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Exhibit 10.24    
  


 
 

SUBORDINATION AND RELEASE AGREEMENT    
  


    THIS SUBORDINATION AND RELEASE AGREEMENT (this "Agreement") is entered into as of August    , 2001, by and between PORT LUDLOW ASSOCIATES LLC, a
Washington limited liability company ("Grantor"), and POPE RESOURCES, a Delaware limited partnership ("Beneficiary"). 


 
 

RECITALS    
  


    A.  Beneficiary
is beneficiary and Grantor is grantor under that certain Deed of Trust of even date herewith (the "Pope Deed of Trust") encumbering residential lots in
the unincorporated master planned resort area commonly known as Port Ludlow, Jefferson County, Washington, as more particularly described in the Pope Deed of Trust (the "Lots"). The Pope Deed of Trust
secures Grantor's obligations to Beneficiary under a Promissory Note in the original principal amount US$5,814,742.00 of even date herewith (the "Pope Note") and other obligations described in the
Pope Deed of Trust. 


    B.  Grantor
has acquired title to the Lots in contemplation of constructing and developing residences and related improvements on the Lots, as further described in the
Pope Deed of Trust. 


    C.  It
is the intent and desire of Beneficiary and Grantor to set forth certain provisions pertaining to subordination and partial release of the lien of the Pope Deed
of Trust in this unrecorded Agreement rather than in the Pope Deed of Trust. The Pope Deed of Trust makes reference to this Agreement. 


    NOW,
THEREFORE, the parties agree as follows: 


 
 

AGREEMENT    
  


    1.  Subordination.  Beneficiary agrees that it will subordinate the lien of the Pope Deed of Trust to the
lien of a future mortgage or deed of trust (the "Construction Deed of Trust") given to secure Grantor's obligations under a revolving loan for the purpose of constructing houses and related
improvements on the Lots (the "Construction Loan"), subject to the following terms and conditions: 



    a.  The
aggregate amounts secured by the Pope Deed of Trust (including principal, interest, and late charges due under the Pope Note and all obligations of Grantee paid
or performed by Beneficiary for Grantee's account as provided under the Pope Deed of Trust), Construction Deed of Trust, and all other financial encumbrances on the Lots (except liens for taxes and
assessments, including without limitation homeowners association asessments, not yet due and payable) shall not exceed at any time eighty percent (80%) of the aggregate fair market value of all Lots
encumbered by the Pope Deed of Trust from time to time. The agreement or agreements under which Beneficiary shall agree to the subordination of the lien of the Pope Deed of Trust to the lien of the
Construction Deed of Trust shall contain reasonably sufficient provisions to ensure compliance by Grantor and Grantor's construction lender with the foregoing limitation. 


    b.  Beneficiary
shall not subordinate the lien of the Pope Deed of Trust on (i) any of the Lots improved by a completed single family residence as of the date
hereof ("Type I Lots"), or (ii) any of the Lots upon which a single family residence is under construction and is fifty percent (50%) or more completed, based on the estimated total
construction cost, as of the date hereof ("Type II Lots"). The Type I Lots and Type II Lots are described on Exhibit A hereto. 



    c.  Beneficiary
shall not be required to subordinate the lien of the Pope Deed of Trust to more than one (1) financial encumbrance at any time. 


    d.  The
Construction Loan shall be made solely for the purpose of constructing houses and related improvements on the Lots (including permitting, design, engineering
and direct 






 


construction management related to such construction but excluding Grantor's overhead), and funding closing costs and other costs directly related to such loan, and all sums so borrowed by Grantor
shall be used only for those purposes. 


    e.  The
amount drawn and outstanding under the Construction Loan shall be limited to an amount reasonably necessary to consummate the loan and to construct the
improvements on the Lots to be constructed with the proceeds thereof, which improvements shall be specifically described in agreements and documents relating to the Construction Loan. The terms and
conditions of any Construction Loan and all documents in connection therewith (including the Construction Deed of Trust) shall be subject to Beneficiary's prior written approval, which approval shall
not be unreasonably withheld or delayed provided all such terms and conditions conform with the requirements of this Agreement. The foregoing notwithstanding, Beneficiary shall not disapprove any
proposed Construction Loan by reason of the term of such loan or the interest rate to be paid by Grantor thereunder, so long as all other requirements of this Agreement are met. It is understood that
the Construction Loan may be in the form of a revolving credit under which individual "loans" are made for construction on each Lot. 


    f.   Without
limiting the generality of Beneficiary's rights of review and approval of Grantor's Construction Loan documents, the Construction Deed of Trust and
Construction Loan agreement shall expressly provide (i) that the Construction Loan shall be used solely for the purposes permitted under this Agreement; (ii) that in the event of any
failure of performance by Grantor under or in connection with the Construction Loan, the beneficiary under the Construction Deed of Trust shall give written notice of such failure to Beneficiary and a
reasonable opportunity to cure such failure before declaring a default under the Construction Deed of Trust or the Construction Loan; and (iii) a procedure or mechanism to ensure that the
aggregate amounts secured by the Pope Deed of Trust, Construction Deed of Trust, and all other financial encumbrances on the Lots (except liens for taxes and assessments not yet due and payable and
homeowner association liens arising under any recorded declaration of covenants, conditions, and restrictions) shall not exceed at any time eighty percent (80%) of the aggregate fair market value of
all Lots encumbered by the Pope Deed of Trust from time to time. 


    g.  No
subordination of the lien of the Pope Deed of Trust to any other lien or encumbrance shall be effective unless evidenced by a subordination instrument executed
and delivered by Beneficiary and recorded in the Official Records of Jefferson County. 


    h.  Grantor
covenants and agrees that it will not cause or permit the aggregate amounts secured by the Pope Deed of Trust, Construction Deed of Trust, and all other
financial encumbrances on the Lots (except liens for taxes and assessments not yet due and payable and homeowner association liens arising under any recorded declaration of covenants, conditions, and
restrictions) to exceed at any time eighty percent (80%) of the aggregate fair market value of all Lots encumbered by the Pope Deed of Trust from time to time. 




    2.  Partial Release.  Grantor shall have the right to sell, transfer, and convey title to individual
Lots, or to grant a Construction Deed of Trust as to individual Lots, and Beneficiary shall release the lien of the Pope Deed of Trust from title to each Lot so sold, transferred, conveyed, or
encumbered concurrently
with such transfer and conveyance or encumbrance, provided that (i) Grantor shall pay to Beneficiary the release price ("Release Price") set forth on Exhibit B  hereto, subject to adjustment as
provided below, (ii) in the case of any sale, transfer, or conveyance of title, each Lot so released shall be sold, transferred, or
conveyed in a bona fide sales transaction, (iii) no material default under the Pope Note or Pope Deed of Trust shall have occurred and be continuing, (iv) Grantor shall have given
Beneficiary at least seven (7) days prior written notice and shall have complied with all other terms and conditions of this Agreement, and (v) the partial release shall not impair the
validity of the lien of the Pope Deed of Trust as to the remaining Lots. It is expressly understood that the terms of this Section 2 


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shall not apply to the sale, conveyance, or transfer of all or a portion of the Property to an Approved Transferee in accordance with Section 10 of the Pope Deed of Trust. 



    a.  The
Release Price shall be paid by Grantor to Beneficiary through an escrow established for the transfer, conveyance or encumbrance of the Lot to be released
hereunder, and the amount of the Release Price shall be treated as a payment under the Pope Note, to be applied first to interest accrued under the Pope Note and thereafter to principal. 


    b.  The
parties acknowledge that the Release Prices reflect a reasonable allocation among the Lots of the total original principal amount under the Pope Note (increased
by twenty percent (20%) to provide for repayment of unpaid principal and accrued interest due under the Pope Note) to each Lot based upon the respective values of the Lots and other relevant factors
(such as the state of improvement of each Lot) as of the date of this Agreement. Grantor shall have the right from time to time to propose revisions to the schedule of Release Prices, to which Pope
shall not unreasonably withhold or delay its consent, provided that any revision to the schedule of Release Prices shall not (i) decrease the aggregate of all Release Prices, (ii) impair
Beneficiary's security under the Pope Deed of Trust, or (iii) decrease the rate of repayment of amounts due under the Pope Note. 


    c.  It
shall be a further condition to the release of any Lot from the lien of the Pope Deed of Trust that Grantor shall provide a written notice to Beneficiary at
least seven (7) days prior to the date that Grantor intends to transfer or convey title to such Lot free of the lien created by the Pope Deed of Trust. Such written notice shall specify the Lot
to be released hereunder, certification by Grantor that the Lot to be released will be sold, transferred or conveyed in a bona fide sales transaction, and the Release Price to be paid by Grantor to
Beneficiary as a condition to the release of lien. Such written notice shall be accompanied by (i) a completed Request for Partial Reconveyance relating to the Lot to be released, and
(ii) a proposed form of Beneficiary's escrow instructions to the escrow officer who will close the sale of the Lot. Grantor shall be solely liable for payment of all reconveyance fees and
recording fees relating to partial releases of the lien of the Pope Deed of Trust under this Agreement. 




    3.  Repayment of Note.  Grantor covenants and agrees, in the case of any sale, transfer, or conveyance of
title to any Lot in a bona fide sales transaction, to pay to Grantor upon the closing of such sale,
transfer, or conveyance a sum equal to the Release Price applicable to such Lot, in partial repayment of accrued interest, principal, and other amounts due under the Pope Note. 


    4.  Default.  Any failure by Grantor to make any payment or to perform or observe any of the obligations
under this Agreement shall be deemed a default under the Pope Deed of Trust, if (i) in the event of a failure to perform or observe any obligation requiring only the payment of money by Grantor
to Beneficiary, such failure continues for a period of ten (10) days after written notice from Beneficiary, or (ii) in the event of a failure to perform or observe any other obligation
under this Agreement, such failure continues for a period of thirty (30) days after written notice to Grantor from Beneficiary, or for such longer period as may be reasonably required to cure
such failure (provided that Grantor promptly commences such cure upon receipt of notice from Beneficiary and diligently prosecutes such cure to completion). In the event of such breach or default,
Beneficiary shall be entitled to exercise any and all rights and remedies provided in the Pope Deed of Trust or under law. 



    5.  No Recordation.  Neither party shall record this Agreement or any memorandum thereof without the
express written consent of the other party. 


    6.  Definitions.  Any capitalized term used in this Agreement and not otherwise defined herein shall have
the same definition as set forth for such term in the Pope Deed of Trust and Pope Note. 


    7.  No Modification.  No term or provision of this Agreement is intended to modify any term or provision
of the Pope Deed of Trust or Pope Note or to limit or impair the obligations of either party 


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thereunder. This Agreement may not be modified or amended except with a written instrument executed by both parties hereto or their respective successors-in-interest. 


    IN
WITNESS WHEREOF, Grantor and Beneficiary have executed this Agreement as of the date first written above. 



	GRANTOR:	 	PORT LUDLOW ASSOCIATES LLC, a

Washington limited liability company
	

 	
 	

By WEST COAST NORTHWEST PACIFIC

PARTNERS LLC, a Washington limited liability

company, its manager
	

 	
 	

By:	
 	

/s/ RANDALL J. VERRUE   

	 	 	Name:	 	Randall J. Verrue

	 	 	Its:	 	President & CEO

	
BENEFICIARY:	
 	

POPE RESOURCES, a Delaware limited partnership
	

 	
 	

By POPE MGP, Inc., a Delaware corporation,

its managing general partner
	

 	
 	

By:	
 	

/s/ DAVID L. NUNES   
 David L. Nunes

Its President







	EXHIBITS:
	 	 
	 	 

	

A	
 	

—	
 	

Type I Lots and Type II Lots
	B	 	—	 	Release Prices




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EXHIBIT A
  
    LEGAL DESCRIPTION OF PROPERTY
  (NOT SUBJECT TO SUBORDINATION)    




TYPE I LOTS  


Lots
9, 94 and 99, Teal Lake Village, as per plat recorded in Volume 6 of Plats, pages 186 through 197, which is an amendment to Volume 6 of Plats, pages 158 through 169, records of Jefferson County,
Washington. 


Situate
in the County of Jefferson, State of Washington. 


Lots
50 and 51 of Timberton Village Phase II as recorded in Volume 7 of plats, pages 107 through 112, records of Jefferson County, Washington. 


Situate
in the County of Jefferson, State of Washington. 



Lots
11, 30 and 36, Woodridge Village, Division I, as per plat recorded in Volume 7 of plats, pages 47 through 50, records of Jefferson County, Washington. 


Situate
in the County of Jefferson, State of Washington. 


TYPE II LOTS  


Lot
15, Teal Lake Village, as per plat recorded in Volume 6 of Plats, pages 186 through 197, which is an amendment to Volume 6 of Plats, pages 158 through 169, records of Jefferson County, Washington. 



Situate
in the County of Jefferson, State of Washington. 


Lot
34 of Timberton Village Phase II as recorded in Volume 7 of plats, pages 107 through 112, records of Jefferson County, Washington. 


Situate
in the County of Jefferson, State of Washington. 


Lot
27, Woodridge Village, Division I, as per plat recorded in Volume 7 of plats, pages 47 through 50, records of Jefferson County, Washington. 



Situate
in the County of Jefferson, State of Washington. 


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EXHIBIT B
  
    RELEASE PRICES    




	Subdivision Key:
	 	 

	

Fair	
 	

=	
 	

Fairwood Village
	LPV	 	=	 	Ludlow Point Village
	PL7	 	=	 	Port Ludlow No. 7
	TLV	 	=	 	Teal Lake Village
	TMB1	 	=	 	Timberton Village Phase 1
	TMB2	 	=	 	Timberton Village Phase 2
	

TMB3	
 	

=	
 	

Timberton Village Phase 3
	WRV 1	 	=	 	Woodridge Village Division 1
	LBV TH	 	=	 	Ludlow Bay Village Town Home Lot
	LBV SFL	 	=	 	Ludlow Bay Village Single Family Lot





	Subdivision
	 	Lot #
	 	Release Price

(in US dollars)
	 
	LPV	 	1	 	21,182.21	 
	LPV	 	2	 	21,182.21	 
	PL7	 	5	 	16,141.40	 
	PL7	 	6	 	20,175.70	 
	PL7	 	15	 	174,361.89	 
	PL7	 	20	 	30,264.60	 
	PL7	 	21	 	18,158.55	 
	PL7	 	22	 	18,835.17	 
	TLV	 	9	 	229,230.95	 
	TLV	 	15	 	184,396.80	 
	TLV	 	16	 	74,759.35	 
	TLV	 	17	 	27,570.84	 
	TLV	 	18	 	113,955.52	 
	TLV	 	19	 	203,309.26	*
	TLV	 	74	 	17,836.65	 
	TLV	 	75	 	22,608.98	 
	TLV	 	76	 	22,608.98	 
	TLV	 	77	 	22,608.98	 
	TLV	 	78	 	64,304.07	 
	TLV	 	94	 	223,840.74	*
	TLV	 	95	 	230,221.48	*
	TLV	 	99	 	209,030.33	 
	TMB 1	 	17	 	29,390.09	 
	TMB 2	 	28	 	28,071.68	 
	TMB 2	 	29	 	28,336.40	 
	TMB 2	 	30	 	28,071.68	 
	TMB 2	 	31	 	28,071.68	 
	TMB 2	 	33	 	223,342.01	*
	TMB 2	 	34	 	149,569.53	 
	TMB 2	 	35	 	64,623.85	 
	TMB 2	 	36	 	61,073.46	 
	TMB 2	 	37	 	49,390.96	 




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	TMB 2	 	38	 	42,108.06	 
	TMB 2	 	39	 	35,089.87	 
	TMB 2	 	40	 	28,071.68	 
	TMB 2	 	46	 	31,611.48	 
	TMB 2	 	50	 	233,829.05	 
	TMB 2	 	51	 	205,142.16	 
	TMB 2	 	52	 	35,120.58	 
	TMB 2	 	54	 	28,102.39	 
	TMB 2	 	55	 	28,367.11	 
	TMB 2	 	57	 	28,367.11	 
	TMB 2	 	58	 	24,593.30	 
	TMB 3	 	60	 	45,281.01	 
	TMB 3	 	61	 	41,507.59	 
	TMB 3	 	62	 	43,394.30	 
	TMB 3	 	63	 	37,734.17	 
	TMB 3	 	64	 	33,960.76	 
	TMB 3	 	65	 	39,620.88	 
	TMB 3	 	66	 	41,507.59	 
	TMB 3	 	67	 	43,394.30	 
	TMB 3	 	68	 	45,281.01	 
	TMB 3	 	69	 	28,300.63	 
	TMB 3	 	70	 	28,300.63	 
	TMB 3	 	71	 	32,074.05	 
	TMB 3	 	72	 	30,187.34	 
	TMB 3	 	73	 	28,300.63	 
	TMB 3	 	74	 	28,300.63	 
	TMB 3	 	75	 	30,187.34	 
	TMB 3	 	76	 	24,527.21	 
	TMB 3	 	77	 	24,527.21	 
	TMB 3	 	78	 	24,527.21	 
	WRV 1	 	11	 	480,213.11	 
	WRV 1	 	19	 	47,355.81	 
	WRV 1	 	23	 	37,454.33	 
	WRV 1	 	24	 	34,778.56	 
	WRV 1	 	25	 	34,778.56	 
	WRV 1	 	26	 	34,778.56	 
	WRV 1	 	27	 	149,932.72	 
	WRV 1	 	28	 	54,711.78	 
	WRV 1	 	30	 	230,345.37	*
	WRV 1	 	36	 	436,114.38	 
	LBV TH	 	4	 	62,026.87	 
	LBV TH	 	4	 	62,026.87	 
	LBV TH	 	4	 	62,026.87	 
	LBV TH	 	4	 	62,026.87	 
	LBV TH	 	4	 	62,026.87	 
	LBV TH	 	5	 	40,182.35	 
	LBV TH	 	5	 	40,182.35	 
	LBV TH	 	5	 	40,182.35	 
	LBV TH	 	6	 	21,973.41	 




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	LBV TH	 	6	 	21,973.41	 
	LBV TH	 	6	 	21,973.41	 
	LBV TH	 	6	 	21,973.41	 
	LBV TH	 	7	 	38,116.68	 
	LBV TH	 	7	 	38,116.68	 
	LBV TH	 	7	 	38,116.68	 
	LBV TH	 	7	 	38,116.68	 
	LBV TH	 	7	 	38,116.68	 
	LBV TH	 	8	 	18,922.67	 
	LBV TH	 	8	 	18,922.67	 
	LBV TH	 	9	 	18,922.67	 
	LBV TH	 	9	 	18,922.67	 
	LBV TH	 	10	 	20,976.08	 
	LBV TH	 	10	 	20,976.08	 
	LBV TH	 	10	 	20,976.08	 
	LBV TH	 	10	 	20,976.08	 
	LBV TH	 	11	 	19,454.67	 
	LBV TH	 	11	 	19,454.67	 
	LBV TH	 	11	 	19,454.67	 
	LBV TH	 	11	 	19,454.67	 
	LBV TH	 	12	 	20,068.70	 
	LBV TH	 	12	 	20,068.70	 
	LBV TH	 	12	 	20,068.70	 
	LBV TH	 	13	 	14,390.66	 
	LBV TH	 	13	 	14,390.66	 
	LBV TH	 	13	 	14,390.66	 
	LBV TH	 	13	 	14,390.66	 
	LBV TH	 	14	 	15,075.21	 
	LBV TH	 	14	 	15,075.21	 
	LBV TH	 	14	 	15,075.21	 
	LBV TH	 	14	 	15,075.21	 
	LBV SFL	 	1	 	71,185.51	 
	LBV SFL	 	2	 	71,185.51	 
	LBV SFL	 	3	 	71,185.51	 
	LBV SFL	 	4	 	71,185.51	 
	 	 	 	 	
	 
	 	 	 	 	6,977,690.23	 








*  TMB2
Lot 33, TLV Lot 95, and TLV Lot 19 have been sold by Olympic Real Estate Development LLC ("ORED"), an affiliate of Pope Resources, to third parties in bona fide transactions
after June 21, 2001, and prior to the date hereof. TLV Lot 94 and WRV 1 Lot 30 might be sold by ORED to a third party in a bona fide transaction after June 21, 2001, and prior to the
date hereof. Any Lot sold by ORED to a third party prior the date hereof is not subject to payment of a Release Price. 


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Exhibit 10.24


SUBORDINATION AND RELEASE AGREEMENT

RECITALS

AGREEMENT

EXHIBIT A LEGAL DESCRIPTION OF PROPERTY (NOT SUBJECT TO SUBORDINATION)

EXHIBIT B RELEASE PRICES