MASTER
LOAN AGREEMENT

     

    DATED
AS OF SEPTEMBER 25, 2009

     

    AMONG

     

    POPE
RESOURCES, A DELAWARE LIMITED PARTNERSHIP

     

    AS
BORROWER

     

    AND

     

    NORTHWEST
FARM CREDIT SERVICES, FLCA

     

    AS
LENDER


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    MASTER
LOAN AGREEMENT

    TABLE
OF CONTENTS

    


    
      
        
          
            
              
                
                  	
                          TERMS

                        	
                          SECTION

                        
	
                          Definitions

                        	 	
                          1

                        
	
                          Loans

                        	 	
                          2

                        
	
                          Loans

                        	 	
                          2.01

                        
	
                          Fees

                        	 	
                          2.02

                        
	
                          Evidence
      of Debt

                        	 	
                          2.03

                        
	
                          Payments
      Generally

                        	 	
                          2.04

                        
	
                          Accounting
      Terms

                        	 	
                          2.05

                        
	
                          Stock/Participation
      Certificates

                        	 	
                          3

                        
	
                          Ownership

                        	 	
                          3.01

                        
	
                          Voting
      Rights

                        	 	
                          3.02

                        
	
                          Stock
      Conversion

                        	 	
                          3.03

                        
	
                          Patronage

                        	 	
                          3.04

                        
	
                          FPF
      Account

                        	 	
                          4

                        
	
                          General
      Authorization

                        	 	
                          5

                        
	
                          Conditions
      Precedent

                        	 	
                          6

                        
	
                          Documents
      Required for Closing

                        	 	
                          6.01

                        
	
                          Conditions
      precedent to Advances Under All Loans

                        	 	
                          6.02

                        
	
                          Liens

                        	 	
                          7

                        
	
                          Creation
      of Liens

                        	 	
                          7.01

                        
	
                          Perfection
      of Liens

                        	 	
                          7.02

                        
	
                          Priority

                        	 	
                          7.03

                        
	
                          Representations
      and Warranties

                        	 	
                          7

                        
	
                          Representations
      and Warranties of Borrower

                        	 	
                          8.01

                        
	
                          Representations
      and Warranties of Lender

                        	 	
                          8.02

                        
	
                          Survival

                        	 	
                          8.03

                        
	
                          Covenants

                        	 	
                          9

                        
	
                          Affirmative
      Covenants

                        	 	
                          9.01

                        
	
                          Financial
      Covenants

                        	 	
                          9.02

                        
	
                          Negative
      Covenants

                        	 	
                          9.03

                        


                

              

            

          

        

      

    


    
      
         


      

      
        i

        
          

        

      

      
         


      

    

    


    
      
        
          
            	
                    Default

                  	 	
                    10

                  
	
                    Events
      of Default

                  	 	
                    10.01

                  
	
                    Notice
      and Opportunity to Cure

                  	 	
                    10.02

                  
	
                    Prepayment
      and Breakage Fees

                  	 	
                    11

                  
	
                    Prepayment
      Fee

                  	 	
                    11.01

                  
	
                    Breakage
      Fee

                  	 	
                    11.02

                  
	
                    Participation

                  	 	
                    11.03

                  
	
                    Enforcement
      and Waiver; Indemnity

                  	 	
                    12

                  
	
                    Enforcement
      and Waiver by Lender

                  	 	
                    12.01

                  
	
                    Indemnity;
      Waiver of Damages by Borrower

                  	 	
                    12.02

                  
	
                    Communications

                  	 	
                    13

                  
	
                    Notices
      and Other Communications

                  	 	
                    13.01

                  
	
                    Facsimile
      Documents and Signatures

                  	 	
                    13.02

                  
	
                    Use
      of E-mail

                  	 	
                    13.03

                  
	
                    Participation

                  	 	
                    14

                  
	
                    Governing
      Law; Jurisdiction; Etc

                  	 	
                    15

                  
	
                    Governing
      Law

                  	 	
                    15.01

                  
	
                    Submission
      to Jurisdiction

                  	 	
                    15.02

                  
	
                    Waiver
      of Venue

                  	 	
                    15.03

                  
	
                    Service
      of Process

                  	 	
                    15.04

                  
	
                    Waiver
      of Jury Trial

                  	 	
                    15.05

                  
	
                    Consultation
      with Counsel

                  	 	
                    15.06

                  
	
                    Miscellaneous

                  	 	
                    16

                  
	
                    Construction

                  	 	
                    16.01

                  
	
                    Binding
      Effect, Assignment and Entire Agreement

                  	 	
                    16.02

                  
	
                    Severability

                  	 	
                    16.03

                  
	
                    No
      Personal Liability of General Partners

                  	 	
                    16.04

                  
	
                    Exhibit
      A: Form of Compliance Certificate

                  	 	 
      
	
                    Exhibit
      B: Covenant Compliance Worksheet

                  	 	 
      
	
                    Exhibit
      C: Prepayment Fee and Breakage Fee

                  	 	 
      
	
                    Exhibit
      D: Adjusted Partners’ Capital Worksheet

                  	 	 
      


          

        

      

    


    
      
         


      

      
        ii

        
          

        

      

      
         


      

    


    Pope
Resources, a Delaware Limited Partnership

    Customer
No. 56548

    


    MASTER
LOAN AGREEMENT

    (INCLUDING
MEMBERSHIP AGREEMENT)

     

    THIS MASTER LOAN AGREEMENT
(this “Loan Agreement”) is made and entered into effective September 25, 2009,
by and between Lender, as defined below, and Borrower, as defined
below.

     

    RECITALS

     

    WHEREAS, Borrower has
requested that Lender make a $9,800,000.00 loan to Borrower to refinance
existing long term debt; and

     

    WHEREAS, Lender has agreed to
make the requested Loan available to Borrower on the terms and conditions
hereinafter set forth, which shall apply to Loan No. 56548-841 and to any future
Loans made subject to this Loan Agreement.

     

    NOW THEREFORE, IN
CONSIDERATION of the mutual covenants and agreements herein contained,
the parties hereto covenant and agree as follows:

     

    1.     
     Definitions.  Capitalized
terms not otherwise defined herein shall have the meanings given in the Note(s)
or other Loan Documents.  As used herein:

     

    “Adjusted Partners’
Capital” means the GAAP based amount of the capital account of the
partners of Borrower, adjusted for book to market value differences in
Timberlands, as calculated on Exhibit D.

     

    “Affiliate” means,
with respect to any Person, another Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.

     

    “Appraised Value of
Timberlands” means an appraisal of Borrower’s Fee Timberlands on an
annual or more frequent basis.  The appraisal must be performed by a
certified appraiser and approved by Lender.

     

    “Asset Disposition”
means any sale, lease, transfer or other disposition (including any such
transaction effected by way of merger, amalgamation or consolidation)
by  Borrower, subsequent to the Closing Date of any asset (including
stock or other equity interests in Borrower), including without limitation, any
sale leaseback transaction (whether or not involving a Capital Lease), but
excluding (a) the sale of inventory in the ordinary course of business for fair
consideration, (b) the sale or disposition of obsolete machinery and equipment
no longer used or useful in the conduct of such Person's business (except for
assets which are security for Lender's Loans), and (c) the sale of or
realization on delinquent receivables.

     

    MASTER
LOAN AGREEMENT - 1

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Bankruptcy Code”
means the Bankruptcy Code in Title 11 of the United States Code, as amended,
modified, succeeded or replaced from time to time.

     

    “Bankruptcy Event”
means, with respect to any Person, the occurrence of any of the following with
respect to such Person:  (a) a court or governmental agency having
jurisdiction in the premises shall enter a decree or order for relief in respect
of such Person in an involuntary case under any applicable bankruptcy,
insolvency or other similar Law now or hereafter in effect, or appointing a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person, or for any substantial part of its Property, or
ordering the winding up or liquidation of its affairs; or (b) there shall be
commenced against such Person an involuntary case under any applicable
bankruptcy, insolvency or other similar Law now or hereafter in effect, or any
case, proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such Person,
or for any substantial part of its Property, or for the winding up or
liquidation of its affairs, and such involuntary case or other case, proceeding
or other action shall remain undismissed, undischarged or unbonded for a period
of 60 consecutive days; or (c) such Person shall commence a voluntary case under
any applicable bankruptcy, insolvency or other similar Law now or hereafter in
effect, or consent to the entry of an order for relief in an involuntary case
under any such Law, or consent to the appointment or taking possession by a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person, or for any substantial part of its Property, or make
any general assignment for the benefit of creditors; or (d) such Person shall be
unable to, or shall admit in writing its inability to, pay its debts generally
as they become due.

     

    “Base Rate” shall have
the meaning indicated in the particular Note for a Loan.

     

    “Borrower” means Pope
Resources, A Delaware Limited Partnership, a Delaware limited partnership,
provided however, for purposes of covenant compliance, “Borrower” shall include
all subsidiaries of Pope Resources, a Delaware Limited Partnership, whose
financial statements should, under GAAP, be consolidated with Pope Resources, A
Delaware Limited Partnership.

     

    “Borrower’s
Obligations” means, without duplication, all of the obligations of
Borrower to Lender whenever arising, under this Loan Agreement, the Notes or any
of the other Loan Documents, including without limitation, all principal,
interest, monies advanced on behalf of Borrower under the terms of the Loan
Documents, and taxes, insurance premiums, costs and expenses, and fees and any
amounts that would have accrued but for the automatic stay under the Bankruptcy
Code, and any obligations under any Swap Contract between Borrower and any Swap
Issuer, whenever arising.

     

    “Breakage Fee” shall
have the meaning given in Exhibit C attached hereto.

     

    “Business Day” means
any day Lender is open for business in Spokane, Washington, except it shall not
include Saturday, Sunday or a day that commercial banks in Spokane, Washington
are closed.  Provided however, for purposes of defining any date upon
which an interest rate shall be determined by Lender using an Index other than
published by Lender, Business Day means any day Lender and the Index Source are
open for business except it shall not include Saturday, Sunday or a day that
commercial banks in Spokane, Washington are closed.

     

    MASTER
LOAN AGREEMENT - 2

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Calculation Date”
means the first three Fiscal Quarter-Ends and the Fiscal Year-End of
Borrower.

     

    “Capital Lease” means,
as applied to any Person, any lease of any Property by that Person as lessee
which, in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.

     

    “Capital Stock” means
(i) in the case of a corporation, capital stock, (ii) in the case of an
association or business entity, any and all shares, interests, participations,
rights or other equivalents (however designated) of capital stock, (iii) in the
case of a partnership, partnership interests (whether general or limited), (iv)
in the case of a limited liability company, membership interests, and (v) any
other interest or participation that confers on a Person the right to receive a
share of the profits and losses of, or distribution of assets of, the issuing
Person.

     

    “Closing Date” for any
particular Loan, means the Business Day the associated Loan Documents are fully
executed and delivered to Lender, following satisfaction of all conditions
precedent or waiver thereof by Lender.

     

    “Collateral” for a
Loan means the Property described in any Loan Document providing Lender a Lien
in such Collateral.  Collateral shall also mean all Property pledged
to Lender after a Closing Date, as Collateral for Borrower’s
Obligations.

     

    “Company” and “Companies” means
Borrower, as well as any present or future Subsidiaries whose financial
statements and accounting procedures should, in accordance with GAAP, be
consolidated with Borrower.

     

    “Compliance
Certificate” shall have the meaning given in Section 9.01.b.iii.and shall
be in substantially the form of Exhibit A hereto.

     

    “Consolidated Capital
Expenditures” means, for any period, all internally financed operating
capital expenditures (excluding timberland acquisitions and the portion of the
same associated with the minority interest in Timber Funds, and any real estate
capital expenditures financed through creation of a local improvement district,
or “LID”) of Companies, on a consolidated basis for such period, as determined
in accordance with GAAP.

     

    “Consolidated Cash Flow
Coverage Ratio” means, as of any date of determination for the prior four
fiscal quarters ending on such date, the ratio of (a) Consolidated EBITDDA minus
Consolidated Capital Expenditures to (b) scheduled principal payments (not
including balloon principal payments which have been refinanced) and interest
expense.

     

    MASTER
LOAN AGREEMENT - 3

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Consolidated EBITDDA”
means, for any period, the sum of:  (a) Consolidated Net Income; (b)
Consolidated Interest Expense; (c) consolidated depreciation expense; (d)
consolidated amortization expense; (e) consolidated depletion expense (excluding
the portion associated with the minority interest in Timber Funds); (f) the cost
of land sold by Companies; and, (g) plus or minus, as the case may be,
Consolidated Taxes to the extent recognized in the computation of Consolidated
Net Income, all as determined in accordance with GAAP.

     

    “Consolidated Net
Income” means, for any period, the net income or net loss after
Consolidated Taxes for such period of Companies on a consolidated basis, as
determined in accordance with GAAP.

     

    “Consolidated Taxes”
means, as of any date of determination, the provision for federal, state and
other income taxes of Companies on a consolidated basis, as determined in
accordance with GAAP.

     

    “Control” means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of a Person, whether through the ability
to exercise voting power, by contract or otherwise.  “Controlling” and
“Controlled” have meanings correlative thereto.

     

    “Covenant Compliance
Worksheet” shall mean a certificate in substantially the form of Exhibit
B hereto.

     

    “Event of Default”
shall have the meaning provided in Section 10 hereof.

     

    “Fee Timberland” means
all timber and timberland owned by Borrower.

     

    “FPF Account” means
the Future Payment Fund Account that is an interest-bearing conditional advance
payment account with Lender and all money paid into that account and all
interest earned thereon.

     

    “Fiscal Quarter” means
the three month periods ending March 31, June 30, September 30 and December
31.

     

    “Fiscal Quarter-End”
means March 31, June 30, September 30 and December 31.

     

    “Fiscal Year” means the calendar year.
“Fiscal Year-End” means December 31.

     

    “Fiscal Year-to-Date”
means the period from the first day of Borrower’s Fiscal Year being reported
upon through the last day of the Fiscal Quarter being reported
upon.

     

    “Fixed Rate Maturity
Date” shall have the meaning indicated in the particular Note for a
Loan.

     

    “Fixed Rate Option”
shall have the meaning indicated in the particular Note for a Loan.

     

    MASTER
LOAN AGREEMENT - 4

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “GAAP” means generally
accepted accounting principles in the United States set forth in the opinions
and pronouncements of the Accounting Principles Board and the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or such other principles as may be approved
by a significant segment of the public accounting profession in the United
States, that are applicable to the circumstances as of the date of
determination, consistently applied.

     

    “Governmental
Authority” means the United States, any foreign state or nation, or any
state, commonwealth, district, territory, agency, department, subdivision,
court, tribunal or other instrumentality thereof.

     

    “Incipient Default”
means an event that with the giving of notice or passage of time, or both, would
become an Event of Default.

     

    “Indebtedness” means:
(a) all obligations of Borrower for borrowed money; (b) all obligations of
Borrower evidenced by bonds, debentures, notes or similar instruments, or upon
which interest payments are customarily made; (c) all obligations of Borrower
under conditional sale or other title retention agreements relating to property
purchased by Borrower (other than customary reservations or retentions of title
under agreements with suppliers entered into in the ordinary course of
business); (d) all obligations, including without limitation, intercompany
items, of Borrower issued or assumed as the deferred purchase price of property
or services purchased by Borrower (other than trade debt incurred in the
ordinary course of business and due within six months of the incurrence thereof)
which would appear as liabilities on a balance sheet of Borrower; (e) all
obligations of Borrower under take-or-pay or similar arrangements or under
commodities agreements; (f) all Indebtedness of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on, or payable out of the proceeds of production
from, property owned or acquired by Borrower, whether or not the obligations
secured thereby have been assumed; (g) all guaranty obligations of Borrower; (h)
the principal portion of all obligations of Borrower under capital leases; (i)
the maximum amount of all standby letters of credit issued or bankers'
acceptances facilities created for the account of Borrower and, without
duplication, all drafts drawn thereunder (to the extent unreimbursed); and (j)
all obligations of Borrower in respect to any Swap Termination Value of any Swap
Contract between Borrower and any Swap Issuer.  The Indebtedness of
any Person shall include the Indebtedness of any partnership or joint venture in
which Borrower is a general partner or a joint venturer.

     

    “Indebtedness to Total
Capitalization Ratio” means, as of any date of determination, Companies’
Indebtedness, excluding the portion thereof associated with the minority
interest in Timber Funds, divided by the sum of (a) Companies’ Indebtedness
excluding the portion thereof associated with the minority interest in Timber
Funds, plus (b)Adjusted Partner’s Capital.

     

    “Intercompany
Indebtedness” means any Indebtedness of a Borrower that is owing to a
Subsidiary or Related Party.

     

    MASTER
LOAN AGREEMENT - 5

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Laws” means all
ordinances, codes, statutes, rules, regulations, licenses, permits, orders,
injunctions, writs or decrees of any Governmental Authority, and without
limiting the generality of the foregoing, the following are Laws:  the
Internal Revenue Code of 1986 (“IRC”), the Employee Retirement Income Security
Act of 1974 (“ERISA”), the Fair Labor Standards Act (“FLSA”), and the
Comprehensive Environmental Response, Compensation and Liability Act of 1980
(“CERCLA”).

     

    “Lender” means
Northwest Farm Credit Services, FLCA, an association organized under the laws of
the United States, together with its successors and assigns.

     

    “Lien” means any
mortgage, pledge, hypothecation, assignment, deposit arrangement, security
interest, encumbrance, lien (statutory or otherwise), preference, priority or
charge of any kind (including any agreement to give any of the foregoing, any
conditional sale or other title retention agreement, any financing or similar
statement or notice filed under the Uniform Commercial Code as adopted and in
effect in the relevant jurisdiction or other similar recording or notice
statute, and any lease in the nature thereof).

     

    “Loan” means all
principal amounts advanced by Lender to Borrower or on the account of Borrower
or otherwise under the Note and the other Loan Documents evidencing such Loan,
which by its terms is made subject to this Loan Agreement, and all fees or
charges incurred as provided for in the Note and the other Loan Documents, plus
all interest accrued thereon.

     

    “Loan Documents” means
all of the contractual obligations associated with the Loan(s), including but
not limited to: this Loan Agreement; the Note(s); and other documents or
instruments as required by Lender, executed in connection with the Loan(s), and
any extensions, renewals, amendments, substitutions or replacements
thereof.

     

    “Loans” means two or
more Loans.

     

    “Loan Maturity Date”
shall have the meaning indicated in the particular Note for a Loan.

     

    “Loan Segment” shall
have the meaning indicated in the particular Note for a Loan.

     

    “Market Value of
Timberlands” means the value of Fee Timberland as determined by an
appraisal performed by a certified appraiser and acceptable to
Lender.

     

    “Material” means that
which, in reasonable and objective contemplation, will or realistically might
affect the business or property of a Person, or the Person's creditworthiness as
to such business or property, in a significant manner.

     

    “Material Adverse
Effect” means a material adverse effect on (a) the condition (financial
or otherwise), operations, business, assets, liabilities or prospects of
Borrower, (b) the ability of Borrower or its Related Parties to perform any
Material obligation under the Loan Documents to which it is a party, or (c) the
Material rights and remedies of Lender under the Loan Documents.

     

    “Merchantable Timber”
means timber of acceptable quality of species identified in the appraisal
completed for Lender, which are in excess of 35 years of age and which can be
harvested without violation of applicable laws and regulations.

     

    MASTER
LOAN AGREEMENT - 6

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Note” means the note
evidencing a Loan and which contains a promise to pay a sum
certain.

     

    “Notes” means one or
more Notes.

     

    “Organization” means a
corporation, limited liability company, joint venture, firm business trust,
estate, trust, partnership or association, two or more Persons having a joint or
common interest, or any other legal or commercial entity.

     

    “Organization
Documents” means (a) with respect to any corporation, the certificate or
articles of incorporation and the bylaws; (b) with respect to any limited
liability company, the certificate or articles of formation or organization and
operating agreement; and (c) with respect to any partnership, joint venture,
trust or other form of business entity, the partnership, joint venture or other
applicable agreement of formation or organization and any agreement, instrument,
filing or notice with respect thereto filed in connection with its formation or
organization with the applicable Governmental Authority in the jurisdiction of
its formation or organization and, if applicable, any certificate or articles of
formation or organization of such entity.

     

    “Participation
Certificate” means Stock which does not confer voting rights upon the
owner.

     

    “Permitted Liens”
means:

     

    a.           Liens
(other than Liens created or imposed under ERISA) for taxes, assessments or
governmental charges or levies not yet due or Liens for taxes being contested in
good faith by appropriate proceedings for which adequate reserves, determined in
accordance with GAAP, have been established (and as to which the Property
subject to any such Lien is not yet subject to foreclosure, sale or loss on
account thereof);

     

    b.           Statutory
Liens of landlords and Liens of carriers, warehousemen, mechanics, materialmen
and suppliers and other Liens imposed by law or pursuant to customary
reservations or retentions of title arising in the ordinary course of business,
provided that such Liens secure only amounts not yet due and payable or, if due
and payable, are unfilled and no other action has been taken to enforce the same
or are being contested in good faith by appropriate proceedings for which
adequate reserves, determined in accordance with GAAP, have been established
(and as to which the Property subject to any such Lien is not yet subject to
foreclosure, sale or loss on account thereof);

     

    c.           Liens
(other than Liens created or imposed under ERISA) incurred or deposits made by
Borrower in the ordinary course of business in connection with workers'
compensation, unemployment insurance and other types of social security, or to
secure the performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds and other similar
obligations (exclusive of obligations for the payment of borrowed
money);

     

    d.           Liens
in connection with attachments or judgments (including judgment or appeal bonds)
provided that the judgments secured shall, within 90 days after the entry
thereof, have been discharged or execution thereof stayed pending appeal, or
shall have been discharged within 45 days after the expiration of any such
stay;

     

    MASTER
LOAN AGREEMENT - 7

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    e.           Easements,
rights-of-way, restrictions (including zoning restrictions), minor defects or
irregularities in title and other similar charges or encumbrances not, in any
material respect, impairing the use of the encumbered Property for its intended
purposes;

     

    f.           Liens
on Property securing purchase money Indebtedness (including Capital Leases and
obligations under letters of credit) to the extent permitted hereunder, provided
that any such Lien attaches to such Property concurrently with or within 90 days
after the acquisition thereof;

     

    g.          Any
interest of title of a lessor under, and Liens arising from UCC financing
statements relating to, leases permitted by this Loan Agreement and the other
Loan Documents;

     

    h.          Normal
and customary rights of setoff upon deposits of cash in favor of banks or other
depository institutions;

     

    i.          
 Liens existing as of the Closing Date and set forth in a schedule
presented to Lender; provided that no such Lien shall at any time be extended to
or cover any Property other than the Property subject thereto on the Closing
Date;

     

    j.         
  Liens on the FPF Account pursuant to Section 4 hereof;
and

     

    k.           Liens
on Property securing Indebtedness to the extent the Indebtedness is permitted
under Sections 9.03 f.(vi), (vii) or (ix) hereof.

     

    “Person” means an
individual, an Organization or a Governmental Authority.

     

    “Prepayment Fee” shall
have the meaning given in Exhibit C attached hereto.

     

    “Property” or “Properties” means any
interest in any kind of property or asset, whether real, personal or mixed,
tangible or intangible.

     

    “Records” means
correspondence, memoranda, tapes, discs, computer data, papers, certificates,
books, cruise maps and other documents, or transcribed information of any type,
whether expressed in ordinary or machine readable language.

     

    “Regulation U or X”
means Regulation U (12 CFR Part 221, Credit by banks and persons other than
brokers and dealers for the purpose of purchasing or carrying margin stock) or
Regulation X (12 CFR Part 224, Borrowers of securities credit) respectively, to
the Board of Governors of the Federal Reserve System as from time to time in
effect and any successor to all or a portion thereof.

     

    “Related Party or
Parties” means, with respect to any Person, such Person’s Affiliates and
the general partners, directors and officers of such Person and of such Person’s
Affiliates.

     

    MASTER
LOAN AGREEMENT - 8

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    “Responsible Officer”
means the chief executive officer, president, chief financial officer, treasurer
or assistant treasurer of Borrower or the effective equivalent thereof or any
other duly authorized officer.  Any document delivered hereunder that
is signed by a Responsible Officer shall be conclusively presumed to have been
authorized by Borrower and such Responsible Officer shall be conclusively
presumed to have acted on behalf of Borrower.

     

    “Stock” means
uncertificated shares of stock evidencing proprietary interests in Northwest
Farm Credit Services, ACA (“ACA”), an Affiliate of Lender, and all patronage,
distributions and other rights and entitlements related thereto.

     

    “Subsidiary” means, as
to any Person, (a) any corporation more than 50 percent of whose stock of any
class or classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or not at
the time, any class or classes of such corporation shall have or might have
voting power by reason of the happening of any contingency) is at the time owned
by such Person directly or indirectly through Subsidiaries, and (b) any
partnership, association, joint venture or other entity in which such Person
directly or indirectly through Subsidiaries has more than 50 percent equity
interest at any time.  Unless otherwise specified, all references
herein to a “Subsidiary” or “Subsidiaries” shall refer to a Subsidiary or
Subsidiaries of Borrower. For purposes of section 9 of this Loan Agreement,
Subsidiary or Subsidiaries shall include Timber Funds; provided however,
Sections 9.02.a. and 9.03.c.i. shall exclude Timber Funds from such
definition.

     

    “Swap Contract” means
(a) any and all rate swap transactions, basis swaps, credit derivative
transactions, forward rate transactions, commodity swaps, commodity options,
forward commodity contracts, equity or equity index swaps or options, bond or
bond price or bond index swaps or options or forward bond or forward bond price
or forward bond index transactions, interest rate options, forward foreign
exchange transactions, cap transactions, floor transactions, collar
transactions, currency swap transactions, cross-currency rate swap transactions,
currency options, spot contracts, or any other similar transactions or any
combination of any of the foregoing (including any options to enter into any of
the foregoing), whether or not any such transaction is governed by or subject to
any master agreement, and (b) any and all transactions of any kind, and the
related confirmations, which are subject to the terms and conditions of, or
governed by, any form of master agreement published by the International Swap
Dealers Association, Inc., any International Foreign Exchange Master Agreement,
or any other master agreement, including any such obligations or liabilities
under any such master agreement.

     

    “Timber Funds” means,
ORM Timber Fund I, LP, ORM Timber Fund II, Inc. and any future similar
timberland investment entity.

     

    
      
        2.          
Loans.

      

    

     

    2.01       Loans.  Subject to the
terms and conditions set forth herein, Lender agrees to make Loan No. 56548-841
to Borrower.  Borrower agrees to repay the Loan(s) and all of
Borrower’s Obligations under the Loan Documents, according to their
terms.

     

    MASTER
LOAN AGREEMENT - 9

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    2.02        Fees.  Borrower shall
pay Lender’s fees, as set forth in the Note or a separate fee
letter.

     

    2.03        Evidence
of Debt.  The Loan(s) shall
be evidenced by one or more accounts or records maintained by Lender in the
ordinary course of business.  The accounts or records maintained by
Lender shall be conclusive absent manifest error of the amount of the Loans made
by Lender to Borrower and the interest and payments thereon.  Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of Borrower to pay any amount owing with respect
to Borrower’s Obligations.

     

    2.04        Payments
Generally.  All payments to
be made by Borrower shall be made without condition or deduction for any
counterclaim, defense, recoupment or setoff.  Except as otherwise
expressly provided herein, all payments by Borrower hereunder shall be made to
Lender in U.S. Dollars and in immediately available funds as further described
in the Note(s) and according to the terms of the Note(s).

     

    2.05        Accounting
Terms means, except as otherwise provided herein, all accounting terms
used herein shall be interpreted, and all financial statements and certificates
and reports as to financial matters to be delivered to Lender hereunder shall be
prepared in accordance with GAAP, applied on a consistent basis.

     

    
      
        3.           
Stock/Participation
Certificates.

      

    

     

    3.01        Ownership.  Borrower agrees
to acquire and maintain Stock or Participation Certificates in an amount
required by ACA’s Board of Directors, pursuant to its
bylaws.  Borrower hereby grants Lender a first lien security interest
in all Stock or Participation Certificates presently owned or to be acquired by
Borrower.  All right, title and interest in the Stock or Participation
Certificates shall hereby vest in Pope Resources, A Delaware Limited
Partnership, a Delaware limited partnership.

     

    3.02        Voting
Rights.  For so long as
Borrower owns voting Stock, Borrower is entitled to one vote at ACA stockholder
meetings and to participate in the affairs of ACA.  Such vote may be
cast by any stockholder who meets the definition of “farmers, ranchers or
aquatic producers or harvesters” in the Farm Credit Administration
regulations.  Borrower authorizes David L. Nunes to act as Borrower’s
attorney-in-fact for all joint owners of the voting Stock and to cast the vote
or appoint proxies on behalf of Borrower.  In the event that the
attorney-in-fact designated above is unavailable or otherwise unable or
unwilling to act, then Borrower authorizes Thomas M. Ringo to act upon
Borrower’s behalf as attorney-in-fact or such other person as Borrower may
indicate in a written authorization provided to Lender.

     

    3.03        Stock
Conversion.  Borrower
authorizes conversion of any Stock or Participation Certificates into any other
class of Stock or Participation Certificates of ACA as provided by law, and
authorizes ACA’s appropriate officer(s) to record such conversion on ACA’s
books, with full power of substitution.  In an Event of Default, ACA
may retire any Stock/Participation Certificates acquired by Borrower at book
value (not to exceed par value or face amount) and apply the proceeds to the
outstanding balance of any Loan.  When the policies of ACA permit
retirement of excess Stock/Participation Certificates, ACA, at its sole
discretion, may elect to retire and apply excess Stock/Participation
Certificates to Borrower’s Obligations, or if permitted by ACA’s policies,
excess Stock or Participation Certificates may be applied upon request by
Borrower.

     

    MASTER
LOAN AGREEMENT - 10

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    3.04        Patronage.  Only the portion
of a Loan held by Lender for its own account and not subject to participation
shall be eligible for patronage or equity distributions of any kind in
accordance with the bylaws, practices and procedures of ACA. To the extent a
participation in any portion of a Loan is sold at any time, such portion so
participated may not be eligible for patronage distributions of ACA or its
successors or assigns.

    


    4.           
FPF
Account.  If requested by
Borrower, Lender may open and maintain an FPF Account for Borrower on any
Loan.  An FPF Account or accounts will be held, applied or withdrawn
in accordance with the following terms and conditions.  Payments will
be accepted into an FPF Account and held for application on Loans with, or
serviced by, Lender.  Interest will accrue on FPF Account balances at
such minimum balances to be determined by Lender, from the date payments were
made into an FPF Account.  A variable interest rate, subject to
adjustment in the sole discretion of Lender, will be paid on FPF Account(s). The
rate paid on funds held in any FPF Account will not exceed the rate paid by
Borrower on the related Loan.

    


    The
maximum account balance for each FPF Account shall be subject to the limitations
set forth below.

    


    a.           The
sum which may be held in an FPF Account associated with an operating or
revolving line of credit Loan shall not exceed the lesser of the Note amount or
the actual maximum outstanding balance on that Loan during the previous 12
months. Lender reserves the right to further limit the maximum FPF Account
balance in the event a Borrower’s historical Note usage is significantly less
than the lesser of their maximum outstanding balance or the Note commitment
amount;

    


    b.           For
all other Loans, the maximum amount that may be held in the FPF Account shall
not exceed the outstanding principal balance on the associated Loan or some
other amount as may be determined by Lender.

    


    c.           Provided
however, amounts held in an FPF Account for a given Loan may, at Lender’s
option, be limited to a pro rata amount equal to Lender’s ratable share if the
Loan is participated with other lenders.

    


    Funds
will be applied to Borrower’s Obligations on any Loan covered by this Loan
Agreement at Borrower’s direction or when any payment under any Loan covered by
this Loan Agreement becomes due and payable. Application of funds to a Loan does
not relieve Borrower from the obligation to make all payments as provided for in
the Loan Documents. Funds may be returned to Borrower for purposes for which
Lender would make or increase Loans to Borrower, upon written request or upon
request pursuant to Lender’s electronic funds transfer procedures.

    


    MASTER
LOAN AGREEMENT - 11

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Funds
held in any FPF Account are uninsured. Funds are protected only by the financial
condition of Lender.  In the event Lender were to become insolvent and
liquidated, the funds in Borrower’s FPF Account would be applied against any
outstanding Loan of Borrower.  Any funds in excess of the total
outstanding Loan balances would be at risk and subject to the claims of
creditors of Lender.

     

    Borrower
hereby grants to Lender a first lien security interest in any FPF Account
established or to be established by or on behalf of Borrower related to any
Loan.  To the extent allowed by law, Borrower authorizes the filing of
and appoints Lender as its attorney-in-fact, coupled with an interest, for the
purpose of executing and filing financing statements and similar documents that
may, in Lender’s reasonable judgment, be necessary or advisable for perfecting,
continuing and reperfecting its security interest.  Borrower further
acknowledges and agrees that in the Event of Default under any Loan covered by
this Loan Agreement, Lender has a right of set-off against all funds in
Borrower’s FPF Accounts.  All conditions applicable to FPF Accounts
are subject to change and the program is subject to termination at Lender’s sole
discretion.

     

    5.           
General
Authorization.  Borrower hereby authorizes any one of the
following named individuals to request funds be deposited or disbursed from any
Loan Borrower may have with Lender, to request on behalf of Borrower, advances
under the Loans, to execute any notice in order to effect prepayment, repricing
or payment of any Loan Segment (as that term may be defined in a given Note)
under the Note(s), to request retirement of Stock under any Stock retirement
program Lender may have in effect, and other Loan servicing requests, including
deposits to and withdrawals from any FPF Account.  Individuals
authorized hereunder:  a Responsible Officer or any other
individual(s) as authorized by Borrower in a written authorization provided to
Lender.  Any such request shall be conclusively presumed to have been
made to or for the benefit of Borrower.

     

    6.            Conditions
Precedent.  The obligation of Lender to close a Loan is subject
to satisfaction of the following conditions precedent by Borrower, on or before
the Closing Date or to waiver thereof by Lender.

     

    
      6.01       
Documents Required for
Closing.

    

     

    a.           Borrower
and all other required parties shall have executed where appropriate and
delivered to Lender, on or prior to a Closing Date, the applicable Loan
Documents, each in form and substance satisfactory to Lender;

     

    b.           A
certified (as of the applicable Closing Date) copy of resolutions, or
equivalent, of the governing body of each Organization signing a Loan Document,
authorizing the execution, delivery and performance of each of the Loan
Documents to which it is a party and providing Lender an incumbency certificate
for any Person authorized to execute the Loan Documents;

     

    c.           A
certified (as of the applicable Closing Date) copy of the current Organization
Documents including any amendments thereto, of each such Person, together with a
certificate (dated as of the Closing Date) of each such Person to the effect
that such Organization Documents have not been amended since the date of the
aforesaid certification;

     

    MASTER
LOAN AGREEMENT - 12

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    d.           A
certificate (as of the most recent date practicable) of the relevant Secretary
of State as to the current existence of each such Person, a certificate (as of
the most recent date practicable) of the Secretary of State of each state in
which the business activities or Property of such Person requires qualification
as a foreign corporation or entity, as the case may be, and that such Person is
duly qualified to transact business in that state as a foreign corporation or
entity, as the case may be;

     

    e.           The
written opinion of the outside counsel for Borrower, dated as of the applicable
Closing Date and addressed to Lender and any participating lenders as Lender may
request, in form satisfactory to Lender, to the effect that after due
inquiry:

     

    i.           Borrower
is a limited partnership duly formed and validly existing under Delaware law,
and is duly qualified to do business as a foreign limited partnership in the
State of Washington;

     

    ii.          Borrower
has all necessary partnership power and authority under the Certificate, the
Partnership Agreement, and the Delaware RULPA to enter into, and to perform its
obligations under, each of the Loan Documents;

     

    iii.         Borrower
has authorized, by all necessary partnership action on the part of Borrower, the
execution and delivery of, and the performance of the transactions contemplated
by, each of the Loan Documents, and Borrower has executed and delivered each of
the Loan Documents;

     

    iv.         Each
of the Loan Documents constitutes the valid and binding obligation of Borrower,
enforceable against Borrower in accordance with its terms; and

     

    v.          The
execution and delivery by Borrower of, and the performance of the transactions
contemplated by, each of the Loan Documents do not (a) violate Borrower’s
Certificate or its Partnership Agreement; (b) to counsel's knowledge, breach, or
result in a default under, any existing obligation of Borrower under any
material agreement or instrument to which Borrower is a party; (c) to
counsel's  knowledge, breach or otherwise violate any existing
obligation of Borrower under any court order that names Borrower and is
specifically directed to it or its property; or (d) are not prohibited by, nor
do they subject Borrower to the imposition of a fine, penalty or other similar
sanction for a violation under, any applicable statutes or
regulations;

     

    f. 
          Evidence, as
requested by Lender, that no condition shall exist which would constitute a
Material Adverse Effect, in the reasonable opinion of Lender, in the business,
operation or financial conditions of Borrower since the date of the applicable
Loan commitment;

     

    g.           If
real Property is Collateral for one or more loans, an appraisal of the
Collateral acceptable to Lender as determined by Lender in accordance with its
policies and procedures, in an amount satisfactory to Lender.  Lender
will engage a state certified appraiser to perform the appraisal.  The
appraisal shall be for the sole and exclusive use of Lender;

     

    MASTER
LOAN AGREEMENT - 13

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    h.           If
real Property is Collateral for one or more Loans, a title insurance commitment
acceptable to Lender;

     

    i.    
       Environmental report satisfactory to
Lender;

     

    j.     
      Commercial general liability insurance with
Borrower as the named insured and Lender as additional insured in commercially
reasonable amounts and terms and issued by an insurer or insurers reasonably
satisfactory to Lender;

     

    k.           Evidence
that all other actions which, in the opinion of Lender, are reasonably necessary
to perfect and protect the security interests created by the Loan Documents have
been taken; and

     

    l.       
    Copies of the most recent timberland appraisals covering
all fee timber and timberlands currently owned by Borrower.

     

    6.02        Conditions
Precedent to Advances Under Any Loan.  The obligation of
Lender to fund any advance under any Loan is subject to the following additional
conditions precedent:

     

    a.           Evidence
as requested by Lender that no condition shall exist which would constitute a
Material Adverse Effect, in the opinion of Lender, in the business, operation or
financial conditions of Borrower at the time of the advance;

     

    b.           Borrower
shall have complied with all conditions precedent contained herein and in
Lender's escrow instructions and commitment letters for any Loan, if
any;

     

    c.           Payment
by Borrower to Lender of the following amounts:

     

    i.           Any
unpaid balance of any Loan fees; and

     

    ii.          All
unpaid costs and expenses to Lender; and

     

    d.           All
representations and warranties made in the Loan Documents are true and
correct.

     

    
      
        7.            
Liens.

      

    

     

    7.01       
Creation
of Liens.  As security for
the prompt payment and performance of Borrower’s Obligations, Borrower hereby
agrees to assign and pledge to Lender all of its right, title and interest in
and to, and grants to Lender, Liens upon the Collateral.  In order to
further evidence such Liens, upon Lender’s request, Borrower shall execute,
acknowledge where required for perfection purposes, and deliver on or before the
Closing Date, the Deeds of Trust, consents, notices, subordinations,
indemnities, assignments, security agreements, financing statements and other
Loan Documents required by Lender.

     

    MASTER
LOAN AGREEMENT - 14

    Pope Resources, A Delaware Limited
Partnership; Customer No. 56548

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    7.02        Perfection
of Liens.  Borrower promises
and hereby agrees to:

     

    a.           Authorize
all financing statements, amendments and continuation statements and other
documents as Lender may from time to time require in order to perfect, continue
and reperfect its Lien in the Collateral;

     

    b.           Pay
for or reimburse Lender for all reasonable costs of closing, including without
limitation, all taxes, costs of filing the financing statements or recording the
Deeds of Trust in such public offices as Lender may designate; and

     

    c.           Take
such other steps as Lender may reasonably direct, including the noting of
Lender's Lien on the Collateral and on any certificates of title therefore, to
perfect Lender's Lien upon the Collateral.

     

    The
original, a copy or a memorandum of this Loan Agreement may be filed or recorded
as a financing statement if Borrower fails or refuses to comply with the
requirements of this Loan

     

    
      
        8.            Representations and
Warranties.

      

    

     

    8.01        Representations
and Warranties of Borrower.  To induce Lender
to enter into this Loan Agreement, Borrower represents and warrants to Lender as
follows:

     

    a.           Borrower
is a validly formed limited partnership that has been duly organized and exists
and is in good standing under the laws of the State of Delaware, the
jurisdiction in which it was organized, has the lawful power to own its
properties and to engage in the business it conducts, and is duly qualified to
do business in all other states where the nature of the business transacted by
it or Property owned by it makes such qualification necessary, except to the
extent that the failure to qualify would not create a Material Adverse
Effect;

     

    b.           Borrower
is not in default with respect to any Contractual Obligation so as to have a
Material Adverse Effect on the consolidated financial condition of
Borrower;

     

    c.           The
execution, delivery and performance of the Loan Documents will not immediately
or with the passage of time, or the giving of notice, or both:

     

    i.           Violate
the Organizational Documents governing Borrower, or violate any Laws or result
in a default under the terms of any Contractual Obligation to which Borrower is
a party or by which Borrower or its respective Properties is bound;
or

     

    ii.           Result
in the creation or imposition of any Lien upon any of the Property of Borrower,
except the Liens in favor of Lender;

     

    d.           Borrower
has the power and authority to enter into and perform the Loan Documents to
which it is a party or is bound, and to incur obligations, and has taken all
action necessary to authorize the execution, delivery and performance of the
Loan Documents to which it is a party or is bound;

     

    MASTER
LOAN AGREEMENT - 15

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    e.           The
Loan Documents, when delivered, will be legally valid and binding Contractual
Obligations, enforceable in accordance with their respective terms;

     

    f.     
      Borrower has good and marketable title to
all of its Property and such Property is not subject to any Lien, except for
Permitted Liens;

     

    g.           Borrower’s
financial statements have been and will be prepared and presented and hereafter
will present fully and fairly the financial condition of Borrower on the dates
thereto and the results of operations for the periods covered
thereby.  There have been no conditions so as to create a Material
Adverse Effect in the financial condition or business of Borrower since the date
of Borrower’s most recent quarterly financial statements, as filed with the
Securities and Exchange Commission;

     

    h.           Except
as otherwise permitted herein, Borrower has filed all federal, state and local
tax returns and other reports that it was required by Law to file prior to the
date hereof and that are Material to the conduct of its business; has paid or
caused to be paid all taxes, assessments and other similar governmental charges
that were due and payable prior to the date hereof; have made adequate provision
for the payment of taxes which are accruing but not yet payable; and have no
knowledge of any deficiency or additional assessment in a Material amount in
connection with any taxes which has not been provided for on their
books;

     

    i.       
    To the best of its knowledge, after due diligence in
investigating relevant matters, except as otherwise disclosed or to the extent
that the failure to comply would not be Material to the conduct of the business
of Borrower, it has complied with all applicable laws with respect
to:

     

    i.           The
products that it produces or sells or to the services it performs;

     

    ii.          The
conduct of its businesses; and

     

    iii.         The
use, maintenance and operation of the Properties owned or leased by
it;

     

    j.           No
representation or warranty by Borrower, as to its best knowledge, after due
diligence in investigating relevant matters, contained herein or in any
certificate or other document furnished pursuant hereto, or in the Loan
Documents, contains any untrue statement of Material fact or omits to state a
Material fact necessary to make such representation or warranty not misleading
in light of the circumstances under which it was made;

     

    k.           To
the best knowledge of Borrower, after due diligence in investigating relevant
matters, each consent, approval or authorization of, or filing, registration or
qualification with, any Person required to be obtained or effected by Borrower
in connection with the execution and delivery of the Loan Documents, or the
undertaking or performance of any obligation thereunder, has been duly obtained
or effected;

     

    MASTER
LOAN AGREEMENT - 16

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    l.           No
part of the proceeds of the Loan(s) will be used, directly or indirectly, for
the purpose of purchasing or carrying or trading in any securities in violation
of Regulation U.  If requested by Lender, Borrower shall furnish to
Lender a statement to the foregoing effect in conformity with the requirements
of FR Form U-1 referred to in Regulation U.  No indebtedness being
reduced or retired out of the proceeds of the Loans was or will be incurred for
the purpose of purchasing or carrying any margin stock within the meaning of
Regulation U.  “Margin stock” within the meanings of Regulation U does
not constitute more than 25 percent of the value of the consolidated assets of
Borrower.  None of the transactions contemplated by this Loan
Agreement (including without limitation, the direct or indirect use of the
proceeds of the Loans) will violate or result in a violation of the Securities
Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, or
regulations issued pursuant thereto, or Regulation U or X;

     

    m.          Borrower
is not subject to regulation under the Public Utility Holding Company Act of
2005 or the Federal Power Act or the Investment Company Act of 1940, each as
amended.  In addition, Borrower is not (i) an “investment company”
registered or required to be registered under the Investment Company Act of
1940, as amended, and is not controlled by such a company, or (ii) a “holding
company,” or a “subsidiary company” of a “holding company,” or an “affiliate” of
a “holding company” or of a “subsidiary” of a “holding company,” within the
meaning of the Public Utility Holding Company Act of 2005, as
amended;

     

    n.           Borrower
has obtained all material licenses, permits, franchises or other governmental
authorizations necessary to the ownership of its Property and to the conduct of
its businesses;

     

    o.           Borrower
is not in violation of any Law, which violation could reasonably be expected to
have a Material Adverse Effect; and

     

    p.           Borrower
is current with all Material reports and documents, if any, required to be filed
with any state or federal securities commission or similar agency and is in full
compliance in all Material respects with all applicable rules and regulations of
such commissions.

     

    8.02        Representations
and Warranties of Lender.  Lender represents
and warrants to Borrower as follows:

     

    a.           Lender
is a legal entity duly organized, validly existing and is in good standing under
the Farm Credit Act of 1971, as amended, has the necessary power and authority
to conduct the business in which it is currently engaged, is duly qualified to
conduct its business and is in compliance with all Material requirements of law,
except to the extent that failure to comply therewith would not, in the
aggregate, be reasonably expected to have a Material Adverse Effect on the
operations of Lender.

     

    b.           Lender
and each person executing this Loan Agreement on behalf of Lender has the
necessary power and authority, and the legal right, to make and deliver this
Loan Agreement, and has taken all necessary action to authorize the conditions
of this Loan Agreement and to authorize the execution, delivery and performance
thereof.  No consent or authorization of, filing with, notice to or
other similar act by or in respect of any Governmental Authority or any other
Person is required to be obtained or made by or on behalf of Lender in
connection with the execution, delivery, performance, validity or enforceability
of this Loan Agreement.  This Loan Agreement has been duly executed
and delivered on behalf of Lender.  This Loan Agreement constitutes a
legal, valid and binding Loan Agreement enforceable against Lender in accordance
with its terms.

     

    MASTER
LOAN AGREEMENT - 17

    Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    8.03      
Survival.  All
of the representations and warranties set forth in Subparagraph 7.01 shall
survive until all of Borrower’s Obligations are paid and satisfied in full and
all offsets, defenses or counterclaims that Borrower has or may claim to have,
have been released or discharged.

     

    
      
        	
                9.

              	
                Covenants.

              


      

    

     

    9.01      
Affirmative
Covenants.  Borrower hereby covenants and agrees that so
long as this Loan Agreement is in effect or any of Borrower’s Obligations shall
remain outstanding, and until all of the commitments hereunder or in the Notes
and other Loan Documents have been terminated, Borrower shall maintain the
following covenants:

     

    a.      
Loan
Purpose.  Borrower shall use the proceeds of a Loan only for
the purposes set forth in the Note evidencing such Loan, and will furnish Lender
such evidence as it may reasonably require with respect to such
use.

     

    b.      
Financial
Reporting/Notices.  Borrower shall furnish Lender, in form and
detail satisfactory to Lender, during the term of the Loan(s):

     

               i.           As
soon as available, but in any event within 90 days after each Fiscal Year-End: a
consolidated balance sheet, the related consolidated statement of shareholders’
(or equivalent) equity and cash flows and the related consolidated statement of
income or operations for such Fiscal Year of Borrower and its Subsidiaries as of
the end of such Fiscal Year, setting forth in each case, in comparative form,
the figures for the previous Fiscal Year, all in reasonable detail and prepared
in accordance with GAAP.  Such consolidated statements shall be
audited and accompanied by a report and opinions of an independent certified
public accountant, reasonably acceptable to Lender, which report and opinion
shall be prepared in accordance with generally accepted auditing standards and
shall not be subject to any “going concern” or like qualification or exception
or any qualification or exception as to the scope of such audit;

     

               ii.          As
soon as available, but in any event within 45 days after each of the first three
Fiscal Quarter-Ends, a consolidated balance sheet, the related consolidated
statement of cash flows and the related consolidated statement of income or
operations for such Fiscal Quarter-End of Borrower and its Subsidiaries, and for
the portion of Borrower’s Fiscal Year then ended, setting forth in each case, in
comparative form, the figures for the corresponding Fiscal Quarter-End of the
previous Fiscal Year and the corresponding portion of the previous Fiscal Year,
all in reasonable detail;

     

               iii.         Concurrently
with the delivery of the financial statements referred to in Sections 9.01.b.i
and ii, a duly completed Compliance Certificate, signed by a Responsible
Officer, certifying that such financial statements are fairly presenting the
financial condition, results of operations, shareholders’ (or equivalent) equity
and cash flows of Borrower and its Subsidiaries in accordance with GAAP (subject
only to normal year-end audit adjustments and the absence of footnotes with
respect to financial statements provided under Section 9.01.b.ii.).  A
sample Compliance Certificate is attached hereto as Exhibit
A.  Borrower’s Compliance Certificate shall be accompanied by a
Covenant Compliance Worksheet, a sample of which is attached hereto as Exhibit
B, signed by a Responsible Officer;

    

      MASTER
LOAN AGREEMENT - 18

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548

       

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

               iv.     
   Promptly upon receipt thereof, copies of written
communications of any material weaknesses or significant deficiencies in
internal controls over financial reporting submitted to Borrower’s audit
committee by its independent certified public accountants in connection with an
audit or review of Borrower and the responses of management to such
communications;

     

               v.        
 Promptly upon the request of Lender, (1) copies of any filings and
registrations with, and reports to or from, the Securities Exchange Commission,
or any successor agency, and copies of all financial statements, proxy
statements, notices and reports as Borrower shall send to its shareholders, and
(2) all reports and written information to and from the United States
Environmental Protection Agency, or any state or local agency responsible for
environmental matters, the United States Occupational Health and Safety
Administration, or any state or local agency responsible for health and safety
matters, or any successor agencies or authorities concerning environmental,
health or safety matters that are Material to Borrower;

     

               vi.      
 Upon Borrower’s obtaining knowledge thereof, Borrower shall give written
notice to Lender immediately of (1) the occurrence of an event or condition
consisting of an Event of Default or Incipient Default, specifying the nature
and existence thereof and what action Borrower proposes to take with respect
thereto, and (2) the occurrence of any of the following with respect to
Borrower:  (a) the pendency or commencement of any litigation,
arbitral or governmental proceeding against Borrower or a Related Party which if
adversely determined is likely to have a Material Adverse Effect, (b) the
institution of any proceedings against Borrower or a Related Party with respect
to, or the receipt of notice by such Person of potential liability or
responsibility for violation, or alleged violation, of any federal, state or
local law, rule or regulation, including but not limited to, environmental Laws,
the violation of which would likely have a Material Adverse Effect;

     

               vii.     
 By January 31st of each
year, a timber harvest plan describing the proposed harvest of timber from the
real property Collateral for the ensuing calendar year, which will specify the
total timber volume by species to be harvested from the real property Collateral
and the location, by tract, of the harvest; and

     

               viii.    
 Within 45 days of the end of each of the first three Quarters, a timber
harvest report detailing all timber harvest activity on the real property
Collateral, including, at a minimum, the total volume of logs by species scaled
and reconciliation of actual activity compared to the timber harvest plan for
harvest and log sales by species and by tract.

     

    c.      
Insurance.  Borrower shall
maintain, for itself and its Subsidiaries, general liability insurance with
insurance companies reasonably acceptable to Lender in such amounts, with such
terms and covering such risks as are usually carried by companies engaged in the
same or similar business and similarly situated, and make such increases in the
type or amount of coverage as Lender may reasonably request.  At the
request of Lender, copies of such policies (or such other proof of compliance
with this subsection as may be satisfactory to Lender) shall be delivered to
Lender.

     

    
      MASTER
LOAN AGREEMENT - 19

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548

    

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    d.      
Taxes.  Borrower shall pay,
or cause to be paid, for itself and its Subsidiaries, before they become
delinquent and where the failure to pay or discharge such amounts will have a
Material Adverse Effect, all taxes imposed upon it or on any of their Property
or that it is required to withhold and pay, except when contested in good faith
by appropriate proceedings with adequate reserves therefore having been set
aside on their books.  Notwithstanding the foregoing right of contest,
such taxes will be paid whenever foreclosure on any Lien that has attached
appears imminent.

     

    e.      
Records/Inspection.  Borrower
shall keep accurate and complete Records of its operations, consistent with
sound business practices.  Borrower shall permit Lender or its
representatives, agents or independent contractors, during normal business hours
or at such other times as Borrower and Lender may agree to: (i) inspect or
examine Borrower’s properties, books and records; (ii) make copies of Borrower’s
books and records; and (iii) discuss Borrower’s affairs, finances and accounts
with Borrower’s officers, employees and independent certified public
accountants.  Without limiting the foregoing, Borrower shall permit
Lender, through an employee of Lender or through an independent third party
contracted by Lender, to conduct on an annual basis, a review of the
Collateral.  Borrower further agrees to pay to Lender a Collateral
inspection fee designated by Lender (not to exceed $750.00 per day, per
reviewer, with the number of reviewers to be reasonably determined by Lender)
and reimburse Lender’s reasonable costs and expenses incurred in connection with
such Collateral inspection reviews.

     

    f.      
Appraisal of
Collateral.  Lender may, at any time, request an appraisal of
Collateral.  Borrower shall be responsible for the cost of the first
two appraisals requested by Lender after the Closing Date and any subsequent
appraisals requested by Lender in the Event of Default or Incipient
Default.  Lender shall be responsible for the cost of any subsequent
appraisals, provided there is no Event of Default or Incipient
Default.

     

    g.      
Release of
Collateral.  Provided there is no Event of Default or Incipient
Default, Lender may provide Borrower a partial release from its lien on the
Collateral pursuant to a written request from Borrower.  If granted by
Lender, Borrower shall bear all costs thereof, including but not limited to
appraisals, if reasonably required, reasonable legal fees and recording
fees.  If an appraisal is required as a condition for a partial
release, such appraisal shall not count toward the lifetime limit of two
appraisals Borrower shall be obligated for pursuant to Section 9.01.f.
above.  The partial release may be subject to and require an
additional Timber Cutting Payment, payable at the time of such
release.  No release will be provided if the proposed Collateral to be
released is integral to Lender’s Collateral pool, as reasonably determined by
Lender.

     

    h.      
Laws.  Borrower
shall comply with all Laws applicable to it and its Property if noncompliance
with any such Law would have a Material Adverse Effect.

     

    
      MASTER
LOAN AGREEMENT - 20

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548

    

    
 

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

     

    i.       
Property
Maintenance.  Borrower shall maintain and preserve its Property
in good repair, working order and condition, normal wear and tear and casualty
and condemnation excepted, and will make, or cause to be made, in such
Properties and equipment from time to time, all repairs, renewals, replacements,
extensions, additions, betterments and improvements as may be needed or proper,
to the extent and in the manner customary for companies in similar
businesses.  Borrower shall perform in all material aspects, all of
its obligations under the terms of all Material agreements, indentures,
mortgages, security agreements or other debt instruments to which it is a party
or which it is bound.

     

    j.       Indebtedness.  Borrower
shall pay when due (or within applicable grace periods) all Indebtedness due
third persons, except when the amount is being contested in good faith by
appropriate proceedings and with adequate reserves being set aside on their
books.

     

    k.      
Subordination.  Borrower
hereby subordinates all Intercompany Indebtedness to Borrower’s Obligations to
Lender; provided however, so long as there exists no Event of Default or
Incipient Default, Borrower may pay such Intercompany Indebtedness in the
ordinary course of its businesses.

     

    l.       
Change of
Location.  Borrower shall provide Lender with reasonable notice
in advance of any change in its headquarters location.

     

    m.     
Additional
Documents.  From time to time, Borrower shall execute and
deliver to Lender such additional documents and will provide such additional
information as Lender may reasonably require to carry out the terms of this Loan
Agreement and be informed of the status and affairs of Borrower.

     

    9.02      
Financial
Covenants.  Borrower hereby covenants and agrees that so
long as this Loan Agreement is in effect or any of Borrower’s Obligations shall
remain outstanding, Borrower shall comply with and maintain the following
financial covenant, to be measured as follows:

     

    a.       Indebtedness
to Total Capitalization Ratio shall be less than or equal to 0.30:1.00, to be
measured as of each Fiscal Year-End, beginning with the 2009 Fiscal
Year;

     

    b.       Consolidated
Cash Flow Coverage Ratio shall be greater than or equal to 1.1:1 to be measured
quarterly on a four quarter rolling basis, beginning with the 2011 Fiscal
Year-End financial statements;

     

    c.       The
Loan to appraised value shall not exceed 50% during the life of the
Loan;

     

    d.     
 The principal balance of the Loan per MBF of merchantable timber volume on
Collateral shall not exceed $200/MBF.  It is estimated the Loan
balance / MBF at loan closing will be $129/MBF.  The Loan balance /
MBF will be measured annually.  Borrower shall provide an update to
the Collateral showing the final harvest amount for the year, plus annual
growth.  Borrower may add or substitute collateral satisfactory to
Lender to maintain the Loan balance to merchantable timber volume
relationship;

     

    
      MASTER
LOAN AGREEMENT - 21

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548

       

    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    9.03      
Negative
Covenants.  Borrower hereby covenants and agrees that so
long as this Loan Agreement is in effect or any of Borrower’s Obligations shall
remain outstanding, and until all of the commitments hereunder have terminated,
unless the prior written consent of Lender is obtained, which consent shall not
be unreasonably withheld, Borrower shall not and shall not allow any of its
Subsidiaries to:

     

    a.   
   Liens.  Create, assume or suffer to exist, and
will not permit any of its Subsidiaries or any owner of Collateral to create,
assume or suffer to exist, any Lien on any Collateral now owned or hereafter
acquired by it other than Permitted Liens.

     

    b.       Nature of
Business.  Substantively alter the nature, character or conduct
of its business conducted by it.

     

    c.       Consolidation, Merger, Sale or Purchase of
Assets.

     

     
i.           Dissolve,
liquidate or wind up its affairs, or enter into any transaction of merger or
consolidation; provided however, that, so long as no Event of Default or
Incipient Default would be directly or indirectly caused as a result thereof,
Borrower may merge or consolidate with any of its Subsidiaries, provided that
Borrower is the surviving entity;

     

      ii.           Make
an Asset Disposition that would have a Material Adverse Effect on the financial
condition of Borrower.

     

    d.       Fiscal Year; Organizational
Documents.  Change its Fiscal Year-End or amend, modify or
change its Organization Documents, which would result in a Material Adverse
Effect.

     

    e.       Accuracy of
Reporting.  Furnish any certificate or other document to Lender
that contains any untrue statement of Material fact or that omits to state all
Material facts necessary to make it not misleading in light of the circumstances
under which it was furnished.

     

    f.      
 Indebtedness.  Create,
assume, incur, suffer to exist or otherwise become or remain liable in respect
of any Indebtedness other than: (i) Indebtedness evidenced by the Note(s); (ii)
existing Indebtedness, listed on a schedule provided to Lender as of the Closing
Date, and in the case of the line of credit with Lender in place on the date of
this Loan Agreement, any subsequently utilized commitment under that line of
credit; (iii) purchase money Indebtedness, including capital leases, not to
exceed $1,000,000.00 annually; (iv) Indebtedness related to Permitted Liens; (v)
Indebtedness incurred or assumed after the date hereof which has been
subordinated to the obligations of Borrower to Lender hereunder and under the
Note(s) on terms and conditions satisfactory to Lender; (vi) Timber Fund
Indebtedness, to the extent allowed under the governing documents of such Timber
Fund; (vii) additional secured Indebtedness of a Subsidiary (other than that
provided for under Section 8.03 f.(vi) above) in aggregate over the term of the
Loan(s), not to exceed $8,000,000.00; (viii) additional unsecured Indebtedness,
in the aggregate over the term of the Loan(s), not to exceed $10,000,000.00;
provided, however, total
additional Indebtedness allowed under (vii) and (viii) above shall not exceed
$10,000,000.00, in aggregate, over the term of the Loan(s); and (ix)
obligations to secure the
performance of bids, trade contracts (other than for borrowed money), leases,
statutory obligations, surety and appeal bonds, performance bonds and other
obligations of a like nature incurred in the ordinary course of
business.

     

    
      MASTER
LOAN AGREEMENT - 22

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548


    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    g.           Material Adverse
Effect.  Create, incur or suffer to exist, a Material Adverse
Effect.

     

    10.        
Default.

     

    10.01     Events
of Default.  Time is of the essence in the performance of the
Loan Documents.  The occurrence of any one or more of the following
events shall constitute an Event of Default under the Loan
Documents:

     

    a.       Borrower
fails to make any payment of principal, interest or other costs, fees or
expenses when due or to perform any obligation or covenant as and when required
under the Loan Documents for the Loan(s) or any loan documents for any other
loan(s) Borrower, or any of them, may have with Lender.

     

    b.       Any
financial statement, representation, warranty or certificate made or furnished
by Borrower to Lender in connection with a Loan, or as an inducement to Lender
to enter into a Loan is Materially false, incorrect or incomplete when
made.

     

    c.       Any
Bankruptcy Event shall occur with respect to Borrower, or any Bankruptcy Event
that has a Material Adverse Effect on Borrower shall occur with respect to any
of Borrower’s Subsidiaries.

     

    d.       This
Loan Agreement or any other Loan Document ceases to be valid and binding on
Borrower or is declared null and void, or the validity or enforceability thereof
is contested by Borrower, or Borrower denies that it has any or further
liability under any of the Loan Documents.

     

    10.02     Notice and Opportunity to
Cure.  Notwithstanding any other provision of the Loan
Documents, Lender shall not accelerate the maturity of a Loan (a) because of a
monetary default (defined below), unless the monetary default is not cured
within ten days of its due date, or (b) because of a nonmonetary default
(defined below), unless the nonmonetary default is not cured within 30 days
after (i) the date on which Lender transmits by facsimile, mails or delivers
written notice of the nonmonetary default to Borrower, or (ii) the date on which
Borrower notifies Lender (verbally or in writing) of the nonmonetary
default.  For purposes of this Loan Agreement, the term “monetary
default” means a failure by Borrower to make any payment required of it pursuant
to the applicable Note or any other Loan Document, and the term “nonmonetary
default” means a failure by Borrower or any other Person to perform any
obligation contained in the Loan Documents, other than the obligation to make
payments provided for in the Loan Documents.

     

    
      MASTER
LOAN AGREEMENT - 23

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548


    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      	
              11.

            	
              Prepayment and Breakage
      Fees.

            


    

     

    
      	
              11.01

            	
              Prepayment
      Fee.

            


    

     

    a.       Exemption to Prepayment
Fee.  Principal prepayments made while a Loan or Loan Segment
is priced under the Base Rate shall not be subject to a Prepayment
Fee.  In addition, there is no Prepayment Fee for any prepaid
principal if a prepayment is received on a Fixed Rate Maturity Date or LIBOR
Maturity Date, as applicable, for the Loan or Loan Segment being
prepaid.  Other prepayments of principal shall be subject to a
Prepayment Fee.

     

    b.       “Prepayment”
Defined.  “Prepayment” shall mean any instance wherein the
indebtedness is partially or fully satisfied in any manner prior to a payment
due date whether voluntarily or involuntarily (excluding scheduled payments that
have been paid) pursuant to the terms of the Loan
Documents.  Prepayment shall include, but not be limited
to:  (i) any payment after an Event of Default under the Loan
Documents; (ii) payment to Lender by any holder of an interest in any
Collateral; (iii) any payment after the Loan Maturity Date is accelerated for
any reason; (iv) payment resulting from any sale or transfer of Collateral
pursuant to foreclosure, sale under power, judicial order or trustee’s sale; and
(v) payment by sale, transfer or offsetting credit in connection with or under
any bankruptcy, insolvency, reorganization, assignment for the benefit of
creditors or receivership or similar proceedings under any statute of the United
States or any state thereof involving Borrower, Guarantors and or the
Collateral.  In the event of any acceleration of the Loan Maturity
Date, the amount due hereunder shall include the charge which would be due under
the Prepayment Fee in the event of a voluntary prepayment at the time of such
acceleration, and the date of acceleration of the Loan Maturity Date will be
deemed to be the date of prepayment.

     

    c.       Prepayment Fee.  The
“Prepayment Fee” is an amount intended to reasonably compensate Lender for the
loss of the intended benefit of Lender’s bargain in the case of a
prepayment.  Borrower and Lender intend that the principal balance of
each Loan Segment will yield to Lender an annual return after the date the Loan
Segment is prepaid of not less than the annual return for the period when the
interest rate is fixed.  In the event of a prepayment, Lender will
lose the intended benefit of its bargain.  Accordingly, the Prepayment
Fee shall be payable, on demand, and shall be an amount calculated on a
make-whole basis, consistent with the procedure described in Exhibit C
hereof.

     

    11.02     Breakage Fee.  In the
event Borrower provides Lender Notice that Loan principal is to be prepaid,
after which Borrower revokes such Notice, then Borrower shall immediately pay
Lender, on demand, a Breakage Fee in an amount calculated on a make-whole basis,
consistent with the procedure described in Exhibit C hereof.

     

    11.03     Participation.  Participant(s),
if any, may calculate a Prepayment Fee or Breakage Fee using the calculation on
a make-whole basis, consistent with the procedure described on Exhibit C hereof,
provided however, a participant may use a different value than Lender for the
Initial and Final Reference Rates, as those terms are described in Exhibit C
hereof.

     

    
      MASTER
LOAN AGREEMENT - 24

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548


    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    
      	
              12.

            	
              Enforcement and Waiver;
      Indemnity.

            


    

     

    12.01     Enforcement and Waiver by
Lender.  Lender shall have the right at all times to
enforce the provisions of the Loan Documents in strict accordance with the terms
thereof, notwithstanding any conduct or custom on the part of Lender in
refraining from so doing at any time or times.  The failure of Lender
at any time or times to enforce its rights under such provisions, strictly in
accordance with the same, shall not be construed as having created a custom in
any way or manner contrary to specific provisions or as having in any way or
manner modified or waived the same.  All rights and remedies of Lender
are cumulative and concurrent, and the exercise of one right or remedy shall not
be deemed a waiver or release of any other right or remedy.  Lender
shall have, in addition to the rights and remedies given it by the Loan
Documents, all rights and remedies allowed by all applicable Laws and in
equity.

     

    12.02     Indemnity; Waiver of Damages by
Borrower.

     

    a.       Indemnification by
Borrower.  Borrower shall indemnify Lender and each Related
Party of Lender (each such Person being called an “Indemnitee”) against, and
hold each Indemnitee harmless from, any and all losses, claims, damages,
liabilities and related expenses (including the fees, charges and disbursements
of any counsel for any Indemnitee), incurred by any Indemnitee or asserted
against any Indemnitee by any third party or by Borrower or any other party
hereto arising out of, in connection with, or as a result of (i) the execution
or delivery of this Loan Agreement, any other Loan Document or any agreement or
instrument contemplated, the performance by the parties hereto of their
respective obligations or the consummation of the transactions contemplated,
(ii) any actual or alleged presence or release of hazardous materials on or from
any Property owned or operated by Borrower, or any environmental liability
related in any way to Borrower or any of its Subsidiaries, or (iii) any actual
or prospective claim, litigation, investigation or proceeding relating to any of
the foregoing, whether based on contract, tort or any other theory, whether
brought by a third party or by Borrower or any other party hereto, and
regardless of whether any Indemnitee is a party thereto; provided that such
indemnity shall not, as to any Indemnitee, be available to the extent that such
losses, claims, damages, liabilities or related expenses (x) are determined by a
court of competent jurisdiction by final and nonappealable judgment to have
resulted from the gross negligence or willful misconduct of such Indemnitee or
(y) result from a claim brought by Borrower or any other party hereto against an
Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or
under any other Loan Document, if Borrower or such party hereto has obtained a
final and nonappealable judgment in its favor on such claim as determined by a
court of competent jurisdiction.  Provided however, in the course of
any proceeding of any nature contemplated by this subsection between or among
Indemnitee, Borrower or any party hereto, each such party shall be responsible
for their own fees and expenses, provided further, that following a
nonappealable judgment, the prevailing party or substantially prevailing party
shall be entitled to payment of its reasonable costs and expenses from the other
party or parties.

     

    b.       Waiver by Borrower of Consequential Damages,
Etc.  To the fullest extent permitted by applicable Law,
Borrower shall not assert, and each such party hereby waives, any claim against
any Indemnitee, on any theory of liability, for special, indirect, consequential
or punitive damages (as opposed to direct or actual damages) arising out of, in
connection with, or as a result of, this Loan Agreement, any other Loan Document
or any agreement or instrument contemplated, the transactions contemplated, any
Loan or the use of the proceeds thereof.  No Indemnitee referred to in
Subsection a. above shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission systems
in connection with this Loan Agreement or the other Loan Documents or the
transactions contemplated.

     

    
      MASTER
LOAN AGREEMENT - 25

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548
 

    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    c.       Payments.  All amounts due
under this Section 12.02 shall be payable not later than ten Business Days after
demand therefore.

     

    d.       Survival.  The agreements in
this Section shall survive the repayment, satisfaction or discharge of
Borrower’s Obligations.

     

    13.         Communications.

     

    13.01     Notice and Other
Communications.

     

    a.       General.  Unless
otherwise expressly provided herein or in the Loan Documents, all notices and
other communications provided for hereunder shall be in writing (including by
facsimile transmission).  All such written notices shall be mailed,
faxed or delivered to the applicable address, facsimile number or, subject to
Section 13.03 below, e-mail address, and all notices and other communications
expressly permitted hereunder to be given by telephone and shall be made to the
applicable telephone number, as follows:

     

    
      	 	
              i.

            	
               
      If to Borrower:

            


    

     
Attention:  Thomas M. Ringo

      19245
Tenth Ave. NE

     
Poulsbo, WA 98370

     
Facsimile:  (360) 697-1476

     
E-mail:  tringo@orminc.com

     

    
      	
               
      

            	
              ii.

            	
               
      If to Lender:

            


    

    
       
Attention:  Kristy Searles

    

    
        Northwest
Farm Credit Services, PCA

       
650 Hawthorne Ave. SE, Suite #210

        Salem,
OR  97301

        Facsimile:  (503)
373-3006

        E-mail:  NWFCSsalemagribusiness@farm-credit.com

    

    


    b.       Effectiveness.  All such
notices and other communications shall be deemed to be given or made upon the
earlier to occur of (1) actual receipt by the relevant party hereto and (2) (a)
if delivered by hand or by courier, when signed for by or on behalf of the
relevant party hereto; (b) if delivered by Certified Mail, Return Receipt
Requested, upon receipt; (c) if delivered by Facsimile, when sent and receipt
has been confirmed by telephone; and (d) if delivered by e-mail (which form of
delivery is subject to the provisions of Section 13.03 below), when
delivered.  In no event shall a voicemail message be effective as a
notice, communication or confirmation hereunder.

    
       

      MASTER
LOAN AGREEMENT - 26

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548

    

     

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    13.02     Facsimile Documents and
Signatures.  Loan Documents may be transmitted and or
signed by facsimile.  The effectiveness of any such documents and
signatures shall, subject to applicable law, have the same force and effect as
manually signed originals and shall be binding on Borrower and Lender, as
applicable.  Lender may also require that any such document and
signature be confirmed by a manually signed original thereof; provided however,
that the failure to request or deliver the same shall not limit the
effectiveness of any facsimile document or signature.

     

    13.03     Use of
E-mail.  E-mail, internet or intranet websites may be
used only to distribute routine communications, such as financial statements,
billing statements and other like information and to distribute Loan Documents
for execution by the parties thereto, but may not be used for any other purpose,
unless approved by Lender.  Provided, an original signed document that
has been scanned and attached to an e-mail shall have the same force and effect
as a document sent by facsimile.

     

    14.        
Participation.  Notwithstanding
any other provision of this Loan Agreement, Borrower understands that Lender may
at any time enter into participation agreements with one or more participating
lenders, whereby Lender will allocate certain percentages of its commitment to
these lenders.  Borrower acknowledges that, for the convenience of all
parties, this Loan Agreement is being entered into with Lender only, and that
Borrower’s Obligations under this Loan Agreement are undertaken for the benefit
of, and as an inducement to, any such participating lender as well as Lender,
and Borrower hereby grants to each participating lender, all the rights and
remedies afforded Lender hereunder.

     

    15.         Governing Law; Jurisdiction;
Etc.

     

    15.01     Governing Law.  THIS
LOAN AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF WASHINGTON, EXCEPT WHERE FEDERAL LAWS, INCLUDING THE FARM CREDIT
ACT OF 1971, AS AMENDED, MAY BE APPLICABLE.

     

    15.02     Submission to Jurisdiction.  BORROWER
AND EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY SUBMITS, FOR ITSELF AND
ITS PROPERTY, TO THE NONEXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF
WASHINGTON SITTING IN SPOKANE COUNTY AND OF THE UNITED STATES DISTRICT COURT OF
THE EASTERN DISTRICT OF WASHINGTON, AND ANY APPELLATE COURT FROM ANY THEREOF, IN
ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS LOAN AGREEMENT OR
ANY OTHER LOAN DOCUMENT, OR FOR RECOGNITION OR ENFORCEMENT OF ANY JUDGMENT, AND
EACH OF THE PARTIES HERETO IRREVOCABLY AND UNCONDITIONALLY AGREES THAT ALL
CLAIMS IN RESPECT OF ANY SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED
IN SUCH WASHINGTON STATE COURT OR, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, IN SUCH FEDERAL COURT.  EACH OF THE PARTIES HERETO AGREES THAT A
FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE
ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER
PROVIDED BY LAW.  NOTHING IN THIS LOAN AGREEMENT OR IN ANY OTHER LOAN
DOCUMENT SHALL AFFECT ANY RIGHT THAT LENDER MAY OTHERWISE HAVE TO BRING ANY
ACTION OR PROCEEDING RELATING TO THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT
AGAINST BORROWER OR ANY OTHER LOAN PARTY OR ITS PROPERTIES IN THE COURTS OF ANY
JURISDICTION.

     

    
      MASTER
LOAN AGREEMENT - 27

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548
 

    

    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    

      15.03   Waiver of
Venue.  BORROWER AND EACH
OTHER LOAN PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO
THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO
THIS LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENT IN ANY COURT REFERRED TO IN
SECTION 14.02 HEREOF.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE DEFENSE OF AN
INCONVENIENT FORUM TO THE MAINTENANCE OF SUCH ACTION OR PROCEEDING IN ANY SUCH
COURT.

       

      15.04   Service
of Process.  EACH PARTY HERETO
IRREVOCABLY WAIVES PERSONAL SERVICE OR PROCESS, WHICH MAY BE MADE IN ANY OTHER
MANNER PERMITTED BY APPLICABLE LAW.

       

      15.05   WAIVER OF
JURY TRIAL.  BORROWER AND
LENDER HEREBY IRREVOCABLY WAIVE ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN
ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS
LOAN AGREEMENT OR ANY OTHER LOAN DOCUMENTS AND ANY FUTURE MODIFICATIONS,
AMENDMENTS, EXTENSIONS, RESTATEMENTS AND SERVICING ACTIONS RELATING TO THIS LOAN
AGREEMENT AND ANY OTHER LOAN DOCUMENTS.  THE PARTIES INTEND THAT THIS
JURY WAIVER WILL BE ENFORCED TO THE MAXIMUM EXTENT ALLOWED BY LAW.

       

      15.06   Consultation
with Counsel.  Borrower
certifies that it has carefully read this Loan Agreement and other Loan
Documents; that it understands the contents of this Loan Agreement and other
Loan Documents; that in executing this Loan Agreement and other Loan Documents,
it has not relied on the advice, opinions or statements of Lender or its
officers, directors, employees or attorneys; and that it signed this Loan
Agreement and other Loan Documents of their own free will and
accord.  Lender recommends that Borrower consult its counsel and or
other professional advisor before signing this Loan Agreement and other Loan
Documents.  To the extent Borrower has not consulted with an attorney
or other professionals in connection with this Loan Agreement and other Loan
Documents, it acknowledges that it was given the opportunity to do so and chose
of its own free will and accord not to do so.

       

      
        	
                16. 

              	
                Miscellaneous.

              


      

       

      
        	
                16.01

              	
                Construction.

              


      

       

      a.           The
provisions of this Loan Agreement shall be in addition to those of any other
Loan Document or other evidence of liability held by Lender, all of which shall
be construed as complementary to each other.  In the event of a
conflict between the terms of this Loan Agreement and any other Loan Document,
the terms of this Loan Agreement shall control such conflict.  Nothing
herein contained shall prevent Lender from enforcing any or all of the other
Loan Documents in accordance with their respective terms.  All
Exhibits attached to this Loan Agreement are incorporated herein and made a part
hereof.

       

      MASTER
LOAN AGREEMENT - 28

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      


      b.           This
Loan Agreement may be executed in counterparts (and by different parties hereto
in different counterparts), each of which shall constitute an original, but all
of which when taken together shall constitute a single contract.

       

      c.           In
this Loan Agreement, in the computation of a period of time from a specified
date to a later specified date, unless otherwise stated the word “from” means
“from and including” and the word “to” or “until” means “to and
including.”

       

      d.           The
definitions of terms herein shall apply equally to the singular and plural forms
of the terms defined.  Whenever the context may require, any pronoun
shall include the corresponding masculine, feminine and neuter
forms.  The words “include,” “includes” and “including” shall be
deemed to be followed by the phrase “without limitation.”  The word
“will” shall be construed to have the same meaning and effect as the word
“shall.”  Unless the context requires otherwise, (i) any definition of
or reference to any agreement, instrument or other document (including any
Organization Document) shall be construed as referring to such agreement,
instrument or other document as from time to time amended, supplemented or
otherwise modified (subject to any restrictions on such amendments, supplements
or modifications set forth herein or in any other Loan Document), (ii) any
reference herein to any Person shall be construed to include such Person’s
successors and assigns and (iii) the words “herein,” “hereof” and “hereunder,”
and words of similar import when used in any Loan Document, shall be construed
to refer to such Loan Document in its entirety and not to any particular
provision thereof.

       

      e.           A
reasonable person standard shall be applied to each and every warranty,
representation, requirement or thing to be done or performed hereunder except
when the term “in its discretion” or “in its sole discretion” is used
herein.

       

      16.02   Binding
Effect, Assignment and Entire Agreement.  The Loan
Documents will inure to the benefit of, and shall be binding upon, the
respective successors and permitted assigns of the parties
hereto.  Borrower has no right to assign any of its rights or
obligations hereunder without the prior written consent of
Lender.  The Loan Documents constitute the entire agreement between
the parties, and may be amended only by a writing signed on behalf of each party
and dated subsequent to the date herein.

       

      16.03   Severability.  If any provision
of this Loan Agreement shall be held invalid under any applicable Laws, such
invalidity shall not affect any other provision of this Loan Agreement that can
be given effect without the invalid provision, and, to this end, the provisions
hereof are severable.

       

      16.04   No
Personal Liability of General Partners.  In any action
brought to enforce the obligation of Borrower to pay Borrower’s Obligations, any
judgment or decee shall not be subject to execution on, nor be a lien on, the
assets of General Partners of Borrower, other than their interests in the
Collateral. The foregoing shall in no way otherwise affect the personal
liability of Borrower.

       

      MASTER
LOAN AGREEMENT - 29

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

       

      ORAL
AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT OR TO FORBEAR FROM
ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER WASHINGTON
LAW.

       

      In
Witness Whereof, the parties hereto have duly executed this Loan Agreement as of
the date first above written.

       

      LENDER:

      NORTHWEST
FARM CREDIT SERVICES, PCA

       

      
        
          	
                  By:

                	
                  

                	 
      
	 
      	
                  Authorized
      Agent

                


        

      

      


      BORROWER:

      POPE
RESOURCES, A DELAWARE LIMITED PARTNERSHIP

      By: Pope
MGP, Inc., a Delaware corporation, its Managing General Partner

      


      
        
          
            
              
                
                  
                    	
                            By:

                          	  	 
      
	
                            Name:

                          	
                            Thomas
      M. Ringo

                          	 
      
	
                            Its:

                          	
                            Vice
      President and CFO

                          	 
      


                  

                

              

            

          

        

      

      


      MASTER
LOAN AGREEMENT - 30

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

      


      Pope
Resources, A Delaware Limited Partnership

      Customer
No.:  56548

      


      EXHIBIT
A

      FORM OF COMPLIANCE
CERTIFICATE

       

      Financial
Statement Date:  _______________, 20__


       

      To:
Northwest Farm Credit Services, FLCA

       

      Reference
is made to that certain Master Loan Agreement, dated as of September 25, 2009,
(the “Loan Agreement”) among POPE RESOURCES, A DELAWARE LIMITED
PARTNERSHIP (“Borrower”), and NORTHWEST FARM CREDIT SERVICES,
FLCA (“Lender”).

       

      The
undersigned Responsible Officer hereby certifies as of the date hereof that
he/she is the __________________________ of Borrower, and that, as such, he/she
is authorized to execute and deliver this Certificate to Lender on behalf of
Borrower, and that:

       

      [Use
following Paragraph 1 for Fiscal Year-End financial statements]

       

      1.           Attached
hereto as Schedule 1, are the Fiscal Year-End audited financial statements
required by Paragraph 9.01b.i of the Loan Agreement for the Fiscal Year of
Borrower ended as of the above date, together with the report and opinion of an
independent certified public accountant required by such section.

       

      [Use
following Paragraph 1 for [first/second/third] Fiscal Quarter-End financial
statements]

       

      1.           Attached
hereto as Schedule 1, are the financial statements required by Paragraph 9.01.
b.ii of the Loan Agreement for the Fiscal Quarter of Borrower ended as of the
above date.  Such financial statements fairly present the financial
condition, results of operations and cash flows of Borrower and its Subsidiaries
in accordance with GAAP, as of such date and for such period, subject only to
normal year-end adjustments and the absence of footnotes.

       

      2.           The
undersigned has reviewed and is familiar with the terms of the Loan Agreement
and has made, or has caused to be made under his/her supervision, a detailed
review of the transactions and condition (financial or otherwise) of Borrower
during the accounting period covered by the attached financial
statements.

       

      3.           A
review of the activities of Borrower during such fiscal period has been made
under the supervision of the undersigned with a view to determining whether
during such fiscal period Borrower performed and observed all its obligations
under the Loan Documents, and

       

      MASTER
LOAN AGREEMENT - 31

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

      


      [select
one:]

       

      [To the
best knowledge of the undersigned during such fiscal period, Borrower performed
and observed each covenant and condition of the Loan Documents applicable to
it.]

       

      —or—

       

      [The
following covenants or conditions have not been performed or observed and the
following is a list of each such Defaults and their nature and
status:]

       

      4.         
  To the best knowledge of the undersigned, the representations and
warranties of Borrower contained in the Loan Documents, and any representations
and warranties of Borrower that are contained in any document furnished at any
time under or in connection with the Loan Documents, are true and correct on and
as of the date hereof, except to the extent that such representations and
warranties specifically refer to an earlier date, in which case they are true
and correct as of such earlier date.

       

      5.           
To the best knowledge of the undersigned, the financial covenant analyses and
information set forth on Schedule 1, attached hereto, are true and accurate on
the Calculation Date and the undersigned has received no information to the
contrary as of the date of this Certificate.

       

      IN WITNESS WHEREOF, the
undersigned has executed this Certificate as of ___________________,
20__.

       

      POPE
RESOURCES, A DELAWARE LIMITED PARTNERSHIP

      


      
        
          
            
              
                	
                        By:

                      	 
      	 
      
	
                        Name:

                      	  
      	 
      
	
                        Title:

                      	 
      	 
      


              

            

          

        

      

      


      MASTER
LOAN AGREEMENT - 32

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

      


      Pope
Resources, A Delaware Limited Partnership

      Customer/Note No. 56548-841

      


      EXHIBIT
B

      COVENANT
COMPLIANCE WORKSHEET

       

      For the
Fiscal Quarter-End/Fiscal Year-End _____________________ (“Calculation
Date”)

       

      COVENANT
COMPLIANCE WORKSHEET

       

      For the
Fiscal Quarter-End or Rolling Four-Quarter Period - _________________________ (“
Calculation Date”)

       

      
        
          
            
              
                
                  
                    
                      
                        
                          
                            
                              
                                
                                  
                                    
                                      
                                        	
                                                I.

                                              	
                                                Section
      9.02 a. – Indebtedness to Total Capitalization Ratio

                                              	 	 	 
	 
      	
                                                A.

                                              	
                                                Companies’
      Indebtedness at Calculation Date

                                              	 	$	0	 
	 
      	
                                                B.

                                              	
                                                Indebtedness
      associated with minority interest in Timber Funds at Calculation
      Date

                                              	 	$	0	 
	 
      	
                                                C.

                                              	
                                                Numerator
      (Line I.A. minus Line I.B.)

                                              	 	$	0	 
	 
      	
                                                D.

                                              	
                                                Total
      Capitalization at Calculation Date

                                              	 	 	 	 
	 
      	 	
                                                1.

                                              	
                                                Adjusted
      Partners’ Capital at Calculation Date

                                              	 	 	 	 
	 
      	 	 	
                                                a.   
      Partners' capital per GAAP at Calculation Date

                                              	 	$	0	 
	 
      	 	 	
                                                b.    Book
      value of timberland at Calculation Date

                                              	 	$	0	 
	 
      	 	 	
                                                c.    Book
      value of timber and roads net of depletion at Calculation
    Date

                                              	 	$	0	 
	 
      	 	 	
                                                d.   
      Book value of timberland, timber and roads net of depletion for Timber
      Funds at Calculation Date

                                              	 	$	0	 
	 
      	 	 	
                                                e.   
      Appraised value of Borrower's fee timberlands at most recent
      year-end

                                              	 	$	0	 
	 
      	 	 	
                                                f.    
      Adjusted Partners' Capital (Line I.D.1.a. minus I.D.1.b. minus
      I.D.1.c. plus I.D.1.d. plus I.D.1.e.)

                                              	 	$	0	 
	 
      	 	
                                                2.

                                              	
                                                Numerator
      from line I.C. above

                                              	 	$	0	 
	 
      	
                                                E.

                                              	
                                                Denominator
      (Line I D.1.f. plus Line I.D.2.)

                                              	 	$	0	 
	 
      	 	 	 
      	 	 	 	 
	 
      	
                                                Ratio
      of Indebtedness to Total Capitalization (Line I.C. divided by Line
      I.E.)

                                              	 	 	0.00	 
	 
      	 	 	
                                                Maximum
      allowed:

                                              	 	 	0.30	 
	 
      	 	 	 
      	 	 	 	 
	
                                                II.

                                              	
                                                Consolidated
      Cash Flow Coverage Ratio (not to be measured until Fiscal Year-end
      2011)

                                              	 	 	 	 
	 
      	
                                                A.

                                              	
                                                Consolidated
      EBITDDA for the prior four Fiscal Quarters ending on the above date (the
      “Subject Period”)

                                              	 	 	 	 
	 
      	 	
                                                1.

                                              	
                                                Consolidated
      Net Income for the Subject Period

                                              	 	$	0	 
	 
      	 	
                                                2.

                                              	
                                                Consolidated
      Interest Expense for the Subject Period

                                              	 	$	0	 
	 
      	 	
                                                3.

                                              	
                                                Consolidated
      depreciation expense for the Subject Period

                                              	 	$	0	 
	 
      	 	
                                                4.

                                              	
                                                Consolidated
      amortization expense for the Subject Period

                                              	 	$	0	 
	 
      	 	
                                                5.

                                              	
                                                Consolidated
      depletion expense for the Subject Period (excluding the portion associated
      with the minority interest in Timber Funds)

                                              	 	$	0	 
	 
      	 	
                                                6.

                                              	
                                                Cost
      of land sold

                                              	 	$	0	 
	 
      	 	
                                                7.

                                              	
                                                Consolidated
      Taxes for the Subject Period (to the extent considered in calculating
      Consolidated Net Income)

                                              	 	$	0	 
	 
      	 	
                                                8.

                                              	
                                                Consolidated
      EBITDDA (the sum of Lines II.A.1 through I.A.7. inclusive)

                                              	 	$	0	 
	 
      	
                                                B.

                                              	
                                                Consolidated
      Capital Expenditures

                                              	 	$	0	 
	 
      	
                                                C.

                                              	
                                                Numerator
      (Line A.8. minus Line B.)

                                              	 	$	0	 
	 
      	
                                                D

                                              	
                                                Denominator
      - debt service for Subject Period

                                              	 	 	 	 
	 
      	 	
                                                1.

                                              	
                                                Consolidated
      Interest Expense for Subject Period

                                              	 	$	0	 
	 
      	 	2.	
                                                Scheduled
      principal payments during the Subject Period

                                              	 	$	0	 
	 
      	 	
                                                3.

                                              	
                                                Denominator
      - debt service for Subject Period (Line II.D.1. plus Line
      II.D.2.)

                                              	 	$	0	 
	 
      	 	 	 
      	 	 	 	 
	 	
                                                
                                                  E.

                                                

                                              	
                                                
                                                  Consolidated
      Cash Flow Coverage Ratio (Line C. divided by Line
    D.3.)

                                                

                                              	 	
                                                
                                                  to
      1

                                                

                                              	 


                                      

                                    

                                  

                                

                              

                            

                          

                        

                      

                    

                  

                

              

            

          

        

      

      


      MASTER
LOAN AGREEMENT - 33

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

      


      EXHIBIT
C

      PREPAYMENT/BREAKAGE
FEE CALCULATION

      


      
        	
                A.

              	
                Definitions.  For
      purposes of this Exhibit C, the following definitions
    apply:

              


      

      


      
        	
                 
      

              	
                1.

              	
                “Prepayment
      Amount,” for the purpose of a Prepayment Fee, means the amount of any
      principal prepayment.

              


      

      


      
        	
                 
      

              	
                2.

              	
                “Prepayment
      Amount,” for the purpose of a Breakage Fee, means the principal that
      Borrower has indicated on a Notice to be advanced or priced using a Fixed
      Rate Option.

              


      

      


      
        	
                 
      

              	
                3.

              	
                “Remaining
      Fixed Pricing Period,” for any principal priced with a Fixed Rate Option,
      means the period of time beginning (a) on the date a principal prepayment
      is made or, (b) in the case of a Breakage Fee, on the date Notice is given
      and ending on the Fixed Rate Maturity
Date.

              


      

      


      
        	
                 
      

              	
                4.

              	
                “Initial
      Reference Rate,” for any principal priced with a Fixed Rate Option, means
      the annualized rate used by Lender or a participant to obtain the funds
      loaned to Borrower in the case of a Prepayment Fee, or the annualized rate
      applicable on the last Pricing Date, or on the date Notice of prepayment
      is given, as the case may be, in the case of a Breakage
    Fee.

              


      

      


      
        	
                 
      

              	
                5.

              	
                “Final
      Reference Rate” means the annualized rate Lender or a participant would
      use to fund a new advance in such amount for the Remaining Fixed Pricing
      Period on the date of such prepayment.  For a Breakage Fee, the
      Final Reference Rate means the annualized rate as of the date Notice is
      given.

              


      

      


      
        	
                B.

              	
                Calculation of
      Prepayment/Breakage Fee.  The Prepayment and the Breakage
      Fees are calculated on a make-whole basis in five (5) steps as provided
      below:

              


      

      


      
        	
                 
      

              	
                1.

              	
                Compare
      the Initial Reference Rate and the Final Reference Rate.  If the
      Initial Reference Rate is less than or equal to the Final Reference Rate,
      the Prepayment/Breakage Fee is zero.  If the Initial Reference
      Rate is greater than the Final Reference Rate, complete the following
      steps to calculate the Prepayment/Breakage
Fee.

              


      

      


      
        	
                 
      

              	
                2.

              	
                Calculate
      the interest payment that will accrue on the Prepayment Amount over the
      Remaining Fixed Pricing Period at the Initial Reference Rate (“Initial
      Interest Amounts”).

              


      

      


      
        	
                 
      

              	
                3.

              	
                Calculate
      the interest payment that will accrue on the Prepayment Amount over the
      Remaining Fixed Pricing Period at the Final Reference Rate (“Final
      Interest Amounts”).

              


      

      


      MASTER
LOAN AGREEMENT - 34

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

      


      
        	
                 
      

              	
                4.

              	
                Calculate
      the “Differential Interest Amount” for each interest payment due during
      the Remaining Fixed Pricing Period by subtracting the Final Interest
      Amount from the Initial Interest Amount for each such
    payment.

              


      

      


      
        	
                 
      

              	
                5.

              	
                The
      Prepayment or Breakage Fee is the sum of the discounted present value of
      each Differential Interest Amount, discounted at the Final Reference Rate
      from the date such payment would be due back to the prepayment date, or in
      the case of a Breakage Fee, on the date Notice is
  given.

              


      

      


      An
example of a Prepayment/Breakage Fee calculation is attached hereto as Exhibit
C-1.

      


      MASTER
LOAN AGREEMENT - 35

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      


      EXHIBIT
C-1

      EXAMPLE
OF PREPAYMENT/BREAKAGE FEE CALCULATION

      


      
        
          
            	
                    Prepayment
      Amount

                  	 	$	1,000,000.00	 
	
                    Initial
      Reference Rate

                  	 	 	5.50	%
	
                    Final
      Reference Rate

                  	 	 	5.00	%
	
                    Scheduled
      Interest Payments in the Remaining Fixed Pricing Period

                  	 	 	1	 
	
                    Remaining
      Fixed Pricing Period

                  	 	
                    90
      Days

                  	 
	
                    Installment
      Period

                  	 	
                    Quarterly

                  	 
	 
      	 	 	 	 
	
                    Compare
      Rates – Step 1

                  	 	 	 	 
	 
      	 	 	 	 
	
                    Initial
      Reference Rate

                  	 	 	5.50	%
	
                    Final
      Reference Rate

                  	 	 	5.00	%
	
                    (The
      Final Reference Rate is the 90-day Current Discount Note Rate, as adjusted
      by Lender)

                  	 	 	 	 
	
                    Continue
      to the next step because the Initial Reference Rate is greater than the
      Final Reference Rate.

                  	 	 	 	 


          

        

      

      


      Scheduled Interest Payments
at the Initial Reference Rate – Step 2

      
        
          
            
              	
                      Interest Payment

                    	 	
                      Initial Interest Amounts

                    	 	 	
                      Balance

                    	 
	 
      	 	 	 	 	$	1,000,000.00	 
	
                      1

                    	 	$	13,750.00	 	 	$	1,000,000.00	 


            

          

        

      

      [($1,000,000.00
x 5.50%)/4 = $13,750.00]

      Carry
forward the Initial Interest Amounts to Step 4

      


      Scheduled Interest Payments
at the Final Reference Rate – Step 3

      
        
          
            
              	
                      Interest Payment

                    	 	
                      Final Interest Amounts

                    	 	 	
                      Balance

                    	 
	 
      	 	 	 	 	$	1,000,000.00	 
	
                      1

                    	 	$	12,500.00	 	 	$	1,000,000.00	 


            

          

        

      

      [($1,000,000.00
x 5.00%)/4 = $12,500.00]

      Carry
forward the Final Interest Amounts to Step 4

      


      Interest
Difference – Step 4

      


      
        
          
            
              	 
      	 	
                      Initial Interest

                    	 	 	
                      Final Interest

                    	 	 	
                      Differential Interest

                    	 
	
                      Interest Payment

                    	 	
                      Amounts

                    	 	 	
                      Amounts

                    	 	 	
                      Amount

                    	 
	
                      1

                    	 	$	13,750.00	 	 	$	12,500.00	 	 	$	1,250.00	 


            

          

        

      

      


      Carry
forward the Differential Interest Amount to Step 5

      


      Net
Present Value of Differential Interest Amounts – Step 5

      
        
          
            
              
                
                  
                    	 
      	 	
                            Final Reference

                          	 	 	
                            Present Value

                          	 	 	
                            Differential

                          	 	 	 	 
	
                            Interest Payment

                          	 	
                            Rate

                          	 	 	
                            Factor

                          	 	 	
                            Interest Amount

                          	 	 	
                            Present Value

                          	 
	
                            1

                          	 	 	5.00	%	 	 	0.98765	 	 	$	1,250.00	 	 	$	1,234.57	 
	 
      	 	 	Prepayment/Breakage
      Fee	 	 	$	1,234.57	 


                  

                

              

            

          

        

      

       

      MASTER
LOAN AGREEMENT - 36

      Pope
Resources, A Delaware Limited Partnership; Customer No. 56548


      
        
           


        

        
          
          

          
            

          

        

        
           


        

      


      Pope
Resources, A Delaware Limited Partnership

      Customer No. 56548

      


      EXHIBIT
D

      ADJUSTED
PARTNERS’ CAPITAL WORKSHEET

      


      (Example
as of 12/31/08 audit date)

      


      
        
          
            
              
                
                  	
                          Partners’
      Capital per GAAP

                        	 	 	 	 	$	87,817	 
	
                          Less:
      book Value of Timberland

                        	 	 	 	 	 	(20,449	)
	
                          Depleted
      Book Value of Fee Timber and Roads

                        	 	 	92,753	 	 	 	 	 
	
                          Less:
      ORM Timber Fund book value of Timber, Land and Roads

                        	 	 	55,789	 	 	 	 	 
	
                          Net
      book value of Timber, Land and Roads

                        	 	 	38,964	 	 	 	(38,964	)
	
                          Plus:
      Appraised Value of Fee Timberland

                        	 	 	 	 	 	$	364,200	 
	
                          Adjusted
      Partners’ Capital

                        	 	 	 	 	 	$	392,604	 


                

              

            

          

        

      

      


      Calculation
of Funded Indebtedness to Adjusted Partners’ Capital as of 12/31/08
was:

      


      
        
          
            
              
                	
                        Funded
      Debt

                      	 	$	29,384,000	 
	
                        Adjusted
      Partners’ Capital

                      	 	$	392,604,000	 
	
                        Total
      Capitalization

                      	 	$	421,988,000	 


              

            

          

        

      

      


      Indebtedness
to Total Capitalization = $29,384,000 divided by $421,988,000 = .07

      


      MASTER
LOAN AGREEMENT - 37

      Pope
Resources, A Delaware Limited Partnership; Customer No.
56548