Exhibit 10.4
 
AUDIT COMMITTEE CHARTER
 
POPE MGP, Inc.
 
As revised April 2005
 
I. PURPOSE
 
The primary function of the Audit Committee (“Committee”) is to assist the Board
of Directors of Pope MGP, Inc. in fulfilling its oversight responsibilities for
Pope Resources and its subsidiaries (the “Partnership”) with respect to the
following:
 

 
·
Accounting and financial reporting,
 
·
Assessment and management of risk and the related internal control environment,
 
·
Compliance with laws and regulations, and
 
·
Internal and external audit processes.

In fulfilling its responsibilities, the Committee will:
 

 
·
Serve as an independent and objective party to monitor the Partnership's
financial reporting process and internal control system,
 
·
Have sole authority for appointment, retention, and firing of independent
accountants,
 
·
Approve all audit and non-audit services provided to the Partnership by the
independent accountants,
 
·
Review and evaluate the audit efforts of the independent accountants and the
Partnership’s internal audit activities,
 
·
Facilitate an open avenue of communication among the independent accountants,
internal audit, and the Board of Directors,
 
·
Establish procedures for receiving and treating concerns (including anonymous
ones from employees of the Partnership and it subsidiaries and affiliated
companies) regarding accounting, internal accounting controls and auditing and
ensure that such concerns are treated confidentially with no threat of
retaliation to the party surfacing the concern.

The Committee will have the complete and unrestricted authority and funding to
conduct investigations into any matters within the Committee’s scope of
responsibilities. The Committee shall be empowered to retain independent counsel
and other professionals to assist in the conduct of any investigation.
 
The Committee will primarily fulfill these responsibilities by carrying out the
activities enumerated in Section III of this Charter.
 
 
 

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Audit Committee Charter
Pope MGP, Inc.
Revised April 2005
 
II. COMPOSITION, MEETINGS AND ADMINISTRATIVE MATTERS
 
Number of Directors: The Committee shall be comprised of three or more directors
as determined by the Board.
 
Independence of Directors: Each member of the Committee shall be an independent
director. A director shall be considered “independent” if he or she is free from
any relationship that may interfere with the exercise of his or her independence
from management and the Partnership or independent judgment as a member of the
Committee and otherwise meets SEC and Nasdaq requirements for service. The
determination of whether a director is independent for this purpose shall rest
with the Board of Directors, and the determination of the Board in compliance
with the requirements set forth in SEC and Nasdaq regulations shall be
conclusive
 
Committee Member Qualifications: All members of the Committee shall have a
working familiarity with basic finance and accounting practices and be able to
read and understand financial statements at the time of their appointment.
 
Designation of “Financial Expert”: The Committee will designate at least one of
its members in the Partnership’s annual Form 10-K as a “financial expert” so
defined under SEC rules.
 
Appointment of Committee Members: The Members of the Committee shall be elected
by the Board at the annual meeting of the Board and shall serve until their
resignation, removal, or replacement. A Chair shall be elected by the full
Board.
 
Meeting Frequency: The Committee shall meet at least four times annually in
regularly scheduled meetings. The Committee shall also meet at other times as
necessary to discharge its responsibilities and as circumstances dictate.
Meetings of the Committee may be in person or telephonically.
 
Meeting Attendees: In addition to Committee Members, the Committee may ask that
members of Partnership management, the Partnership’s independent accountants,
other members of the Board, and/or others be present at Committee meetings as
appropriate to the subject matter under consideration. [Note: At present the
Partnership does not have a formally established internal audit function. On
occasion, financial management personnel perform reviews or procedures that
emulate this function. As such, the Committee may ask that personnel performing
such internal audit functions be present at Committee meetings. “Internal audit”
as used herein is understood to cover that function in broad terms, whether
formally or informally established.]
 
Private Communications: Regularly at Committee meetings, there will be an
opportunity for Committee members to have private communications with each of
management, the financial officers, internal audit, and the independent
accountants. As part of its job to foster open communication, the Committee
shall meet regularly, and at least annually, with the independent accountants in
separate executive session to discuss any matters that the Committee or the
Independent accountants believe should be discussed privately.

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Audit Committee Charter
Pope MGP, Inc.
Revised April 2005
 
Minutes: The Committee Chair shall appoint an individual to prepare minutes for
each meeting. Draft minutes shall be distributed to Committee members, for
approval at the next meeting. Approved minutes shall be distributed to the Board
of Directors and such minutes shall be retained with the permanent corporate
records of the Partnership.
 
Reporting to the Board: The Chair or his or her designee will report Committee
actions to the Board of Directors with such recommendations as the Committee may
deem appropriate.
 
Committee Charter: Annually, the Committee shall review its Charter and, if
appropriate, adopt revisions.

III. DUTIES AND RESPONSIBILITIES
 
To fulfill its duties and responsibilities the Committee shall:
 
Maintain its Independence
 
1.
Adhere strictly to limitations on member compensation stipulated by SEC or
Nasdaq rules.
2.
Monitor rules defining “affiliated persons” and prohibited relationships so as
to avoid independence issues.

Review of Documents and Reports
 
3.
Review with management the Partnership’s annual financial statements and the
independent accountants’ opinion with respect to such financial statements.
4.
Review with the independent accountants the results of their audit of the annual
financial statements, including all matters required to be communicated to audit
committees under generally accepted auditing standards. Such communications
should include significant audit adjustments, significant accounting policies
and any related changes thereto, management judgments and accounting estimates,
disagreements with management, and any other difficulties encountered during
their audit.
5.
Review the Form 10-Q prior to its filing. This review may take place at a
scheduled meeting or it may take place as a result of dissemination of a draft
10-Q followed by individual responses to either management or the Committee
Chair.
6.
Review comments provided by the independent accountants relating to the
Partnership’s internal controls or other related matters, and review and monitor
management’s response and follow-up actions.
7.
Review any internal reports (if applicable) to management prepared by internal
auditors and management's response.

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Audit Committee Charter
Pope MGP, Inc.
Revised April 2005
 
Independent Accountants
 
8.
Assume direct responsibility for appointment, compensation, and oversight of the
independent accountant. The independent auditor reports directly to the
Committee.
9.
Review the independent accountants’ plan and scope relating to their audit of
the annual financial statements. Review with the independent accountants the
coordination of audit effort to assure completeness of coverage, reduction of
redundant efforts, and the effective use of audit resources.
10.
On an annual basis, review and discuss with the accountants all significant
relationships the accountants have with the Partnership to determine and confirm
the accountants' independence. Obtain a formal written statement from the
outside auditors delineating all relationships with the Partnership. Ensure that
the CEO, CFO, Controller (or persons in equivalent positions) have not been
employed by the company’s audit firm during the 1year period preceding the
current year audit.
11.
Ensure that the independent accountants will not provide any non-audit services
including: a) bookkeeping or other services related to the accounting records or
financial statements of the audit client; b) financial information systems
design and implementation; c) appraisal or valuation services, fairness
opinions, or contribution-in-kind reports; d) actuarial services; e) internal
audit outsourcing services; f) management functions or human resources; g)
broker or dealer, investment adviser, or investment banking services; h) legal
services and expert services unrelated to the audit; i) any other service that
the Committee determines is impermissible. The independent auditor may engage in
any non-audit service, including tax services that is not listed above, only if
the activity is pre-approved by the Audit Committee.
12.
Ensure that the lead audit or coordinating partner and the reviewing partner
must rotate off of the audit every 5 years.

Financial Reporting Processes and Internal Controls
 
13.
 
Review with financial management the Partnership’s significant accounting and
reporting policies and any changes thereto.
 
14.
Review with financial management the accounting treatment of individual events
or transactions that may have a significant impact on financial reporting.
15.
Consider, through periodic discussions, the independent accountants' judgments
about the quality and appropriateness of the Partnership's accounting principles
as applied in its financial reporting.
16.
Determine that management has implemented policies and procedures ensuring that
the Partnership’s risks are identified and that controls are adequate, in place,
and functioning properly.
17.
Consider and review with management and the independent accountants:

 
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Audit Committee Charter
Pope MGP, Inc.
Revised April 2005
 
The adequacy of the Partnership’s internal controls including computerized
information system controls and security. Any related significant findings and
recommendations of the independent accountants regarding internal controls
together with management’s responses thereto.

18.
Evaluate whether management is setting the appropriate tone at the top by
communicating the importance of internal controls and ensuring all individuals
possess an understanding of their roles and responsibilities.
   
19.
Require the independent accountants to keep the Committee timely informed about
fraud, illegal acts, and deficiencies in internal control.

Ethical and Legal Compliance
 
20.
Confirm that management has an appropriate review system in place to ensure that
the Partnership's financial statements, reports and other financial information
(disseminated to governmental organizations and the public) satisfy legal
requirements.
21.
Evaluate the need for and related activities (if applicable) of the
Partnership’s internal audit activities. If applicable, review such activities,
organizational structure, and qualifications of internal audit resources.
22.
Review, with management and Partnership counsel, the Partnership’s policies and
procedures to minimize and monitor risks and exposures from noncompliance with
laws and regulations. Specifically consider compliance matters pertaining to
corporate securities trading policies.
23.
Review and approve any extension of credit by the Partnership to a director or
officer of the Partnership or its general partners.
24.
Approve a code of ethics for senior financial officers and review it annually
for potential improvement. Obtain annually an assurance in writing from each
senior financial officer that they have complied.
25.
Establish and maintain procedures to receive, retain, and treat complaints from
employees and others about accounting, internal accounting controls, or auditing
matters. The procedures established must address “whistleblower complaints” by
establishing for the confidential, anonymous submission by employees of concerns
regarding questionable accounting or auditing matters. Remind employees annually
of the availability of the procedures and how to utilize them.
26.
Review, with management and Partnership counsel, the process for determining
risks and exposures from litigation, claims and assessments, including counsel’s
assessment of specific significant matters.
27.
Perform any other activities consistent with this Charter, the Partnership
Agreement and governing law, as the Committee or the Board deems necessary or
appropriate.

 
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