer agrees not to
distribute Seller's Documents to others (other than its consultants, affiliates,
investors, advisors and their respective employees) in whole or in part at any
time without the prior written consent of Seller, and to keep confidential all
information contained therein or made available in connection with any further
discussions relating to the Property. Seller's Documents are being delivered for
the limited purpose of assisting Buyer in deciding whether or not to proceed
with its purchase of the Property and upon the express understanding that they
will be used only for such purpose. Buyer agrees to make use of Seller's
Documents only for the purpose of evaluating the purchase of the Property and
agrees not to disclose to any person, except its consultants, affiliates,
investors, advisors and their respective employees who have a need to know, the
contents of Seller's Documents, that discussions are taking place, or that
information is being exchanged between parties. Upon the termination of this
Agreement, Buyer shall return its copies of Seller's Documents to Seller without
retaining any copies thereof. Buyer shall not distribute Seller's Documents to
more than ten (10) investors at a time and shall require all such investors to
keep confidential all information contained therein.

    The above notwithstanding, Buyer and its agents and consultants shall have
the right (i) to use all Seller's Documents in connection with its due diligence
review; (ii) to discuss the Property, and information contained in or learned
from the Seller's Documents, with governmental authorities in

6

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

connection with its due diligence review; (iii) to disclose information
contained in the Seller's Documents to the extent required by any law or
regulation or in connection with enforcement of this Agreement; and (iv) to keep
and retain all Seller's Documents and all records relating to the Property upon
Closing. Buyer shall have no confidentiality obligation after Closing.

    Seller also covenants and agrees that (1) no materials withheld from Seller
pursuant to clauses (i) or (ii) in the first sentence of this Section 4.2
contain or will contain any information about or allegation of (a) any material
defect concerning the Property (including its physical condition, value,
usefulness or development potential) not otherwise disclosed in the privilege
log prepared by Seller for Buyer regarding every item withheld pursuant to
clause (ii) in the first sentence of this Section 4.2 (the "Privilege Log"), a
schedule to this Agreement, or the environmental reports, assessments, and
studies described at Schedule 8.1.1(i), (b) any fact or circumstance which, if
true, would make any representation or warranty of Seller in this Agreement
materially inaccurate, or (c) a claim by any third party to have any right or
interest in or materially affecting any portion of the Property except as
disclosed in the Contracts, DNR Lease, Preliminary Commitment, Privilege Log,
Tenant Leases, or Schedule 8.1.1(b); and (2) Seller shall, within ten (10) days
after the date this Agreement is executed by all parties, deliver the Privilege
Log to Buyer.

    4.3  Inspection of Real Property.  During the Inspection Period, Buyer at
its sole expense may inspect the physical condition of the Real Property, verify
to its satisfaction the financial information provided to it and conduct any
environmental or other inspections as it deems appropriate; provided, however,
Buyer shall have the right to enter upon the Real Property only in accordance
with the following terms and conditions:

    (a) This Agreement has not been terminated;

    (b) Any entry upon the Real Property shall be only for the purpose of
inspections, studies, and surveys upon prior written notice to Seller; and

    (c) Buyer shall indemnify, defend and hold Seller harmless from any claims,
demands and causes of action for personal injury, property damage, mechanics
liens, violation of laws or breach of contract or lease that arise out of or are
related to Buyer's activities on the Real Property prior to Closing, including
without limitation Seller's costs, expenses and attorney's fees, except to the
extent such claims, demands or causes of action arise out of Seller's
negligence, misconduct, breach of lease or contract or violation of law. Without
expanding Buyer's obligations set forth above, it is understood that Buyer shall
not liable for or in connection with the discovery and reporting as required by
law of any hazardous or environmental condition on the Property. Notwithstanding
anything to the contrary herein, this indemnity shall survive termination of
this Agreement.

    (d) Buyer's entry shall be at reasonable times and in compliance with all
laws, leases, and other agreements of Seller, so as to minimize any disruption
of Seller's tenants and the operations of Seller, its affiliates and
subsidiaries. Buyer, its agents and consultants, to the extent reasonably
possible, will be sensitive to the impacts of their due diligence efforts on the
employees of Seller, will minimize their intrusions, and will not disclose the
purpose of their work to any person or entity without Seller's prior written
consent. Unless Seller has given its prior written consent, which shall not
unreasonably be withheld or delayed, (i) no improvements shall be constructed
upon the Real Property, no materials, vehicles or equipment shall be placed or
stored on the Real Property except for the purposes of testing, and no
construction activity shall be conducted upon the Real Property, and (ii) no
grading, filling, excavation, or other disturbance of the soils shall be
permitted. Buyer's activities shall not violate any law, regulation, ordinance
or permit.

    Buyer may communicate with and retain Seller's consultants regarding the
condition of the Real Property. All consultants retained by Buyer shall be
compensated solely by Buyer for their work. If this Agreement is terminated for
any reason prior to Closing, then Buyer shall provide to Seller and shall

7

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

cause its consultants to provide to Seller complete copies of any work product
Buyer and its consultants have produced on behalf of Buyer, provided that Seller
shall compensate Buyer and its consultants for their reproduction costs. Buyer
shall cause all of its consultants to keep the transaction described in this
Agreement completely confidential.

    4.4  Approval of Property Condition.  If Buyer is satisfied in its sole
discretion with the results of its inspection of Seller's Documents and the Real
Property, then at any time prior to expiration of the Inspection Period Buyer
shall give written notice to Seller of Buyer's approval of the condition of the
Property. If Buyer shall fail to give timely written notice to Seller of Buyer'
s approval of the condition of the Property, then Buyer shall be deemed to have
disapproved the condition of the Property, whereupon this Agreement shall
terminate, the Earnest Money shall be returned to Buyer, and the parties shall
have no further obligations hereunder except under those provisions intended to
survive the termination of this Agreement.

    4.5  Certification.  Within ten (10) days after the date this Agreement has
been executed by all parties, Seller shall certify and deliver to Buyer complete
copies of all Tenant Leases, Contracts, the DNR Lease, and all reports,
assessments, and studies listed on Schedule 8.1.1(i). With respect to any
materials previously delivered to Buyer, Seller's certification shall be
sufficient as to those materials if it identifies how and when such materials
were delivered and certifies that the copies so delivered were complete.

8

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

ARTICLE V.  CONDITIONS PRECEDENT TO CLOSING

    Buyer's obligations under this Agreement are expressly conditioned on, and
subject to satisfaction of, the following conditions precedent:

    5.1  Performance by Seller.  Seller shall have timely performed all material
obligations required by this Agreement to be performed by it.

    5.2  Approval of Property Condition.  Buyer shall have given written notice
to Seller prior to expiration of the Inspection Period that Buyer approves the
condition of the Property based on Seller' s inspection of Seller's Documents
and the Real Property. It is understood that Buyer may disapprove the Real
Property prior to expiration of the Inspection Period for any reason (and
thereby terminate this Agreement and receive back the Earnest Money) if it is
dissatisfied with any aspect of the Real Property, including (without
limitation) its condition, value or development potential.

    5.3  Title Policy.  Title Company shall be ready, willing and able to issue
the Title Policy.

    5.4  Representations and Warranties True.  The representations and
warranties of Seller contained herein shall be true and correct on and as of the
Closing Date in all material respects, and Seller shall so certify to Buyer in
an instrument reasonably specified by Buyer.

    5.5  No Damage or Destruction.  There shall be no material damage to or
destruction of any portion of the Property.

    5.6  Tenant Estoppels.  Seller shall have delivered to Buyer, not less than
five (5) days prior to expiration of the Inspection Period, from tenants under
the Tenant Leases comprising at least 80% of the rentable area of the Village
Center, a tenant estoppel letter in the form of Schedule 5.6-1 without any
material exception or claim thereon and dated not less than thirty (30) days
after the date this Agreement is executed and delivered by all parties. Seller
shall also have delivered, not less than five (5) days prior to expiration of
the Inspection Period, a certificate of Seller with respect to the Leases for
the Harbormaster Restaurant and the Conference Center containing substantially
the same information contained in Schedule 5.6-1 without any material exception
or claim thereon (except that Seller may describe such tenant's existing default
as alleged by Seller) and dated not less than thirty (30) days after the date
this Agreement is executed and delivered by all parties. Seller shall also have
used best efforts to obtain from the State of Washington an estoppel letter as
to the DNR Lease in the form of Schedule 5.6-2.

    5.7  OWSI Stock Purchase Closing.  Buyer as buyer and Olympic Property Group
LLC as seller shall have simultaneously closed that certain Stock Purchase
Agreement of even date herewith relating to the stock of Olympic Water and
Sewer, Inc., a Washington corporation.

    5.8  Heron Beach Inn.  Seller shall have terminated or made arrangements
satisfactory to Buyer for the termination of the management agreement relating
to the Heron Beach Inn.

    5.9  Consents and Notices.  Buyer and Seller shall have timely given all
notices required by all applicable laws, ordinances, regulations, and agreements
relating to the conveyance of the Property and other matters relating thereto
and shall have timely obtained all consents required by all applicable laws,
ordinances, regulations, and agreements relating to the same. Without limiting
the generality of the foregoing, the DNR shall have approved the transfer of the
DNR Lease without requiring any material and adverse change to the terms of such
lease and at a rental rate not exceeding the rate DNR currently alleges is
payable thereunder (which rate Seller is contesting). If such consent by the DNR
has not been obtained by the date scheduled for Closing, at Buyer's option the
Closing Date shall be extended for up to forty-five (45) days to allow the
parties to satisfy this condition (and the parties shall cooperate for such
purpose).

9

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

    5.10  Liquor License.  The Washington State Department of Licensing shall
have issued new temporary retail liquor licenses under applicable statutes
permitting the sale of liquor at the Heron Beach Inn, Port Ludlow Marina, and
Port Ludlow Golf Course after closing in the same manner and to the same extent
as presently allowed.

    5.11  Payment Certification.  Buyer shall have received from Seller a
written warranty and certification in the form of Schedule 5.11 that Seller has
paid all contractors, material providers and any other persons or parties
performing work or supplying construction materials for work on any part of the
Real Property for all work performed and materials supplied through the date of
Closing. Seller also agrees to indemnify, defend and hold harmless Buyer and the
Real Property from any claim or allegation which, if true, would make such
warranty and certification inaccurate (and including, without limitation, from
any mechanics lien or similar lien filed by any person or party).

    The conditions set forth in Sections 5.1 through 5.11 above are intended
solely for the benefit of Buyer. If any of the foregoing conditions is not
satisfied or waived by Buyer in writing as of the Closing Date, then Buyer shall
have the right at its sole election either to waive such condition and proceed
with Closing or, in the alternative, to terminate this Agreement, whereupon this
Agreement shall terminate, the Earnest Money shall be returned to Buyer, and the
parties shall have no further obligations hereunder except under those
provisions intended to survive the termination of this Agreement (provided, that
if any such condition is not satisfied due to Seller's default hereunder, then
Buyer shall have all remedies for such default provided under this Agreement or
under law).

    Seller's obligations under this Agreement are expressly conditioned on, and
subject to satisfaction of, the following conditions precedent:

    5.12  Performance by Buyer.  Buyer shall have timely performed all material
obligations required by this Agreement to be performed by it.

    5.13  Representations and Warranties True.  The representations and
warranties of Buyer contained herein shall be true and correct on and as of the
Closing Date in all material respects, and Buyer shall so certify to Seller in
an instrument reasonably specified by Buyer.

    5.14  OWSI Stock Purchase Closing.  Buyer as buyer and Olympic Property
Group LLC as seller shall have simultaneously closed the OWSI Stock Purchase
Agreement.

    5.15  Consents and Notices.  Buyer and Seller shall have timely given all
notices required by all applicable laws, ordinances, regulations, and agreements
relating to the conveyance of the Property and other matters relating thereto
and shall have timely obtained all consents required by all applicable laws,
ordinances, regulations, and agreements relating to the same. It is understood
that if the DNR has not consented to transfer of the DNR Lease by the date
scheduled for Closing, such date may be extended at Buyer's option in the manner
described in Section 5.9 above.

    5.16  Board Approval.  Within ten (10) calendar days after mutual execution
and delivery of this Agreement, the Board of Directors of Pope MGP, Inc., the
managing general partner of Pope Resources, shall have approved the execution
and delivery of this Agreement and the OWSI Stock Purchase Agreement and the
performance by Pope Resources of the transactions contemplated herein and
therein.

    The conditions set forth in Sections 5.12 through 5.16 above are intended
solely for the benefit of Seller. If any of the foregoing conditions are not
satisfied or waived by Seller in writing as of the Closing Date, Seller shall
have the right at its sole election either to waive the condition in question
and proceed with the sale or, in the alternative, to terminate this Agreement.
No such termination, however, shall be deemed a waiver of Seller's right to
retain the Earnest Money if Buyer is then in default under this Agreement.

10

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

ARTICLE VI.  OPERATIONS PENDING CLOSING

    6.1  Operations Pending Closing.  At all times prior to the Closing or the
sooner termination of this Agreement, Seller agrees: (a) to maintain, manage and
operate the Property in the ordinary course of business free from waste and
neglect, in accordance with applicable laws, regulations and permits, and
consistent with its past management practices; (b) to maintain the Property in
its current condition and state of repair (normal wear and tear and casualty
loss excepted); (c) to maintain its existing casualty and liability insurance on
the Property; (d) to perform all of its material obligations under the Tenant
Leases, DNR Lease, and the Contracts and not to amend, modify or terminate or
permit the termination of any of the Tenant Leases, DNR Lease, or the Contracts
without the prior written consent of Buyer, which shall not unreasonably be
withheld; (e) not to lease or rent any portion of the Property without the prior
written consent of Buyer, except for leases in the ordinary course of business
of the Marina and accommodations and rental agreements at the Golf Course, RV
Park, and Heron Beach Inn; and (f) not to make any capital improvements costing
in excess of Fifty Thousand Dollars (US$50,000.00) to all or any portion of the
Real Property (except MPR Platted Lots in the ordinary course of business)
without Buyer's prior written consent.

    6.2  Conditions of Title to Real Property.  Without Buyer's prior written
consent, at all times prior to the Closing or sooner termination of this
Agreement, Seller agrees with respect to the Real Property: (a) not to mortgage
the Property; (b) not to enter into any new agreements that would be binding on
Buyer after Closing without the prior written consent of Buyer except for leases
in the ordinary course of business of the Marina, future reservations in the
Golf Course, RV Park, and the Heron Beach Inn, construction agreements for homes
on the MPR Platted Lots in the ordinary course of business, Golf Course
membership agreements in the ordinary course of business, construction
agreements for capital improvements approved by Buyer, sales of MPR Platted Lots
as described at subsection (c) hereof; and (c) not to enter into any new
agreements to transfer all or any portion of the Property except for sales of
MPR Platted Lots for sale prices equal to or in excess of the minimum sale
prices set forth on Schedule 6.2, conveyances of open space tracts to homeowner
associations in the ordinary course of business.

    6.3  Special Conditions Applicable to Heron Beach Inn, Marina and Golf
Course.  Seller shall continue to operate the Golf Course and the Marina, and
shall use best efforts to cause the Heron Beach Inn to continue to be operated,
in accordance with existing practices, policies, and procedures and will not
conduct any transaction outside the ordinary course of business except with
Buyer's prior written consent. Among other things, Seller will cause Equipment
and Inventory to be maintained at normal and customary levels and repairs and
maintenance to be performed as reasonably required. As to the Heron Beach Inn,
Seller shall cause guest and room service levels and marketing efforts to be
maintained in accordance with existing practice and existing management
personnel to remain fully involved in the operation of the Heron Beach Inn until
the day of Closing. Seller shall use best efforts and due diligence to cause the
termination prior to Closing of the Hotel Management Agreement dated April 3,
1991, between Pope Resources and CRG Hospitality, Inc., as amended (the "CRG
Agreement").

    6.4  Updating of Schedules.  The schedules attached hereto may be revised
prior to Closing to reflect changes in the ordinary course of business or as
otherwise approved by Buyer. Seller shall also give Buyer prompt written notice
if Seller, after the date this Agreement is executed by Seller, discovers or
learns of any fact or occurrence that would make any of Seller's warranties and
representations materially inaccurate if such warranty or representation were
made on or after the date Seller discovered or learned of such fact or
occurrence.

    6.5  Liquor Licenses.  Seller will cooperate fully with Buyer in Buyer's
efforts to obtain from the Washington State Department of Licensing ("DOL") new
temporary retail liquor licenses under applicable statutes to permit the sale of
liquor at the Heron Beach Inn, Port Ludlow Marina, and Port

11

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

Ludlow Golf Course after closing in the same manner and to the same extent as
presently allowed. Buyer and Seller acknowledge that the DOL probably will not
issue non-temporary retail liquor licenses to Buyer until some time after
closing and that the issuance of such licenses will not be a condition precedent
to Buyer's obligation to close this transaction. Seller also will cooperate
fully with Buyer in Buyer's efforts to secure any non-temporary liquor licenses
desired by Buyer for the sale of liquor at the Heron Beach Inn, Port Ludlow
Marina, and Port Ludlow Golf Course after closing.

ARTICLE VII.  CLOSING AND ESCROW

    7.1  Closing.  The Closing hereunder (the "Closing" or the "Closing Date")
shall be held at the offices of the Title Company in Seattle, Washington,
forty-five (45) days following Buyer's approval of the condition of the Property
under Article IV.

    7.2  Seller's Deliveries.  On or prior to the Closing Date, Seller shall
deposit with Escrow Officer the following:

    (a) The duly executed and acknowledged (where applicable) MPR Deed, Peacock
Hill Deed, Assignment of DNR Lease, Assignment of Tenant Leases, Assignment of
Contracts, Bill of Sale, and Assignment of Intellectual Property;

    (b) The duly executed Washington State Real Estate Excise Tax Affidavits
relating to the MPR Deed and Peacock Hill Deed, consistent with the allocations
set forth on Schedule 2.1;

    (c) An affidavit duly executed by Seller in the form of Schedule 7.2(c)
hereto (the "FIRPTA Affidavit");

    (d) A duly executed management agreement to be negotiated in good faith
prior to Closing (the "Management Agreement"), under which Buyer will manage
certain post-closing obligations of Seller described therein and relating to the
Property in exchange for reasonable consideration to be described therein;

    (e) The Tenant Estoppel Letters;

    (f)  The Contracts, DNR Lease, and Tenant Leases;

    (g) A certificate executed by Seller stating that Seller's representations
and warranties in Article VIII are true and correct as of the Closing Date;

    (h) The duly executed Easements Over Adjoining Lands in the form of
Schedule 7.2(i);

    (i)  The duly executed Bio-solids Disposal Agreement in the form of
Schedule 7.2(i); and

    (j)  The duly executed Seller's Payment Certificate in the form of
Schedule 5.11.

    7.3  Buyer's Deliveries.  On or prior to the Closing Date, Buyer shall
deposit with Escrow Officer the following:

    (a) The Purchase Price;

    (b) The duly executed and acknowledged (where applicable) Assignment of DNR
Lease, Assignment of Tenant Leases, Assignment of Contracts, and Assignment of
Intellectual Property;

    (c) The duly executed Washington State Real Estate Excise Tax Affidavits
relating to the MPR Deed and Peacock Hill Deed, consistent with the allocations
set forth on Schedule 2.1;

    (d) The duly executed Management Agreement;

    (e) A certificate executed by Buyer stating that Buyer's representations and
warranties in Article VIII are true and correct as of the Closing Date; and

12

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

    (f)  The duly executed Bio-solids Disposal Agreement in the form of
Schedule 7.2(i).

    7.4  Title Policy; Other Instruments.  Seller shall cause Title Company to
issue the Title Policy to Buyer at Closing or as soon thereafter as practicable
(provided, however, that it shall be a condition to Buyer's obligation to close
that title Company shall be committed to issue the Title Policy effective on and
as of the Closing Date). Seller and Buyer shall each deposit such other
instruments as are reasonably required by Escrow Officer or otherwise required
to close the escrow and consummate the purchase of the Property in accordance
with the terms hereof.

    7.5  Prorations.  

    7.5.1  General.  Except as otherwise provided in Sections 7.5.2 and 7.5.3,
all revenues and all expenses of the Property, including but not limited to,
real property taxes, hotel occupancy taxes, assessments, rents under the Tenant
Leases, water, sewer and utility charges, amounts payable under the Contracts,
and other expenses normal to the operation and maintenance of the Property, but
excluding insurance premiums and payments pursuant to any of the Contracts that
Buyer has elected not to assume, shall be prorated as of 12:01a.m. on the
Closing Date (the "Cutoff Time"). Real Property tax prorations will be on the
basis of taxes paid or payable in the year of Closing. Prepaid rents, security
deposits, earnest money deposits, prepaid rentals or other deposits under any
Tenant Leases or by customers under the Contracts, including without limitation
gift certificates, prepaid fees and Member Book Balances for the Golf Course or
any other facilities comprising part of the Property, shall be credited to
Buyer. Prepaid rents and security deposits under the DNR Lease shall be credited
to Seller. Utility deposits or prepaid amounts under any of the Contracts
assigned to Buyer shall be credited to Seller. Any rents under Tenant Leases or
other receivables past due as of the Closing Date shall not be prorated at
Closing but upon receipt by Buyer shall be applied first to amounts due after
Closing and the balance, if any, remitted to Seller for amounts due prior to
Closing.

    7.5.2  Heron Beach Inn Adjustments and Prorations.  Except as otherwise
provided herein, adjustments and prorations for the Heron Beach Inn shall be
determined in accordance with the current edition of the Uniform Systems of
Accounts for Hotels, as published by the Hotel Association of New York City, and
shall all be prorated as of the Cutoff Time. The following matters and items
shall be prorated or credited as of the Cutoff Time. Net credits in favor of
Buyer shall be deducted from the balance of the Purchase Price at Closing, and
net credits in favor of Seller shall be paid in cash at Closing.

    (a)  Revenues and Expenses.  Except as otherwise provided in this section,
Seller shall be entitled to all revenue and shall be responsible for all
expenses for the period of time up to but not including the date of Closing, and
Buyer shall be entitled to all revenue and shall be responsible for all expenses
for the period of time from, after and including the date of Closing.

    (b)  Guest Ledger Receivables.  Guest Ledger Receivables shall mean all
amounts, including, without limitation, room charges and housekeeping costs,
accrued to the accounts of guests occupying rooms in Heron Beach Inn as of the
Cutoff Time. Seller shall receive a credit for all Guest Ledger Receivables for
all room nights up to but not including the room night during which the Cutoff
Time occurs, and Buyer shall be entitled to the amounts of Guest Ledger
Receivables for the room nights after the Cutoff time. Seller and Buyer shall
each receive a credit equal to one-half of the amount of Guest Ledger
Receivables for the full room night during which the Cutoff Time occurs. All
restaurant and bar facilities will be closed as of the Cutoff Time and Seller
shall receive the income from the same until the Cutoff time.

13

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

    (c)  Advance Bookings.  Buyer shall receive a credit for advance payments
and security deposits, if any, under advance room and event bookings to the
extent they relate to a period after the Cutoff Time.

    (d)  Petty Cash Funds and House Banks.  Buyer shall purchase all petty cash
funds and cash in house banks at 100% of face value at the Cutoff Time.

    (e)  Accounts Receivable.  Seller shall retain the receivables of the Heron
Beach Inn as of the Cutoff Time, other than Guest Ledger Receivables. Buyer
agrees that it will promptly remit to Seller any funds received by Buyer in
payment of such accounts receivable. With regard to any collection made from a
person or entity who has accounts receivable arising both prior and subsequent
to the Cutoff Time, such collection shall be applied first to current accounts
receivable, then to prior accounts receivable.

    (f)  Operating Supplies and Inventory.  Operating supplies and inventory for
the Heron Beach Inn are included in the Personal Property for the Heron Beach
Inn, and no proration or credits shall be made at Closing.

    (g)  Calculation of Heron Beach Inn Prorations.  Seller shall cause its
accounting staff to make such inventories, examinations, and audits of the Heron
Beach Inn, and of the books and records of the Heron Beach Inn, as they may deem
necessary to make the adjustments and prorations required under this section and
other provisions of this Agreement. Buyer or its designated representatives may
be present at such inventories, examinations and audits. Based upon such audits
and inventories, Seller will prepare and deliver to the parties no later than
two (2) days prior to Closing a closing statement containing Seller's best
estimate of the prorations and adjustments in this Agreement.

    7.5.3  Compensating Tax.  Seller has disclosed to Buyer that portions of the
Real Property are currently classified or designated as current use or forest
land for tax purposes under RCW Ch. 84.33 or RCW Ch. 84.34, which portions to
Seller's current actual knowledge are identified either in the Preliminary
Commitment or in Schedule 7.5.3 or both. Conversion of the Real Property to
another use will require the payment of compensating tax. At Closing, Buyer
either shall continue the current classification or designation or pay the
compensating tax, and in any event Buyer shall bear sole responsibility for, and
shall indemnify and hold Seller harmless against, all such compensating tax. The
provisions of this section shall survive Closing. In any suit, action, or appeal
therefrom to enforce this section, the prevailing party shall be entitled to its
costs incurred therein, including reasonable attorneys' fees and costs of
litigation.

    7.5.4  Golf Club Memberships.  All complimentary Golf Club memberships, or
special memberships based upon a promise of or right to a material discount of
annual fees or charges from standard rates in effect from time to time, shall be
terminated by Seller at or prior to Closing, except that Seller shall not be
required to terminate (and Buyer shall accept) the special memberships of George
Folquet, R.D. Bruce, and Joan Bruce as described in the recorded amended and
restated lifetime membership easement, whose rights Seller has no ability or
right to terminate.

    7.6  Closing Costs and Expenses.  Buyer and Seller shall each pay their own
attorneys fees and expenses and the following:

    (a) Seller shall pay:

     (i) The owner's standard coverage portion of the premium for the Title
Policy;

    (ii) All real estate excise or transfer taxes; and

    (iii) One-half (1/2) of the fees for the Escrow Officer.

14

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

    (b) Buyer shall pay:

     (i) One-half (1/2) of the fees for the Escrow Officer;

    (ii) All costs and expenses of Buyer's consultants and investigations during
the Inspection Period;

    (iii) The premium differential between owner's standard coverage and owner's
extended coverage for the Title Policy plus the cost of all endorsements
requested by Buyer;

    (iv) All survey costs;

    (v) All costs of recording the MPR Deed and Peacock Hill Deed; and

    (vi) Any sales or use tax relating to the conveyance of the Personal
Property.

    7.7  Closing Statements.  The prorations shall be made on the basis of a
written closing statement submitted by Escrow Officer to Buyer and Seller prior
to the Closing Date and approved by Buyer and Seller, which approval shall not
be unreasonably withheld. In the event any prorations or apportionments made
hereunder shall prove to be incorrect for any reason, then any party shall be
entitled to an adjustment to correct the same. Any item that cannot be prorated
because of the unavailability of information shall be tentatively prorated on
the basis of the best data then available and re-prorated between Buyer and
Seller when the information is available. Notwithstanding the foregoing, any
adjustments or re-prorations shall be made, if at all, within one hundred eighty
(180) days after the Closing Date.

    7.8  Delivery Outside of Escrow.  Seller shall deliver to Buyer at Closing
outside of the Closing escrow the originals of Seller's Documents (including but
not limited to the originals of the Tenant Leases, DNR Lease, and Contracts),
keys and/or codes to all doors and security equipment, copies of all books and
records of Seller used in the operation, maintenance, repair and protection of
the Property, and such other presently existing records and items as reasonably
requested by Buyer.

    7.9  Guest Property.  All baggage or other property of guests of the Heron
Beach Inn checked or left in the care of Seller shall be listed in an inventory
to be prepared in duplicate and signed by Seller and Buyer on the Closing date.
Buyer shall be responsible from and after the Closing date and will indemnify
and hold Seller harmless from and against all claims for all baggage and
property listed in such inventory. Seller shall indemnify and hold harmless
Buyer from and against claims for baggage and property not listed in such
inventory but shown to have been left in Seller's custody prior to the Closing
Date.

ARTICLE VIII.  REPRESENTATIONS AND WARRANTIES

    Seller and Buyer make the following representations and warranties:

    8.1  Seller's Representations.  Seller represents and warrants to Buyer as
of the Date of this Agreement:

    8.1.1  General Representations and Warranties Applicable to the Property.  

    (a)  Tenant Leases.  There are no leases, licenses, or other agreements
granting any person or party the right to use or occupy the Real Property or any
portion thereof except the Tenant Leases, matters set forth in the Title
Commitment, matters that would be disclosed by an accurate ALTA survey of the
Real Property, the use by guests, members, or patrons of the Heron Beach Inn and
the Golf Course in the ordinary course of business between the date hereof and
the Closing Date, and the Heron Beach Inn Reservations. The Tenant Leases have
not been modified, amended, or terminated except as identified on Schedule 1.3.
Schedule 1.3

15

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

sets forth all Tenant Leases and all security deposits and prepaid amounts due
or owing to any tenant thereunder. To Seller's current actual knowledge, neither
Seller nor any tenant is in default under or has asserted any uncured default
under the Tenant Leases and no event has occurred that with the giving of notice
or passage of time, or both, would constitute a default under any of the Tenant
Leases. Seller has completed all tenant build-out items or other improvements
required to be completed by Seller under the Tenant Leases. All brokerage
commissions with respect to the Tenant Leases and any renewals, extensions, or
expansions have been paid in full except with respect to those commission
agreements disclosed on Schedule 1.5.

    (b)  Litigation.  There is no claim, litigation, or proceeding pending
against Seller, or to Seller's current actual knowledge threatened against
Seller, which relate to the Property or the transactions contemplated by this
Agreement except as set forth on Schedule 8.1.1(b). Seller also covenants and
agrees to provide Buyer, within ten (10) days after the date this Agreement is
mutually executed and delivered, a list of all material claims and actions known
to Seller that were asserted or commenced against Seller relating to the
Property since January 1, 1990 (other than the matters listed on Schedules
8.1.1(b)), including all such matters that have been resolved, dismissed, or
settled. Such list shall include without limitation all arbitration and
litigation proceedings known to Seller and commenced since January 1, 1990
(other than the matters listed on Schedules 8.1.1(b)).

    (c)  Compliance.  To Seller's current actual knowledge and except as set
forth on Schedule 8.1.1(e), (i) all permits, licenses, and other governmental
authorizations and approvals required to construct the Improvements upon and to
own and operate the MPR Operating Properties have been obtained, are in full
force and effect, Seller is not in violation of any such permits, licenses, or
other governmental authorizations and approvals, and Seller has received no
notice of violation or claim of violation relating thereto; (ii) all
governmental authorizations and approvals (including subdivision maps) required
for the platting and subdivision of the MPR Platted Lots have been obtained, are
in full force and effect, Seller is not in violation of any such authorizations
and approvals, and Seller has received no notice of violation or claim of
violation relating thereto; and (iii) the Real Property and the use thereof
complies in all material respects with applicable laws and regulations and all
applicable agreements affecting the Real Property (including without limitation
laws and regulations relating to zoning, land use and subdivision of land), and
Seller has not received any notice alleging zoning non-compliance with respect
to the Real Property. To Seller's current actual knowledge and except as set
forth on Schedule 8.1.1(c), there are no unsatisfied requests or demands for
repairs, restorations, or improvements from any person, entity, or authority,
including but not limited to any tenant, insurance carrier, or governmental
authority with respect to the Real Property. All permits, licenses, governmental
authorizations and approvals relating to operation, development or subdivision
of the Real Property or operation of the other Property either run with title to
the Real Property or can be assigned to Buyer without the consent of any third
party, other than liquor licenses and any others specifically listed in
Schedule 8.1.1(c). Notwithstanding the foregoing, Seller makes no representation
or warranty regarding government authorizations and approvals relating to the
provision water and sewer utility services to those portions of the Real
Property to which water and sewer utility services are not currently provided.

    (d)  No Prior Options, Sales, or Assignments.  Seller has not granted any
options nor obligated itself in any manner whatsoever to sell the Property or
any portion thereof to any party other than Buyer except for sales of MPR
Platted Lots for sale prices equal to or in excess of the minimum sale prices
set forth on Schedule 6.2, conveyances of open space tracts to homeowner
associations in the ordinary course of business, and creation of covenants and

16

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

easements in connection with the subdivision and development of lands in the
ordinary course of business. Seller shall indemnify and defend Buyer and hold
Buyer harmless from and against any claim which, if true, would constitute a
breach of the warranty and representation set forth in the foregoing sentence.

    (e)  Condition of Property.  To Seller's current actual knowledge and except
as set forth on Schedule 8.1.1(e)-1, the Property is free from material defects
that would materially impair the use or value of the Property, ordinary wear and
tear excepted. As used within this section, "material defects" means a defect
resulting in a liability or loss to Buyer of more than One Hundred Thousand
Dollars (US$100,000.00) in each instance and One Million Dollars
(US$1,000,000.00) in the aggregate. The inclusion of a defect on
Schedule 8.1.1(e)-1 does not mean that the defect is material.

Schedule 8.1.1(e)-2 describes those improvements and repairs that Seller is
presently undertaking within the Property or had scheduled for completion in
calendar year 2000, and Seller covenants to complete such improvements and
repairs at its own expense prior to Closing; provided, that if the improvements
and repairs listed in Schedule 8.1.1(e)-2 are not completed by Closing, then at
Buyer's option Seller shall grant a reasonable credit to Buyer at Closing to
cover the cost of completing such improvements and repairs.

    (f)  Special Assessments.  Except as set forth on Schedule 8.1.1(f), Seller
has not been notified of any contemplated improvements to the area surrounding
the Real Property that would result in the assessment of a special improvement
or similar lien against the Real Property that is not shown in the Preliminary
Commitments.

    (g)  Existing Agreements.  There are no contracts, agreements, or
understandings (whether written or oral) relating to the Property that will be
binding on Buyer after Closing, except for the Permitted Exceptions, the
Appurtenances, the Tenant Leases, the DNR Lease, the Contracts, and other
matters disclosed in this Agreement. The Contracts have not been modified,
amended or terminated except as identified in Schedule 1.5 and, to Seller's
current actual knowledge, neither Seller nor any other party is in default under
any of the Contracts. All development agreements, land use entitlement
agreements, management agreements, service contracts, supply contracts, vendor
agreements, equipment leases, maintenance agreements, executory purchase and
sale agreements for MPR Platted Lots, construction contracts, brokerage
agreements, and other agreements and contracts (other than Tenant Leases and
Exceptions) applicable to or binding on the Property are listed on Schedule 1.5.
Except as described on Schedule 8.1.1(g), all Contracts and leases related to
the Real Property (except the DNR Lease) can be assigned to Buyer without the
consent of any third party.

    (h)  Taxes.  All business and occupation, sales, rooms, use, and other taxes
imposed with respect to the Property, or the operation thereof, that are due and
payable by Seller have been paid in full and Seller has not received any written
notice that any such tax is overdue, has not been paid, or is subject to audit.

17

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

    (i)  Environmental Compliance.  Seller has not caused or permitted the
Property since December 31, 1985, to be used to generate, manufacture, refine,
transport, treat, store, handle, dispose, transfer, produce, or process
Hazardous Substances except as set forth in the reports, assessments, and
studies described in Schedule 8.1.1(i) or as allowed by any applicable law,
ordinance, or regulation. To Seller's current actual knowledge, there are no
Hazardous Substances on the Property, except as set forth in the reports,
assessments, and studies described in Schedule 8.1.1(i), or as allowed by any
applicable law, ordinance, or regulation; all written reports, assessments, or
studies related to Hazardous Substances on, under, or around the Property
prepared by or for Seller are listed on Schedule 8.1.1(i); and there are no
buried tanks on or under the Property except as set forth in the reports,
assessments, and studies described in Schedule 8.1.1(i) or as otherwise
disclosed to Buyer in writing during the Inspection Period. To Seller's current
actual knowledge, except as specifically disclosed in the reports, assessments
and studies described in Schedule 8.1.1(i), no Hazardous Substances have been
used, generated, manufactured, refined, transported, treated, stored, handled,
disposed of, transferred, produced, or processed on or about the Real Property,
except in compliance with all applicable laws, ordinances, regulations and
permits and in a manner that has not and will not require clean-up or
remediation under any applicable law, ordinance, regulation or permit. For the
purposes hereof, "Hazardous Substances" shall mean asbestos, petroleum and
petroleum derivatives and products, and any substance, chemical, waste, or other
material that is listed, defined, or otherwise identified as "hazardous" or
"toxic" under any federal, state, or local ordinance or law or any
administrative agency rule or determination applicable to the Property. Buyer
acknowledges that Seller has used cleaning solvents, paints, lubricants,
fertilizers, pesticides, other golf course and agricultural products, and
chemicals and similar materials in the ordinary course of business, but Seller
warrants and represents that all such substances have been used, handled,
stored, transported and disposed of in compliance with all applicable laws,
ordinances, regulations and permits and in a manner that has not required and
will not require clean-up or remediation under any applicable law, ordinance,
regulation or permit, except as disclosed otherwise to Buyer in writing during
the Inspection Period. Buyer acknowledges that portions of the MPR Properties
were used prior to December 31, 1985, for lumber mill and other timber industry
purposes and that Seller does not have complete information regarding the
generation, manufacture, refinement, transport, treatment, storage, handling,
disposal, transfer, production, processing, and use of Hazardous Substances
within the MPR Properties prior to December 31, 1985.

    (j)  Authority.  Pope Resources is a limited partnership duly organized,
validly existing, and in good standing under the laws of the State of Delaware
and is qualified to do business in the State of Washington. Olympic Property
Group LLC, Olympic Real Estate Development LLC, and Olympic Resorts LLC are
limited liability companies duly organized, validly existing, and in good
standing under the laws of the State of Washington. Olympic Real Estate
Management, Inc., is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Washington. This Agreement and all
documents to be executed by Seller at Closing have been or will be duly
authorized, executed, and delivered by Seller and are binding on and enforceable
against Seller in accordance with their terms. Seller has obtained all
authorizations or approvals necessary in order for Seller to enter into and
perform its obligations under this Agreement.

    (k)  Employees.  Seller has approximately eighty (80) employees engaged at
or in connection with operation, subdivision and sale of the Property, all of
whom are listed on Schedule 8.1.1(k). Except as described at Schedule 8.1.1(k),
there are no union contracts, labor agreements, or Employee Benefit Plans as
defined in Section 3(3) of the Employee Retirement Income and Security Act of
1974, as amended from time to time, or written

18

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

employment contracts relating to any employees of Seller engaged in the
management, development or operation of the Property.

    (l)  Inventory Sales.  Seller has been engaged in the construction and sale
of homes, town homes, and condominium units on the MPR Property. Buyer shall
have no liability or responsibility for warranty claims (actual or alleged),
defects (actual or alleged) or by any other claim or matter arising from the
construction or sale of such homes, town homes, or condominium units.

    (m)  Easements.  To Seller's actual knowledge, no person or party has any
easement rights or rights to use any portion of the Real Property, other than
rights shown of record, rights under the Tenant Leases, rights of patrons to use
the Golf Course in the ordinary course of operations, the Heron Beach Inn
Reservations, rights otherwise disclosed in the Schedules to this Agreement, and
possible prescriptive easements in the Real Property.

    (n)  Sewer and Water Utilities.  To Seller's actual knowledge, there are no
physical obstacles to the connection of water and sewer facilities to all
undeveloped portions of the Real Property. Notwithstanding the foregoing, Seller
makes no representation or warranty regarding the capacity of the existing water
and sewer facilities or the availability of ground or surface water or water
rights required to provide water and sewer utility services to those portions of
the Real Property to which water and sewer utility services are not currently
provided.

    (o)  Completeness of Documents.  All of Seller's Documents prepared by
Seller specifically for Buyer (including financial information concerning the
Property and Schedules to this Agreement) are accurate in all material respects
and do not omit any material fact necessary to make the information in such
Seller's Documents not misleading. To the best of Seller's actual knowledge, all
of Seller's Documents prepared by Seller but not specifically for Buyer were
accurate in all material respects when prepared.

    (p)  Ownership.  Subject to the Exceptions disclosed in the Preliminary
Commitment and matters that an accurate ALTA survey of the Real Property would
disclose, Seller owns all of the buildings, improvements, structures and
fixtures connected or attached to the Real Property, all equipment and other
personal property located on and used in connection with the Land or
Improvements, and all rights, licenses, entitlements, permits and other
appurtenances used in connection with the Land or Improvements, other than those
relating to tenant fixtures, pay telephones, vending machines, office equipment,
indoor telephone equipment and lines under lease, other utility facilities owned
by private and public utility companies, improvements to easements constructed
by other easement beneficiaries, and structural encroachments from adjoining
properties.

    8.1.2  Additional Warranties and Representations Applicable to Golf
Course.  

    (a)  Memberships.  Schedule 1.5 includes the Golf Course Membership
Agreement Schedule, which lists all members of the Golf Course and provides for
each of such members the following information, which is true, correct, and
complete as of the date of this Agreement: (i) the member's name, (ii) the type
of membership, (iii) the effective date of the membership, (iv) the amount of
the initiation deposit or fee that has been paid in cash (with respect to those
members that elected an installment plan, if any, for payment of the initiation
deposit, this amount includes both the initial cash down payment plus any
receivable), and (v) any terms of the membership or any rights, privileges, or
obligations of the member that are different from other memberships (for
example, pre-paid dues or complimentary memberships), subject to applicable
articles, bylaws, and rules and regulations.

19

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

    (b)  Nature of Memberships.  To Seller's current actual knowledge, no
representations or statements (either orally or in writing) have been made by
Seller to any member of the Golf Course that (i) memberships in the Club are
equity memberships, (ii) members have a right to participate in the ownership,
management, or operation of the Golf Course, (iii) members have a right to share
in any profits from the refinancing or sale of the Golf Course, (iv) memberships
in the Golf Course are perpetual or non-terminable except as set forth in the
membership agreement, or (v) members enjoy contractual rights in addition to or
different from the right to use the Golf Course in accordance with the
applicable membership agreement, by-laws and rules and regulations. No member or
other person has made any claim or allegation which, if true, would render the
warranty and representation in the foregoing sentence inaccurate.

    (c)  Use of Club.  To Seller's current actual knowledge and except for the
memberships listed on Schedule 1.5 and except as may be disclosed in
Schedule 8.1.2(c), Seller has made no representations, statements, promises, or
agreements (either orally or in writing) to any person or entity, including
without limitation home builders, prospective home buyers, or owners or
occupants of the land surrounding the Golf Course, regarding any of the
following: (i) the right to membership in the Golf Course or the intent to
operate the Golf Course as a private or semi-private country club, (ii) the
right to play golf at the Golf Course or to otherwise use any of the Golf Course
facilities, except on the same terms and conditions as are offered to the
public, (iii) the right to participate in the operation, management, or
maintenance of the Golf Course, and (iv) the manner in which the Golf Course
will be operated, managed, maintained, or improved. No member or other person
has made any claim or allegation which, if true, would render the warranty and
representation in the foregoing sentence inaccurate.

    (d)  Water Rights.  Schedule 8.1.2(d) describes all documents, agreements,
instruments, certificates, registrations, and permits evidencing Seller's right
to withdraw surface or underground water for the operation and maintenance of
the Golf Course.

    (e)  Reservations.  Schedule 1.5 includes all reservations and deposits for
use of the Golf Course for time periods after December 31, 2000.

    8.1.3  Additional Warranties and Representations Applicable to Heron Beach
Inn.  

    (a)  Sufficiency of Inventories.  To Seller's actual current knowledge, the
Heron Beach Inn Equipment and Inventory are sufficient for the operation of the
Heron Beach Inn in accordance with the standard of operation heretofore
maintained by Seller and shall not materially differ in amount or quality as of
Closing.

    (b)  Reservations.  Schedule 1.5 includes all reservations and deposits for
use of the Heron Beach Inn for time periods after December 31, 2000.

    (c)  Employees.  Other than the general manager, all employees currently
employed at the Heron Beach Inn are employees of Seller. A complete and accurate
schedule of employees and hire dates is attached hereto as part of
Schedule 8.1.1(k).

    (d)  Franchise and Management.  There are no contracts or other agreements
for franchises, management, marketing, or operation of the Heron Beach Inn
except as shown on Schedule 1.5 attached hereto.

    8.1.4  Seller's Current Actual Knowledge.  The representations and
warranties herein are based upon the current actual knowledge of (a) Gregory M.
McCarry, who is Senior Vice President—Real Estate of Pope Resources and Chief
Operating Officer of Olympic Property Group LLC, Olympic Real Estate Development
LLC, and Olympic Resorts LLC, and (b) Thomas A. Griffin,

20

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

who is Vice President of Olympic Real Estate Management LLC. Seller warrants and
represents that Messrs. McCarry and Griffin are Seller's officers most familiar
with the condition, use, operation and development of the Property. Seller has
no obligation under this Agreement to undertake any investigation or take any
affirmative action to acquire any knowledge, including without limitation the
review of Seller's Documents, other than a reasonable inquiry of Seller's
current employees likely to possess knowledge. It is also understood that
information contained in the Disclosures, as defined in Section 11.1 below, is
not imputed to Mr. McCarry or Mr. Griffin except as and to the extent either of
them has actual knowledge of such information.

    8.2  Buyer's Representations.  Buyer represents and warrants to Seller as of
the Closing Date as follows:

    (a)  Status.  Buyer is a limited liability company duly organized, validly
existing, and in good standing under the laws of the State of California.

    (b)  Authority.  This Agreement and all documents to be executed by Buyer at
Closing have been or will be duly authorized, executed, and delivered by Buyer
and are binding on and enforceable against Buyer in accordance with their terms.

ARTICLE IX.  EMPLOYEES

    Schedule 8.1.1(k) sets forth a list of all employees of Seller regularly
engaged in the management, operation, and construction activities of Seller
relating to the Property ("Employees"). Buyer shall not assume any obligations
of Seller (whether based upon contract or implied by law or otherwise) relating
to the Employees, and Buyer shall have no obligation to hire any of the
Employees upon Closing; provided, that Buyer shall have the right, after
expiration of the Inspection Period, to solicit applications for employment from
the Employees (or any of them), it being understood that all terms and
conditions of employment offered by Buyer shall be in Buyer's sole discretion.
During the Inspection Period, Buyer will designate the Employees with whom Buyer
would like to discuss employment. Buyer shall not communicate with any Employees
except Greg McCarry, Tom Griffin, and Jon Rose regarding their employment with
Buyer or Seller without the prior written consent of Seller. After expiration of
the Inspection Period, Seller shall cooperate with Buyer to further Buyer's
efforts to enter into employment agreements with the Employees.

    Buyer has no obligation under this Agreement to provide benefits to any or
all Employees it hires. However, if Buyer provides benefits to Employees, then
Buyer shall take the following actions in order to preserve Employee benefits to
the extent possible after Closing, if and to the greatest extent allowed by the
various plan and benefit providers, and only if such actions cause no additional
expense to Buyer not compensated by Seller at Closing: (a) If Buyer offers
Employees it hires a group health plan, then it will waive all pre-existing
condition limitations and waiting periods for coverage, and Buyer's health plan
will credit all payments made by the Employees it hires towards deductible,
co-payment, and out-of-pocket limits under Seller's health care plans for the
plan year that includes the Closing Date; and (b) If Buyer offers Employees it
hires a qualified retirement plan, then it will give each such Employee credit
for his or her past service with Seller as of the Closing Date for purposes of
eligibility and vesting, but not for benefit accrual purposes, and will allow
Employees to roll over distributions from Seller's 401(k) plan to Buyer's
retirement plan. Seller shall remain responsible for any pre-Closing employee
benefits, bonus plans, termination plans, and any other employee benefit plan
applicable to the Employees, and also for any benefits or payments due to any
Employee (whether under or by reason of any statute or regulation, contractual
obligation of Seller, or any plan maintained by Seller) as a result of such
Employee's termination in conjunction with the sale of the Property. Seller
shall be responsible to provide any required WARN Act notices and any required
COBRA coverage under Seller's health plans.

21

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

ARTICLE X.  CASUALTY AND CONDEMNATION

    In the event that all or any portion of the Property is damaged or destroyed
by any material casualty or is the subject of a material condemnation action
under the provisions of eminent domain law after the making of this Agreement
but prior to the Closing Date, Buyer may terminate this Agreement and the
Earnest Money shall be returned to Buyer. If the casualty or condemnation is not
material or Buyer does not elect to terminate this Agreement, then Seller shall
have no obligation to repair or replace any damage or destruction caused by the
foregoing, but the following shall apply at the Closing: (a) in the event of a
casualty, Buyer shall receive a credit against the Purchase Price at Closing for
the reasonably estimated remaining cost to restore the Property to its condition
immediately prior to such casualty (it being understood that the proceeds of any
casualty insurance shall be and remain payable to Seller); and (b) in the event
of condemnation, Seller shall assign to Buyer its rights to any resulting
condemnation proceeds and shall not make any settlements without Buyer's prior
written approval. For purposes of this section, "material" means a loss or
liability in excess of Five Hundred Thousand Dollars (US$500,000.00).

ARTICLE XI.  DISCLOSURE, INDEMNITY, AND RELEASE RELATING TO CONDITION OF
PROPERTY

    11.1  Disclosures.  Buyer acknowledges that Seller has disclosed to Buyer
the condition of the Property by providing to Buyer the following documents and
information (collectively, the "Disclosures"): the schedules hereto, the
Preliminary Commitment, Seller's Documents, the right to interview Seller's
consultants and employees, and the right to enter upon, inspect, study, survey,
and conduct tests upon the Property, all prior to the time when Buyer was
irrevocably committed to complete the purchase of the Property under this
Agreement. Buyer further acknowledges that Buyer has acquired information
regarding the condition of the Property from the inspections, studies, surveys
and tests upon the Property conducted by Buyer and its agents, contractors,
consultants, and employees.

    Buyer acknowledges and agrees that the Disclosures disclose material defects
in the condition of the Property and that Seller makes no covenant,
representation, or warranty as to the suitability of the Property for any
purpose or as to the condition of the Property except as otherwise expressly set
forth in this Agreement. Buyer hereby waives all objections and complaints
regarding the condition of the Property, including without limitation objections
and complaints relating to surface and subsurface conditions, except as provided
in any covenant, agreement, representation, or warranty in this Agreement. Buyer
agrees that it is purchasing the Property in its present condition, AS IS,
subject only to the covenants, agreements, representations, and warranties
provided by Seller in this Agreement; provided that nothing in this Agreement
shall be deemed a waiver or release of any claims or rights that Buyer may have
against any third party, including without limitation any prior owner of any
portion of the Property. Buyer assumes the risk that adverse conditions may not
have been revealed by its own investigation or by the Disclosures (but without
limiting Seller's covenants, agreements, warranties and representations in this
Agreement). Except for and with respect to Seller's obligations, warranties and
representations in this Agreement, Buyer hereby waives, releases, acquits, and
forever discharges Seller of and from any and all claims, actions, demands,
rights, damages, costs of response or remedial action, or expenses whatsoever,
direct or indirect, known or unknown, foreseen or unforeseen, including claims
of third parties, that now exist or that may arise in the future on account of
or in connection with the condition of the Property, including without
limitation any surface or subsurface contamination, but excluding claims for
statutory or contractual right of contribution under any state or federal
hazardous substance law or regulation.

    EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER MAKES NO COVENANTS,
REPRESENTATIONS, OR WARRANTIES WITH RESPECT TO: (I) THE CONDITION OF THE REAL OR
PERSONAL PROPERTY OR ANY BUILDINGS,

22

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

STRUCTURES, OR IMPROVEMENTS ON THE REAL PROPERTY OR THE SUITABILITY OF THE REAL
PROPERTY FOR HABITATION OR FOR BUYER'S INTENDED USE OR FOR ANY USE WHATSOEVER;
(II) ANY APPLICABLE BUILDING, ZONING, OR FIRE LAWS OR REGULATIONS, OR WITH
RESPECT TO COMPLIANCE THEREWITH, OR WITH RESPECT TO THE EXISTENCE OF OR
COMPLIANCE WITH ANY REQUIRED PERMITS, IF ANY, OF ANY GOVERNMENTAL AGENCY;
(III) THE AVAILABILITY OR EXISTENCE OF ANY WATER, SEWER, OR OTHER UTILITIES OR
UTILITY RIGHTS; (IV) THE EXISTENCE OF ANY WATER, SEWER OR OTHER UTILITY
DISTRICT; OR (V) THE PRESENCE OF ANY HAZARDOUS SUBSTANCES; (VI) THE PRESENCE OF
ANY UNDERGROUND STORAGE TANKS OR ASBESTOS; OR (VII) COMPLIANCE OF THE PROPERTY
WITH THE TERMS OF THE AMERICANS WITH DISABILITIES ACT.

    BUYER WAIVES ALL CLAIMS AGAINST SELLER, KNOWN OR UNKNOWN, WITH RESPECT TO
THE PROPERTY (BUT EXCLUDING CLAIMS FOR CONTRIBUTION THAT BUYER MIGHT HAVE
AGAINST SELLER UNDER FEDERAL OR STATE ENVIRONMENTAL REGULATIONS AND STATUTES),
AND BUYER ASSUMES THE RISK OF ALL DEFECTS AND CONDITIONS, INCLUDING SUCH DEFECTS
AND CONDITIONS, IF ANY, THAT CANNOT BE OBSERVED BY CASUAL INSPECTION; PROVIDING,
THAT NOTHING HEREIN LIMITS OR IMPAIRS SELLER'S COVENANTS, AGREEMENTS,
REPRESENTATIONS, AND WARRANTIES HEREIN. BUYER ACKNOWLEDGES THAT BUYER HAS HAD
THE OPPORTUNITY TO INSPECT THE PROPERTY AND, EXCEPT FOR THE COVENANTS,
AGREEMENTS, REPRESENTATIONS, AND WARRANTIES OF SELLER HEREIN, IS RELYING
ENTIRELY THEREON, ON ANY CONSULTANTS THAT BUYER RETAINS, AND ON THE DISCLOSURES.

    11.2  Seller's Indemnification Liabilities.  11.2.1 Seller shall defend,
indemnify, and hold Buyer, its affiliates, directors, employees, officers,
partners, and subsidiaries, harmless from and against any and all claims,
demands, damages, losses, liens, liabilities, fines, penalties, monitoring
costs, response costs, and any other costs and expenses (including attorney's
fees and costs and fees of consultants) relating to the Property (collectively,
"Seller's Indemnification Liabilities") that arise from or relate to a liability
or loss arising after the Closing Date from the following matters: (i) breach of
any covenant, agreement, representation or warranty of Seller made herein;
(ii) any warranty claims (actual or alleged), defects (actual or alleged) or by
any other claim or matter arising from the construction or sale of homes, town
homes, or condominium units on or before the Closing Date; (iii) any violation
of the rights of any employee or agent of Seller that occurred or is alleged to
have occurred on or before the Closing Date or in conjunction with the
termination of employment in connection with this transaction; or (iv) any
actual or alleged breach of lease or contract or any mechanics' lien, or any
claim, demand or action for personal injury, death or property damage resulting
from or in connection with any activity on, upon, or about any portion of the
Property that occurred or is alleged to have occurred on or before the Closing
Date, and including without limitation all matters listed on
Schedule 8.1.1(b)-1; provided, that Seller shall not be obligated to indemnify
Buyer (under clause (iv)) from and against any loss, liability, damage, cost or
expense to the extent arising from Buyer's negligence, willful misconduct or
breach of this Agreement (including breach of any representation or warranty of
Buyer). For purposes of this Section 11.2.1, it is understood that a warranty or
representation has been "breached" if such warranty or representation was
inaccurate or untrue in any material respect when made. Without limiting the
generality of Seller's Indemnification Liabilities set forth above, Seller shall
retain all liabilities and obligations relating to those matters of pending and
threatened litigation described in Schedule 8.1.1(b)-1, shall continue to defend
those matters at its own expense and using its own counsel, and Buyer shall
communicate and cooperate with Seller regarding such matters, but at no expense
to Buyer.

23

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

    11.2.2    Seller shall also defend, indemnify, and hold Buyer, its
affiliates, directors, employees, officers, partners, and subsidiaries, harmless
from and against any and all claims, demands, damages, losses, liens,
liabilities, fines, penalties, monitoring costs, response costs, and any other
costs and expenses (including attorney's fees and costs and fees of consultants)
relating to the Property that arise from or relate to (i) the remediation
(including without limitation monitoring) or cleanup of any Hazardous Substances
Problem (as defined below) resulting from the use, storage, handling, disposal
or release of Hazardous Substances on or about the Property that occurred or is
alleged to have occurred on or before the Closing Date (provided that such
Hazardous Substance Problem was not disclosed to Buyer in the reports and
studies listed on Schedule 8.1.1(i) or otherwise in writing prior to expiration
of the Inspection Period); or (ii) any claim, demand or action made or commenced
by a third party (including without limitation any governmental agency) against
Buyer resulting from the use, storage, handling, disposal or release of
Hazardous Substances on or about the Property that occurred or is alleged to
have occurred on or before the Closing Date. Seller's obligations set forth
above shall be deemed part of Seller's Indemnification Liabilities for purposes
of this Agreement.

    As used in this Section 11.2.2,    a "Hazardous Substances Problem" means
the presence of Hazardous Substances on any part of the Property that were used,
stored, handled, disposed of or released in violation of any law or regulation
or so as to require remediation (including monitoring) or cleanup under any law
or regulation, whether or not any claim, demand or action has been made or
commenced against Buyer by any third party. For purposes of clause (i) in the
above paragraph, a Hazardous Substances Problem will have been "disclosed" to
Buyer if there was disclosed (in the reports and studies listed in
Schedule 8.1.1(i) or otherwise in writing to Buyer during the Inspection Period)
reasonably specific information about such Problem. By way of example, if the
presence of an underground tank in a reasonably specific location had been
disclosed to Buyer, then clause (i) of the above paragraph would not impose on
Seller any liability to remove such tank; but if is discovered that the tank
were leaking, and the leak had not been disclosed, then clause (i) would impose
liability to remediate the leak (which might include removing the tank). By way
of further example, disclosure of the mere fact that certain industrial
activities had occurred on a portion of the Property, or that certain chemicals
had been used on the Property, would not constitute disclosure of the need for
remediation or cleanup resulting from such activity or use.

    11.3  Limitations on Seller's Indemnification Liabilities.  Certain of
Seller's Indemnification Liabilities shall be limited as described in this
subsection. Seller's Indemnification Liabilities under Section 11.2.1(i) above
(as to breach of any representation or warranty made herein, and as to breach of
any agreement or covenant to be performed by Seller at or before Closing) shall
apply and be enforced only to the extent that the aggregate liability or loss to
Buyer exceeds Fifty Thousand Dollars (US$50,000.00) and is asserted against or
incurred by Buyer within two (2) year after the Closing Date. Seller's
Indemnification Liabilities under Sections 11.2.1(iii) and 11.2.1(iv) above
shall apply and be enforced only to the extent that the liability or loss to
Buyer is asserted against or incurred by Buyer within four (4) years after the
Closing Date.

    Seller's Indemnification Liabilities under Section 11.2.2, as they apply to
all claims made by Buyer directly against Seller under clause (i) (in the first
paragraph of such Section 11.2.2), shall apply and be enforceable only as to
Hazardous Substances Problems that have been identified to Seller by Buyer and
as to which Buyer has commenced litigation against Seller relating to such
Problems (if Seller has not previously accepted responsibility therefor) within
eight (8) years after the Closing Date. As Seller's Indemnification Liabilities
under Section 11.2.2 apply to claims, demands or actions made or commenced by a
third party against Buyer (and are thus covered by clause (ii) in the first
paragraph of such Section 11.2.2), such Seller's Indemnification Liabilities
shall apply and be enforceable without limit as to claims, demands or actions
that are made or commenced against Buyer within eight

24

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

(8) years after the Closing Date and as to which Buyer has commenced litigation
against Seller to enforce Seller's Indemnification Liabilities hereunder (if
Seller has not previously accepted responsibility therefor) within such
eight-year period after the Closing Date; but as to claims, demands or actions
first made or commenced by a third party against Buyer more than eight (8) years
after the Closing Date, Seller's Indemnification Liabilities shall not exceed
One Million Dollars ($1,000,000) in the aggregate.

    With respect to Seller's Indemnification Liabilities described in
Section 11.2.1, it shall be a further condition to Seller's obligation to
indemnify and defend as to a particular loss or liability that Buyer shall have
commenced litigation against Seller to enforce Seller's Indemnification
Liabilities as to such loss or liability within the applicable time period (if
any) described above (if Seller has not previously accepted responsibility
therefor), except that with respect to any loss or liability resulting from an
action or proceeding commenced by a third party against Buyer within the
applicable limitation period (if any), Buyer shall not be required to have
commenced litigation against Seller within the applicable limitation period in
order to have Seller's Indemnification Liabilities apply to such loss or
liability.

    11.4  Buyer's Indemnification Liabilities and Release.  Buyer shall defend,
indemnify, and hold Seller, its affiliates, directors, employees, officers,
partners, and subsidiaries, harmless from and against any and all claims,
demands, damages, losses, liens, liabilities, fines, penalties, monitoring
costs, response costs, and any other costs and expenses (including attorney's
fees and costs and fees of consultants) relating to the Property (collectively,
"Buyer's Indemnification Liabilities") that arise from or relate to a liability
or loss arising after the Closing Date from the following matters: (i) breach of
any covenant, agreement, representation or warranty of Buyer made herein;
(ii) any claim, demand or action made or commenced by a third party (including
without limitation any government agency) against Seller resulting from the use,
storage, handling, disposal or release of Hazardous Substances on or about the
Property that occurred or is alleged to have occurred after the Closing Date;
(iii) any warranty claims (actual or alleged), defects (actual or alleged) or by
any other claim or matter arising from the construction or sale of homes, town
homes, or condominium units after the Closing Date; (iv) any violation of the
rights of any employee or agent of Buyer that occurred or is alleged to have
occurred after the Closing Date; or (v) any actual or alleged breach of lease or
contract or any mechanics' lien, or any claim, demand or action for personal
injury, death or property damage resulting from or in connection with any
activity on, upon, or about any portion of the Property that occurred or is
alleged to have occurred after the Closing Date, provided, that Buyer shall not
be obligated to indemnify Seller under clause (v) from and against any loss,
liability, damage, cost or expense to the extent arising from Seller's
negligence, willful misconduct or breach of this Agreement (including breach of
any representation or warranty of Seller). For purposes of this Section 11.4, it
is understood that a warranty or representation has been "breached" if such
warranty or representation was inaccurate or untrue in any material respect when
made.

    Buyer hereby waives, releases, acquits, and forever discharges Seller, its
affiliates, directors, employees, officers, partners, and subsidiaries, of and
from all claims, demands, damages, losses, liens, liabilities, fines, penalties,
monitoring costs, response costs, and any other costs and expenses (including
attorney's fees and costs and fees of consultants) relating to the Property that
are incurred by Buyer after the Closing Date except as to (a) costs, expenses,
and liabilities of Buyer for which Seller is obligated to defend, indemnify, and
hold Buyer harmless under Seller's Indemnification Liabilities, including
without limitation Seller's direct liability to Buyer for breach of any warranty
or representation in this Agreement or for breach of any covenant or agreement
to be performed by Seller at or before Closing, subject to the limitations set
forth at Section 11.3, and (b) any obligation of Seller described within this
Agreement that by its express terms is to be performed after or to extend beyond
the Closing Date, including without limitation Seller's Post-Closing Community
Obligations under Article XIV, the obligations of Seller arising under Seller's
Closing documents described at Section 7.2, Seller's obligation to provide the
Title Policy under Section 7.4, Seller's obligations under

25

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

Section 6.5, Seller's obligations regarding post-Closing adjustments of
pro-rations and costs, and Seller's obligations under Section 16.16. Buyer's
release under this paragraph shall not take effect as to any matter that is the
subject of pending litigation between Buyer and Seller as of the date of
expiration of the applicable Seller's Indemnification Liabilities until
dismissal, final judgment, or other resolution of such litigation. For example,
if as of the date two (2) years after the Closing Date Buyer and Seller are
engaged in litigation regarding a claim by Buyer that Seller has breached a
warranty under this Agreement, then Buyer's release of Seller for the breach of
warranty alleged by Buyer in such litigation shall not take effect until
dismissal, final judgment, or other resolution of such litigation.

    Except for Seller's Indemnification Liabilities, Seller's Post-Closing
Community Obligations under Article XIV, the express obligations of Seller under
Seller's Closing documents described at Section 7.2, Seller's obligation to
provide the Title Policy under Section 7.4, Seller's obligations under
Section 6.5, Seller's obligations regarding post-Closing adjustments of
pro-rations and costs, Seller's obligations under Section 16.16, and as
otherwise provided above, Seller shall have no liabilities or obligations to
Buyer after Closing under this Agreement.

    11.5  Survival.  The terms and conditions of this Article XI shall survive
the Closing or termination of this Agreement and shall benefit and bind the
successors and assigns of Buyer and Seller.

26

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

ARTICLE XII.  POSSESSION

    Possession of the Property shall be delivered to Buyer on the Closing Date
subject to the rights of tenants under the Tenant Leases and other Permitted
Exceptions.

ARTICLE XIII.  DOCUMENT RETENTION

    Buyer shall preserve and retain all documents provided by Seller to Buyer,
including without limitation all copies and originals of Seller's Documents, at
a secure administrative office or storage facility within Jefferson County,
Kitsap County, or King County, Washington, for a period not less than ten
(10) years after the Closing Date (the "Document Retention Period"). During the
Document Retention Period, upon the prior written request of Seller, Buyer shall
allow Seller to inspect and copy any and all of Seller's Documents at the office
or storage facility during normal weekday business hours. All copies shall be
made at Seller's expense.

ARTICLE XIV.  OBLIGATIONS TO PORT LUDLOW COMMUNITY

    Buyer acknowledges that Seller has made certain oral and other commitments
to the Port Ludlow community, some or all of which may be legally unenforceable,
but all of which are moral obligations that Buyer and Seller desire and intend
to perform after the Closing Date. These commitments are described on
Schedule 14(a) ("Seller's Post-Closing Community Obligations") and
Schedule 14(b) ("Buyer's Post-Closing Community Obligations"). Within a
reasonable period of time after the Closing Date, Seller shall perform or cause
to be performed at its sole expense each of Seller's Post-Closing Community
Obligations, and Buyer shall perform or cause to be performed at its sole
expense each of Buyer "s Post-Closing Community Obligations. The parties shall
communicate and cooperate with each other to ensure that their performance of
their respective Post-Closing Community Obligations is beneficial and causes no
presently unforeseeable inconvenience or harm to the other party hereto.

ARTICLE XV.  DEFAULT; REMEDIES

    15.1  Default by Buyer.  If Buyer fails, without legal excuse, to complete
the purchase of the Property in accordance with the terms of this Agreement,
Seller's sole and exclusive remedy shall be to retain the Earnest Money as
liquidated damages. Buyer expressly agrees that the delivery to and the
retention of the Earnest Money by Seller represents a reasonable estimation of
the damages in the event of Buyer's default, that actual damages may be
difficult to ascertain and that this provision does not constitute a penalty.
The foregoing limitation on the liability of Buyer shall not be applicable with
respect to Buyer's obligations to be performed or enforced after Closing.

    15.2  Default by Seller.  If Seller fails, without legal excuse, to complete
the sale of the Property in accordance with the terms of this Agreement or
otherwise defaults hereunder, Buyer may elect to pursue any remedy provided by
law or in equity, including termination of this Agreement and suit for damages
and specific enforcement in a proper case. If Seller's default consists of its
failure to tender at Closing its deliveries as described at Section 7.2, then
Buyer may elect to terminate the Agreement, in which case the Earnest Money
shall be returned to Buyer, Seller shall pay to Buyer the Contribution described
below, Buyer shall have no other remedy for Seller's default, and the parties
shall have no further obligations hereunder except under those provisions
intended to survive the termination of this Agreement. It is understood that
nothing in the preceding sentence is intended to limit or impair Buyer's
remedies for Seller's breach unless Buyer elects the remedies described in the
preceding sentence, and that if Buyer has the right to the remedies described in
the preceding sentence but elects not to seek those remedies (as it may elect or
not in its sole discretion), then Buyer shall have the right to seek all
remedies available at law and in equity, including specific performance in a
proper case and all provable damages.

27

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

    The Contribution is the sum of Three Hundred Fifty Thousand Dollars
(US$350,000.00) and is intended (a) to reimburse Buyer for Buyer's costs and
expenses payable to third parties in connection with its due diligence relating
to the Property, and (b) to compensate Buyer for Buyer's time and expenses
relating to the negotiations contemplated hereunder and the time of Buyer's
executives to make the necessary arrangements to organize and finance this
transaction, all of which losses would otherwise be difficult to ascertain. If
Buyer elects to receive the Contribution and Seller pays it, then Buyer within
ten (10) days after receipt of the Contribution shall convey and deliver to
Seller possession and all of Buyer's right, title, and interest in and to all
analyses, maps, reports, studies, surveys, and other documents owned or
possessed by Buyer and relating to the Property. The parties expressly
acknowledge and agree that the Contribution is reasonable in light of Buyer's
time, opportunity cost and expenditures to examine the Property, to negotiate
this Agreement and to conduct due diligence both before and following execution
of this Agreement.

    15.3  Attorneys' Fees.  In the event either party brings an action or any
other proceeding against the other party to enforce or interpret any of the
terms, covenants or conditions hereof, the party prevailing in any such action
or proceeding shall be paid all costs and reasonable attorneys' fees by the
other party in such amounts as shall be set by the court, at trial and on
appeal.

ARTICLE XVI.  MISCELLANEOUS

    16.1  Brokers and Finders.  Each party represents to the other that no
broker or finder has been involved in this transaction. In the event of a claim
for broker's fee, finder' s fee, commission or other similar compensation in
connection with this Agreement, Buyer, if such claim is based upon any agreement
alleged to have been made by Buyer, hereby agrees to indemnify Seller against
any and all damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and costs) that Seller may sustain or
incur by reason of such claim. Seller, if such claim is based upon any agreement
alleged to have been made by Seller, hereby agrees to indemnify Buyer against
any and all damages, liabilities, costs and expenses (including, without
limitation, reasonable attorneys' fees and costs) that Buyer may sustain or
incur by reason of such claim. Notwithstanding anything to the contrary herein,
the provisions of this section shall survive the termination of this Agreement
or the Closing.

    16.2  Notices.  All notices, demands, requests, consents and approvals that
may, or are required to, be given by any party to any other party hereunder
shall be in writing and shall be deemed to have been duly given if delivered
personally, sent by a nationally recognized overnight delivery service,

28

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

electronically transmitted or if mailed or deposited in the United States mail
and sent by registered or certified mail, return receipt requested, postage
prepaid to:

Buyer at:   HCV Pacific Partners LLC
625 Market Street, Suite 600
San Francisco, California 94105
Telephone No. 415-882-0900
Facsimile No. 415-882-0901
with a copy to:
 
Kenneth J. Cohen
Collette & Erickson LLP
555 California Street
Bank of America Center
43rd Floor
San Francisco, California 94104-1791
Telephone No. 415-788-4646
Facsimile No. 415-788-6929
Seller at:
 
Pope Resources
19245 Tenth Avenue N.E.
Poulsbo, Washington 98370-0239
Attn: Gregory M. McCarry
Telephone No. 360-697-6626
Facsimile No. 360-697-6696
with a copy to:
 
Marco de Sa e Silva
Davis Wright Tremaine LLP
2600 Century Square
1501 Fourth Avenue
Seattle, Washington 98101-1688
Telephone No. 206-628-7766
Facsimile No. 206-628-7699

or to such other addresses as either party hereto may from time to time
designate in writing and deliver in a like manner. All notices shall be deemed
complete upon actual receipt or refusal to accept delivery.

    16.3  Amendment, Waiver.  No modification, termination or amendment of this
Agreement may be made except by written agreement. No failure by Seller or Buyer
to insist upon the strict performance of any covenant, agreement, or condition
of this Agreement or to exercise any right or remedy shall constitute a wavier
of any such breach or any other covenant, agreement, term or condition. No
waiver shall affect or alter this Agreement, and each and every covenant,
agreement, term and condition of this Agreement shall continue in full force and
effect with respect to any other then existing or subsequent breach thereof. All
the terms, provisions, and conditions of this Agreement shall inure to the
benefit of and be enforceable by Seller's or Buyer's permitted successors and
assigns.

    16.4  Survival.  All provisions of this Agreement that involve obligations,
duties or rights to be performed after the Closing Date or the recording of the
Deed, and all representations, warranties and indemnities made in or to be made
pursuant to this Agreement shall survive the Closing Date and the recording of
the Deed. Those provisions of this Agreement intended to survive the termination
of this Agreement, including without limitation Article XI and Sections 4.3(c),
4.3(d), and 16.1 hereof, shall survive the termination of this Agreement.

29

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

    16.5  Captions.  The captions of this Agreement are for convenience and
reference only and in no way define, limit or describe the scope or intent of
this Agreement.

    16.6  Merger of Prior Agreements.  This Agreement and the exhibits hereto
constitute the final and complete agreement between the parties with respect to
the purchase and sale of the Property and supersede all prior and
contemporaneous agreements, letters of intent and understandings between the
parties hereto relating to the subject matter of this Agreement except the
Confidentiality Agreement described at Section 16.14.

    16.7  No Joint Venture.  It is not intended by this Agreement to, and
nothing contained in this Agreement shall, create any partnership, joint venture
or other arrangement between Buyer and Seller. No term or provision of this
Agreement is intended to be, or shall be, for the benefit of any person, firm,
organization or corporation not a party hereto, and no such other person, firm,
organization or corporation shall have any right or cause of action hereunder.

    16.8  Governing Law; Time.  This Agreement and the rights of the parties
hereto shall be governed by and construed in accordance with the internal laws
of the State of Washington. "Day" as used herein means a calendar day and
"business day" means any day on which commercial banks are generally open for
business. Any period of time that would otherwise end on a non-business day
shall be extended to the next following business day. Time is of the essence of
this Agreement.

    16.9  Schedules.  All schedules attached hereto or referenced herein are
incorporated in this Agreement. The parties acknowledge and agree, however, that
as of the date this Agreement has been executed, some schedules and exhibits
have not been completed and agreed upon and the parties have also not agreed
upon a final allocation of the Purchase Price among the Real Property, the
Personal Property, and the Olympic Water and Sewer, Inc. stock. The parties
agree to review and negotiate such matters diligently and in good faith, and
upon completion and mutual approval of all such schedules, exhibits and other
matters, they shall promptly execute an amendment to this Agreement
memorializing such agreements.

    16.10  Severability.  In case any one or more of the provisions contained in
this Agreement shall for any reason be held to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality, or unenforceability
shall not affect any other provision hereof, and this Agreement shall be
construed as if such provisions had not been contained herein.

    16.11  Counterparts.  This Agreement and the documents to be delivered
hereunder may be executed in any number of counterparts, and each such
counterpart hereof shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.

    16.12  Assignment.  Buyer's rights under this Agreement are not assignable,
by operation of law or otherwise, and Seller shall have no obligation to perform
hereunder for any assignee or transferee of Buyer, except that Buyer may assign
its rights under this Agreement to any affiliate of Buyer, or to any limited
partnership, general partnership, co-tenancy or a limited liability company that
is controlled or managed directly or indirectly by Buyer. In the event of any
assignment by Buyer of its rights under this Agreement, Buyer will not be
released from any obligations under this Agreement.

    16.13  Tax Deferred Exchange.  Buyer and Seller will cooperate with each
other in connection with the form and structure of this transaction in order to
limit tax liabilities and preserve tax benefits to themselves to the extent
permitted by law. Either Buyer or Seller may elect to close this transaction as
a part of a tax-deferred exchange under Section 1031 of the Internal Revenue
Code, in which case the other party will sign all documents necessary for such
exchange and otherwise cooperate therewith, provided only that the other party
will not be required to incur any additional expense or liability or acquire
title to any property except as provided otherwise in this Agreement. Each party
electing to close as part of a tax-deferred exchange will indemnify, defend, and
hold the other party harmless from

30

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

any loss, liability, claim, or expense that is asserted against or incurred by
the other party in connection with their cooperation with any tax deferred
exchange.

    16.14  Confidentiality.  Buyer shall keep this Agreement, the transactions
described in this Agreement, Seller's Documents, and all information relating to
the Property disclosed by Seller to Buyer completely confidential and shall not
disclose the same to any person or entity (specifically including without
limitation all employees of Seller other than management personnel) other than
Buyer's consultants, affiliates, investors, and their respective employees (who
shall agree to keep the information confidential and be provided only such
information as is necessary to perform their services) without Seller's prior
written consent; provided, that Buyer may disclose information as required under
any law or regulation or as necessary to enforce this Agreement; and provided
further that Buyer shall have no obligation of confidentiality after Closing.
Buyer shall conduct all due diligence consistent with this section. The
obligations of Buyer under this section supplement and do not replace the
obligations of Buyer under that certain Confidentiality Agreement dated
February 8, 2000.

    16.15  Continuing Forest Land Obligations.  Buyer acknowledges that portions
of the Real Property are subject to certain continuing forest land obligations
applicable under the forest practices rules adopted pursuant to RCW 76.09.370
(the "Continuing Obligations"). The Continuing Obligations are described on
Schedule 16.15 hereto. At or before Closing, Buyer agrees to sign and deliver to
Seller an original notice that indicates the Buyer's knowledge of the Continuing
Obligations, including any notice provided or required by the DNR. At Closing,
Seller shall send the executed notice to DNR in accordance with the requirements
of RCW 76.09.390. As of Closing, Buyer assumes and agrees to perform the
Continuing Obligations at Buyer's sole cost and expense in a timely fashion, and
to indemnify, defend and hold Seller harmless from and against the Continuing
Obligations and any claim, loss, damage, cost or expense resulting from Buyer's
failure to fulfill and perform the same. The provisions of this indemnity shall
survive the Closing of this Agreement.

    16.16  Cooperation.  The parties acknowledge that Seller has disclosed in
the schedules to this Agreement various potential issues and disputes relating
to boundary lines affecting the Real Property. Seller agrees to cooperate with
Buyer to resolve such issues and disputes after Closing, and in connection with
any minor boundary line adjustments between the Real Property and Sellers'
adjoining lands reasonably requested by Buyer from time to time (whether before
or after Closing). In addition, Buyer and Seller agree that at any time or from
time to time after the execution of this Agreement, whether before or after
Closing, they will execute and deliver such further documents and undertake such
other actions as the other party may reasonably request in order to effect fully
the purposes of this Agreement.

31

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

    IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

SELLER:   POPE RESOURCES L.P., a Delaware limited partnership, by POPE MGP,
Inc., a Delaware corporation, its managing general partner
 
 
By:
 
/s/ GREGORY M. MCCARRY   

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

    Name:   Gregory M. McCarry

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

    Its:   V.P. Real Estate

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

 
 
OLYMPIC PROPERTY GROUP LLC, a Washington limited liability company
 
 
By:
 
/s/ GREGORY M. MCCARRY   

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

    Name:   Gregory M. McCarry

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

    Its:   C.O.O.

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

 
 
OLYMPIC REAL ESTATE DEVELOPMENT LLC, a Washington limited liability company
 
 
By:
 
/s/ GREGORY M. MCCARRY   

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

    Name:   Gregory M. McCarry

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

    Its:   C.O.O.

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

 
 
OLYMPIC REAL ESTATE MANAGEMENT, INC., a Washington corporation
 
 
By:
 
/s/ TOM GRIFFIN   

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

    Name:   Tom Griffin

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

    Its:   Vice President

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

32

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

 
 
OLYMPIC RESORTS LLC, a Washington limited liability company
 
 
By:
 
/s/ GREGORY M. MCCARRY   

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

    Name:   Gregory M. McCarry

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

    Its:   C.O.O.

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

BUYER:
 
HCV PACIFIC PARTNERS LLC, a California limited liability company
 
 
By:
 
/s/ RANDALL J. VERRUE   

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

    Name:   Randall J. Verrue

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

    Its:   President & CEO

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

33

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

Schedules:

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

   
1.1.1(a)(i)   Description of Heron Beach Inn 1.1.1(a)(ii)   Description of
Marina 1.1.1(a)(iii)   Description of Golf Course 1.1.1(a)(iv)   Description of
Village Center 1.1.1(a)(v)   Description of RV Park 1.1.1(a)(vi)   Description
of Harbormaster Restaurant 1.1.1(a)(vii)   Description of Conference Center
1.1.1(a)(viii)   Description of Miscellaneous MPR Operating Properties
1.1.1(a)(ix)   Description of Sales Office 1.1.1(b)(i)   Description of MPR
Platted Lots 1.1.1(b)(ii)   Description of MPR Unplatted Parcels 1.1.1(b)(iii)  
Description of MPR Outparcels 1.1.2   Description of Peacock Hill Property 1.2  
Appurtenances 1.3   Tenant Leases 1.4   Equipment and Inventory 1.5   Contracts
1.6   Intellectual Property 1.7   DNR Lease 2.1   Allocation of Purchase Price
3.4(a)   Form of MPR Deed 3.4(b)   Form of Peacock Hill Deed 3.5   Form of
Assignment of DNR Lease 3.6   Form of Assignment of Tenant Leases 3.7   Form of
Assignment of Contracts 3.8   Form of Bill of Sale 3.9   Form of Assignment of
Intellectual Property 5.6-1   Form of Tenant Estoppel Letter 5.6-2   Form of DNR
Estoppel Letter 5.11   Form of Seller's Payment Certification 6.2   Minimum MPR
Platted Lot Sale Prices 7.2(c)   Form of FIRPTA Affidavit 7.2(h)   Form of
Easements Over Adjoining Lands 7.2(i)   Form of Bio-solids Disposal Agreement
7.5.3   Current Use and Forest Land 8.1.1(b)   Pending and Threatened Litigation
8.1.1(c)   Compliance with Laws and Permits; Permits and Licenses Requiring
Third Party Consent to Assignment 8.1.1(e)-1   Material Property Defects
8.1.1(e)-2   Seller's Improvements and Repairs 8.1.1(f)   Potential Local
Improvement Districts 8.1.1(g)   Contracts and Leases Requiring Third Party
Consent to Assignment 8.1.1(i)   Hazardous Substances Reports 8.1.1(k)   Union
Contracts, Labor Agreements, and Employee Benefit Plans 8.1.2(c)   Golf Course
Management and Membership Rights 8.1.2(d)   Golf Course Water Rights 9  
Employees and Hire Dates 11.2   Seller's Indemnification Liabilities 14(a)  
Seller's Post-Closing Community Obligations 14(b)   Buyer's Post-Closing
Community Obligations 16.15   Continuing Forest Land Obligations

34

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

QuickLinks

Exhibit 10.1

REAL ESTATE PURCHASE AND SALE AGREEMENT
TABLE OF CONTENTS
REAL ESTATE PURCHASE AND SALE AGREEMENT (Pope Resources and HCV Pacific Partners
LLC) (Port Ludlow and Peacock Hill)
ARTICLE I. PROPERTY
ARTICLE II. PURCHASE PRICE
ARTICLE III. CONDITION AND CONVEYANCE OF TITLE
ARTICLE IV. INSPECTION OF DOCUMENTS AND REAL PROPERTY
ARTICLE V. CONDITIONS PRECEDENT TO CLOSING
ARTICLE VI. OPERATIONS PENDING CLOSING
ARTICLE VII. CLOSING AND ESCROW
ARTICLE VIII. REPRESENTATIONS AND WARRANTIES
ARTICLE IX. EMPLOYEES
ARTICLE X. CASUALTY AND CONDEMNATION
ARTICLE XI. DISCLOSURE, INDEMNITY, AND RELEASE RELATING TO CONDITION OF PROPERTY
ARTICLE XII. POSSESSION
ARTICLE XIII. DOCUMENT RETENTION
ARTICLE XIV. OBLIGATIONS TO PORT LUDLOW COMMUNITY
ARTICLE XV. DEFAULT; REMEDIES
ARTICLE XVI. MISCELLANEOUS