a5748994ex10_35.htm


    Exhibit 10.35

     

    
      	Date:  July
      31, 2008	Pope Resources, A Delaware
      Limited Partnership
	 	Customer/Note No.
      56548-811


    

     

    


    REVOLVING
OPERATING NOTE

    (WITH
MULTIPLE PRICING OPTIONS)

     

    For Value Received, on the
Loan Maturity Date, Borrower, as defined below, as principal, promises to pay to
Lender, as defined below, or order, at its office in Spokane, Washington, or
such other place as the holder of this Revolving Operating Note and Loan
Agreement (this “Note”) may designate in writing, the principal sum of Forty Million and no/100’s
Dollars ($40,000,000.00) (the “Total
Commitment Amount”) or so much thereof as may be outstanding, plus interest
thereon from and after any Disbursement Date, at interest rates as provided for
hereafter.  For all intents and purposes, all Loan Segments are
treated as one obligation under this Note and the other Loan
Documents.

    


    1.
           Definitions.  For
purposes of this Note, the following definitions apply.  Capitalized
terms not otherwise defined herein shall have the meanings given in the Master
Loan Agreement, dated on or about the same date herewith (as amended and
modified, the “Loan Agreement”).

    


    “Applicable Margin”
means the per annum percentage set forth below, which corresponds to the
Borrower’s Pricing Level as of the most recent Calculation Date.

    


    
      	
               

              Pricing

              Level

            	
               

              Consolidated

              Interest
      Coverage

              Ratio

            	
              Applicable

              Margin

              for
      Base Rate

            	
              Applicable

              Margin
      for Fixed

               Rate
      Options

               

            	
              Unused

              Commitment

              Fee

            
	
              I

            	
              ≥
      3.00:1.00

            	
              -
      1.00%

            	
              +1.25%

               

            	
              0.10%

               

            
	
              II

            	
              ≥ 2.00:1.00

            	
              -
      0.75%

            	
              +1.40%

               

            	
              0.15%

               

            
	
              III

            	
              <
      2.00:1.00

            	
              -
      0.50%

            	
              +1.65%

               

            	
              0.20%

               

            


    

    


    The
pricing level shall be determined and adjusted on the date ten (10) Business
Days after the date Borrower provides Lender the Compliance Certificate, as
required herein, for Borrower’s most recent Calculation Date (each, an
“Adjustment Date”); provided however, that the initial pricing level shall be I
and shall remain at such pricing level until the first Adjustment Date occurring
after the first Calculation Date following the Closing Date.  On such
Adjustment Date and on each Adjustment Date thereafter, the pricing level shall
be determined by the Consolidated Interest Coverage Ratio as of the most recent
Calculation Date. If Borrower fails to timely provide Lender the Compliance
Certificate for such most recent Calculation Date, the pricing level commencing
the day after the due date thereof shall be the highest pricing level, which
shall remain in effect until subsequently adjusted ten (10) Business Days after
the delivery of the required Compliance Certificate.  Any adjustment
in the pricing level shall be applicable to all existing Loan
Segments.  Provided, however, in the Event of Default, Lender shall
have the right at any time to change to the highest pricing level and the
applicable interest rate shall also be subject to default interest, as provided
in Section 7.03 hereof.  In calculating the pricing level, Lender will
use the Consolidated Interest Coverage Ratio, notwithstanding any grace period
provided for in the Loan Documents.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    


    “Base
Rate” shall have the meaning given in Section 4.01 hereof.

    


    “Base Rate
Loan Segment” means the principal portion of the Loan plus accrued interest
priced using the Base Rate.

    


    “Beneficiary”
means the party designated as the recipient of a Letter of Credit issued by
Lender under this Loan.

    


    “Borrower”
means Pope Resources, A Delaware Limited Partnership, a Delaware limited
partnership.

    


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

    


    “Closing
Date” means the date the Loan Documents are fully executed and the conditions
precedent to Loan closing have been met to Lender’s satisfaction or waived by
Lender in writing.

    


    “Commitment
Period” means the Closing Date to the Loan Maturity Date.

    


    “Default
Interest” shall have the meaning given in Section 7.03 hereof.

    


    “Disbursement
Date” means any Business Day when Loan principal is advanced under this Note to
or on the account of Borrower.

    


    “Fixed
Rate Loan Segment” means each principal portion of the Loan, plus interest
accrued thereon, with all the following attributes that distinguish such Fixed
Rate Loan Segment from other Fixed Rate Loan Segments: a different Fixed Rate
Maturity Date; and or a different date to which a given Fixed Rate Option was
assigned to the Fixed Rate Loan Segment, except as otherwise provided
herein.

    


    “Fixed
Rate Maturity Date” means the last day of an Interest Period.

    


    “Fixed
Rate Option” means any of the Fixed Rate Options defined in Section 4.02
hereof.

    


    “Index
Source” means Citibank, N.A. for the Base Rate Option and the British Bankers’
Association for the Fixed Rate Options, unless an Index Source is otherwise
identified by Lender.

    


    “Interest
Period” means, as to each Fixed Rate Loan Segment, the period commencing on the
date such Fixed Rate Loan Segment is advanced, converted to or continues as a
Fixed Rate Loan Segment and ending on the date one, three or six months
thereafter, as selected by Borrower in a Notice to Lender; provided
that:

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      (i)      
any Interest Period that would otherwise end on a day that is not a Business Day
shall be extended to the next succeeding Business Day, unless such Business Day
falls in another calendar month, in which case such Interest Period shall end on
the next preceding business Day;

    

     

    (ii)      any
Interest Period that begins on the last Business Day of a calendar month (or on
a day for which there is no numerically corresponding day in the calendar month
at the end of such Interest Period) shall end on the last Business Day of the
calendar month at the end of such Interest Period; and

     

    (iii)     no
Interest Period shall extend beyond the Loan Maturity Date.

    


    “Lender”
means Northwest Farm Credit Services, PCA.

    


    “Letter of
Credit” means a letter of credit issued by Lender to a Beneficiary at the
request of Borrower.

    


    “LIBOR”
means the rate per annum at approximately 11:00 a.m. (London time) on the date
that is two (2) Business Days prior to the beginning of the relevant interest
period by reference to the British Bankers’ Association Interest Settlement
Rates for deposits in Dollars (as set forth by the Bloomberg Information Service
or any successor thereto, which has been nominated by the British Bankers’
Association as an authorized information vendor for the purpose of displaying
such rates) for a period equal to such interest period; provided, that, to the
extent that an interest rate is not ascertainable pursuant to the foregoing
provisions of this definition, “LIBOR” shall be the interest rate per annum
determined by Lender to be the average of the rates per annum at which deposits
in dollars are offered for such relevant interest period to major banks in the
London interbank market in London, England at approximately 11:00 a.m. (London
time) on the date that is two (2) Business Days prior to the beginning of such
interest period.

    


    “Loan” or
“Loan No. 56548-811 means all principal amounts advanced by Lender to Borrower
or on the account of Borrower or otherwise under this Note and the other Loan
Documents, and all fees or charges incurred as provided for in this Note and the
other Loan Documents, plus all interest accrued thereon.

    


    “Loan
Documents” means this Note and all other documents executed in connection with
the Loan, including without limitation the Loan Agreement, and all renewals,
extensions, amendments, modifications, substitutions and replacements
thereof.

    


    “Loan
Maturity Date” means August 1, 2011.

    


    “Loan
Purpose” means (a) to provide financing for Borrower’s operating and
capital needs (including distributions to Borrower’s unitholders in the ordinary
course of business and repurchases of partnership units from Borrower’s
unitholders as may be approved by Borrower’s Board of Directors), and
(b) to pay for Stock, Loan fees and all of Lender’s reasonable transaction
costs.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    


    “Loan
Segment” means the Base Rate Loan Segment, an LOC Loan Segment or a Fixed Rate
Loan Segment.

    


    “LOC Loan
Segment” means the total principal commitment of all Letters of Credit issued by
Lender under this Note.

    


    “Notice”
shall have the meaning given in Section 2.04 hereof.

    


    “Pricing
Date” means the date a given Loan Segment begins to accrue interest under a
given Rate Option or a day when there is a change in the Base Rate.

    


    “Rate
Option” means the Base Rate or one of the Fixed Rate Options.

    


    “Unused
Commitment Fee” shall have the meaning given in Section 2.01
hereof.

    


    2.
           Loan Fee,
Expenses, Stock and Notice.

    


    2.01          Loan
Fee.  Borrower shall pay Lender the Loan fees set forth in a separate Loan
fee letter on the Closing Date.  In addition, Borrower shall pay
Lender, quarterly in arrears, an Unused Commitment Fee to be calculated by
multiplying the average daily unused balance of the Loan by the annual
percentage indicated in the pricing grid in the definition of Applicable Margin
and dividing the resulting product by four.  The Unused Commitment Fee
shall be due on the first day following each Fiscal Quarter-End and shall be
payable by the tenth day following each Fiscal Quarter-End.

    


    2.02          Costs and
Expenses.  Borrower shall
pay Lender, on the Closing Date and subsequently on Lender’s demand, all costs
and expenses related to closing, whether or not the Loan is
disbursed.  Provided, however, such costs and expenses shall not
exceed $1,000.00.

    


    2.03          Stock.  Borrower shall
comply with the capitalization requirements of ACA, as provided in the Loan
Agreement.

    


    2.04          Notice.

    


    a.           Prepayment of
Principal.  Borrower shall provide Lender with Notice of the
amount of any prepayment of a Fixed Rate Loan Segment no later than 10:00 a.m.
Spokane time three Business Days prior to the Business Day the prepayment will
be made.

    


    b.           Pricing.  Borrower
shall provide Lender irrevocable Notice of pricing of a Fixed Rate Loan Segment
by 10:00 a.m. Spokane time three days prior to the Pricing Date.

    


    c.           Form of
Notice.  Borrower may provide Lender any Notice required under
this Note by use of a Notice in form substantially the same as set forth in
Exhibit A hereto or other documentation as may be prescribed by
Lender.  Alternatively, Borrower may telephone Lender at the numbers
designated on Exhibit A or as may be provided by Lender from time to
time.  If Notice is by telephone, Lender will confirm to Borrower the
elected prepayment or pricing in writing.  All such Notices are deemed
irrevocable when given and are subject to Breakage Fees.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    


    3.
           Advances and
Pricing Elections.

    


    3.01          Advances.  So long as there
is no Event of Default or Incipient Default under this Note or the other Loan
Documents during the Commitment Period, Lender will make advances to Borrower on
a Disbursement Date for a purpose consistent and in compliance with the Loan
Documents in amounts requested by Borrower, provided that, after giving effect
to any requested advance, the aggregate principal amount of such advances made
hereunder will not exceed the Total Commitment Amount.  The advances
constitute a revolving line of credit.  During the Commitment Period,
Borrower may borrow, repay and reborrow Loan principal on the terms and
conditions contained herein.

    


    3.02          Letters
of Credit.  Lender will made
Letters of Credit available to Borrower as one means of advancing Loan
proceeds.  Borrower may only request Letters of Credit prior to the
Loan Maturity Date within the Total Commitment Amount for an approved Loan
purpose and so long as there is no Event of Default or Incipient Default under
the Loan Documents.  Letters of Credit are subject to the terms and
conditions of this Note and the other Loan Documents, including, but not limited
to, the following terms and conditions:

    


    a.           Purpose.  Lender
and Borrower agree that the sole purpose for the advance of any Loan proceeds
under a Letter of Credit shall be by Lender to pay directly to the Beneficiary
designated therein, upon its written demand, pursuant to the terms of that
certain Letter of Credit, issued by Lender for the account of
Borrower.

    


    b.           Termination.  Lender's
duty to advance loan proceeds to the Beneficiary shall terminate on July 20,
2011, or the earlier termination of the Letter of Credit.  The
aggregate amount that Lender shall be required to advance shall be limited to
the commitment amount of such Letter of Credit.

    


    c.           Payment.  In
the event any amount is advanced under a Letter of Credit, Borrower shall repay
interest and principal associated with such advance pursuant to the terms of
this Note.

    


    d.           Letter of Credit
Fee.  Borrower shall pay Lender a fee of one and one half of
one percent (1.5%) of the Letter of Credit commitment amount, at inception and
annually during the term of such Letter of Credit, for each Letter of Credit
issued.

    


    e.           Indemnification.  Borrower
shall defend, indemnify and hold Lender harmless for any and all claims,
damages, liabilities, costs or expenses whatsoever by Borrower, or any other
party (“liabilities”) which Lender may incur or suffer by reason of or in
conjunction with Lender's performance under a Letter of Credit except only if
and to the extent that any such liability shall be caused by the willful
misconduct or gross negligence of Lender in performing its obligations under
such Letter of Credit.  Provided however, Lender may rely on the
documents presented to Lender by the Beneficiary in accordance with the Letter
of Credit as to any and all matters set forth therein, whether or not any
statement or any document presented pursuant thereto proves to be forged,
fraudulent, invalid or insufficient in any respect or any statement therein
proves to be untrue or inaccurate in any respect.  Borrower shall
reimburse Lender for any legal or other expenses incurred in connection with
investigating or defending against any of the foregoing except if the same is
due to Lender's gross negligence or willful misconduct.  The
indemnities contained herein shall survive the expiration of any Letter of
Credit.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    


    f.           LOC Loan
Segment.  Any LOC Loan Segment shall be treated as fully
disbursed for purposes of determining the amount that Borrower may borrow under
the Loan.

    


    3.03          Pricing
Elections.  Upon irrevocable
Notice to Lender, as to principal (i) in the amount of an advance,
(ii)  in a Base Rate Loan Segment, or (iii) in a Fixed Rate Loan Segment on
a Fixed Rate Maturity Date, Borrower may elect to designate all or any part of
an advance or the unpaid principal balance of such Loan Segment on such Pricing
Date to bear interest at any Rate Option; provided however, that (1) there
is no Event of Default or Incipient Default; (2) Borrower shall price
principal in Fixed Rate Loan Segments in initial minimum principal amounts of
$1,000,000.00; (3) no Fixed Rate Option may be selected which would have
for its Fixed Rate Maturity Date a date later than the Loan Maturity Date; and
(4) there are no more than five Fixed Rate Loan Segments at any one
time.  If Borrower does not provide Lender irrevocable Notice of
election of a Rate Option three Business Days prior to a Fixed Rate Maturity
Date for a Fixed Rate Loan Segment, the unpaid principal balance of such Loan
Segment shall be priced at the Base Rate effective on such Pricing
Date.

    


    3.04          Single
Base Rate Loan Segment.  If on a Pricing
Date, a Loan Segment is priced under the Base Rate resulting in more than one
Loan Segment priced under the Base Rate, all Loan principal priced under the
Base Rate will be treated as a single Base Rate Loan Segment by combining the
principal balances from all such Loan Segments priced under the Base Rate on
such Pricing Date.

    


    4.
           Pricing
Options.

    


    4.01          Base
Rate:  Prime Based Adjustable Interest Rate.  The Base Rate is
the Prime Based Adjustable Interest Rate.  The “Prime Based Adjustable
Interest Rate” on any given date is the per annum interest rate equal to the
prime base rate (the “Index”) charged on loans at Citibank, N.A. in effect on
such date or one Business Day later, as determined by Lender in its sole
discretion, plus the Applicable Margin.  The Prime Based Adjustable
Interest Rate may change at any time.

    


    4.02          Fixed
Rate Options. A
Fixed Rate Loan Segment may be priced at a fixed rate equal to the 1-, 3- or
6-Month Fixed Rate Options, as defined herein, plus the Applicable
Margin.  With these Fixed Rate Options: (a) rates may be fixed for an
Interest Period of 1-, 3- or 6-months; and (b) rates may only be fixed on a
Pricing Date to take effect on such Pricing Date.  For purposes
hereof, the “1-, 3- and 6- Month Fixed Rate Options” means the LIBOR rates for
the corresponding Interest Period.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    


    4.03          Additional
Pricing Options.  In the event
Borrower should desire to price a Loan Segment using an Index, Pricing Date and
repricing margin other than as provided for herein, Borrower may request Lender
to quote a rate and lock-in fee for an identified principal amount and desired
pricing option.  Lender will provide Borrower such a quote, if
available under Lender's then existing policies and procedures, and shall
provide Borrower the option to elect such a rate upon payment of the lock-in
fee, which rate shall be effective on the date determined upon terms and
conditions and within timeframes as Lender may prescribe at the time of the
quote.

    


    5.           
Payment.

    


    5.01          Payment
of Loan Segments.  Borrower shall
make monthly interest only payments, which payments shall consist of interest
that accrued during such period on the unpaid principal balance of each Loan
Segment.  Interest only payments shall be due and payable on the tenth
day of the following month.

    


    5.02          Payment
in Full on Loan Maturity Date.  The unpaid
principal balance, unpaid interest thereon, and all other amounts due under this
Note and the other Loan Documents shall be paid on the Loan Maturity
Date.

    


    5.03          Application
of Payments.  So long as there
is no Event of Default or Incipient Default, payments received prior to the Loan
Maturity Date, in amounts other than as billed, shall be applied to Loan
Segments, as of the date of receipt, as follows:

    


    a.           First
to any fees and reimbursable expenses due under this Note or any other Loan
Documents;

    


    b.           Second
to billed and unpaid interest by Loan Segment, beginning with the Loan Segment
bearing the highest interest rate and then to Loan Segments in descending order
of their interest rates.  Provided however, if two or more Loan
Segments are subject to the same interest rate as of the date of receipt of
payment, the payment shall be applied first to the Base Rate Loan Segment, then
to the Fixed Rate Loan Segment with the earliest Fixed Rate Maturity Date and
then to the Fixed Rate Loan Segments in increasing order of their Fixed Rate
Maturity Dates;

    


    c.           Third
to the principal balance in the Base Rate Loan Segment; and

    


    d.           Thereafter
to Borrower's FPF Account, except where Borrower provides Lender Notice that
such payment amount should be applied against one of the Fixed Rate Loan
Segments subject to the Prepayment Fee as provided for
herein.  Provided however, on the Loan Maturity Date, payments shall
be applied as provided in subparagraphs a.-c. above, and then to the principal
balance in any Fixed Rate Loan Segments.

    


    5.04          Payment
from FPF Account.  Upon Borrower’s
request, Lender will apply funds, if any, held in the FPF Account with respect
to the Loan to the unpaid balance, if any, of the Loan.  Each payment
from the FPF Account will be applied to Loan Segments as provided for in
subparagraphs a.-c. of Section 5.03 above.  The FPF Account is
governed by the terms of the Loan Documents.  In the Event of Default
or Incipient Default, Lender shall have the right to apply payments made by or
for the account of Borrower, including without limitation, from the FPF Account,
to any Loan Segment as Lender may determine, in its sole discretion, at any
time.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    


    6.
           Prepayment and Breakage
Fees.  The Loan is subject to the Prepayment and Breakage Fees
indicated in the Loan Agreement.

    


    7. 
          Default.

    


    7.01          Events of
Default.  Time is of the
essence in the performance of this Note.  The occurrence of any one or
more of the following events shall constitute an “Event of Default” under this
Note:

    


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

    


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

    


    c.           Borrower
shall fail generally to pay its debts as such debts become due, or becomes
insolvent or becomes the subject of an insolvency proceeding.

    


    d.           This
Note 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 this
Note or any of the other Loan Documents.

    


    7.02          Acceleration.  In the event of
any uncured Event of Default beyond any applicable cure periods provided for in
the Loan Documents, at Lender's option, without notice or demand, the unpaid
principal balance of the Loan, plus all accrued and unpaid interest thereon and
all other amounts due shall immediately become due and payable.

    


    7.03          Default
Interest.  The Default
Interest rate applicable to a delinquent payment for a Loan Segment shall remain
at the rate in effect on such Loan Segment at the time such payment was
due.  Provided however, upon acceleration and or maturity, the Default
Interest rate shall be equal to and remain at four percent (4%) per annum above
the interest rate in effect for each Loan Segment at the time of acceleration or
maturity and shall accrue on the entire unpaid balance of each Loan Segment,
until paid in full.

    


    8.           
Loan Terms, Provisions and
Covenants.  The Loan is subject to the terms, provisions and
covenants of this Note and the other Loan Documents.

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    


    9.
           Miscellaneous.

    


    9.01          Notice of
Default.  Borrower shall
provide Lender immediate Notice of any Event of Default or Incipient Default
under this Note and the other Loan Documents.

    


    9.02          Interest
Rates.

    


    a.           Base Rate
Option.  The Base Rate interest rate is a per annum rate and is
calculated on the basis of the actual number of days elapsed during the year for
the actual number of days in the year.  If any payment date is not a
Business Day, then payment shall be due on the next succeeding Business
Day.

    


    b.           Fixed Rate
Options.  The interest rate for the Fixed Rate Options and the
Unused Commitment Fee are per annum rates and are calculated on the basis of the
actual number of days elapsed during the year for a 360 day year.  If
any payment date is not a Business Day, then payment shall be due on the next
succeeding Business Day.

    


    9.03          Exhibits.  All
Exhibits hereto are incorporated herein and made a part of this
Note.

    


    9.04          Index and
Index Source.  The Indexes used
herein do not necessarily represent the lowest rates charged by Lender on its
loans.  If any Index or Index Source provided for herein becomes
unavailable during the Loan term, Lender will choose a new Index or Index
Source, which it determines in its sole discretion is comparable, to be
effective upon notification thereof to Borrower.

    


    9.05          Payments.  Upon Lender’s
written request, payments shall be electronically submitted no later than 10:00
a.m. Spokane time on the date specified for payment.  All sums payable
to Lender hereunder shall be paid directly to Lender in immediately available
funds in U.S. dollars.  Lender shall send to Borrower periodic
statements of all amounts due hereunder at applicable interest rates, which
statements shall be considered correct and conclusively binding on Borrower in
all respects and for all purposes unless Borrower notifies Lender in writing of
any objections within 15 days of receipt of any such statement.

    


    9.06          Authorization.  Borrower
authorizes a Responsible Officer, or any other individual(s) as they or either
of them may authorize in writing, to request advances of principal under this
Note, to confirm interest rates and lock-in fees, and to provide Lender notice
of pricing, repricing or prepayment as required under this Note.

    


    9.07          Advances,
Fees and Costs.  Borrower shall
pay Lender, on demand, all attorney fees and costs incurred to protect or
enforce any of Lender's rights in bankruptcy, appellate proceedings, or
otherwise, under this Note or the other Loan Documents.  All sums
advanced by Lender to protect its interests hereunder or under the other Loan
Documents and all Prepayment and Breakage Fees shall be payable, on demand, and
shall accrue interest under the interest rate in effect for the Base Rate Loan
Segment on such date and shall be treated as an advance under the Base Rate Loan
Segment.

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    


    9.08          Funds
Management Services.
Lender may provide funds management services to Borrower.  Upon
request, Lender shall provide Borrower a quote for identified funds management
services.  Borrower shall comply with all funds management service
agreements during the term of this Note.  All fees incurred shall be
considered a request for an advance under the Loan.  The funds
management services and fees may be adjusted upon reasonable notice by
Lender.

    


    9.09          Governing
Law.  The substantive
laws of the State of Washington shall apply to govern the construction of the
Loan Documents and the rights and remedies of the parties, except where the
location of the Collateral for the Loan may require the application of the laws
of another state or where federal laws, including the Farm Credit Act of 1971,
as amended, may be applicable.

    


    9.10          General
Provisions.  Borrower agrees
to this Note as of the date first above written.  Borrower waives
presentment for payment, demand, notice of nonpayment, protest, notice of
protest and diligence in enforcing payment of this Note.  This Note
and the other Loan Documents constitute the entire agreement between Borrower
and Lender and supersede all prior oral negotiations and promises, which are
merged into such writings.  Upon written agreement of the parties, the
interest rate, payment terms or balances due under this Note may be indexed,
adjusted, renewed or renegotiated.  Lender may at any time, without
notice, release all or any part of the security for this Note, including the
real estate and or personal property covered by the Loan Documents; grant
extensions, deferments, renewals or reamortizations of any part of the Loan over
any period of time; and release from personal liability any one or more of the
parties who are or may become liable for the Loan, without affecting the
personal liability of any other party.  Lender may exercise any and
all rights and remedies available at law, in equity and provided herein and in
the other Loan Documents.  Any delay or omission by Lender in
exercising a right or remedy shall not waive that or any other right or
remedy.  No waiver of default by Lender shall operate as a waiver of
the same or any other default on a future occasion.  Lender shall not
be obligated to renew the Loan or any part thereof or to make additional or
future loans to Borrower.

    


    9.11          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 DOCUMENT AND ANY FUTURE MODIFICATIONS, AMENDMENTS, EXTENSIONS, RESTATEMENTS
AND SERVICING ACTIONS RELATING TO THIS LOAN DOCUMENT.  THE PARTIES
INTEND THAT THIS JURY WAIVER WILL BE ENFORCED TO THE MAXIMUM EXTENT ALLOWED BY
LAW.

    


    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.

    


    (signature
page follows)

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    


    BORROWER:

    POPE
RESOURCES, A DELAWARE LIMITED PARTNERSHIP

    


    By:
_______________________________________                                                                

    David L.
Nunes, President and Chief Executive Officer

     

    
 

    
      
        

      

      Pay
to the Order of CoBank, ACB.

       

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      Pope
Resources, a Delaware Limited Partnership

    

    Customer/Note
No. 56548-811

    


    EXHIBIT
A

    NOTICE/CONFIRMATION

    
      	
              To:

            	
               

            	
               

            
	Technical
      Accounting Services	 	 
	Northwest
      Farm Credit Services, PCA	P.
      O. Box 2515	Fax:
      509-340-5508
	1700
      South Assembly Street	Spokane,
      WA 99220-2515	Tel.:
      1-800-216-4535
	Spokane,
      WA 99224-2121	 	 


    

    


    NOTICE

    This
Notice is provided pursuant to the Revolving Operating Note dated July 31, 2008,
as extended, renewed, amended or restated.

    


    o  PRICING.  If
checked, Borrower elects to price or reprice principal in a Loan Segment as
follows:

    
      	
              o

            	New
      Advance
	
              o

            	Base
      Rate Loan Segment
	
              o

            	Fixed
      Rate Loan Segment Currently Priced Under Fixed Rate Option
      __________________________________________________
	 	Principal
      Amount
      _________________________________________________________________________________________
	 	To
      New Fixed Rate Option
      __________________________________________________________________________________
	 	To
      be Effective (Date)
      _____________________________________________________________________________________


    

    


    o  PREPAYMENT OF
PRINCIPAL.  If checked, Borrower elects to prepay principal as
follows:

    
      	
              o

            	Base
      Rate Loan Segment
	
              o

            	Fixed
      Rate Loan Segment Priced
	 	Under
      Option
      ____________________________________________________________________________________________
	 	Principal
      Amount
      _________________________________________________________________________________________
	 	To
      be Effective (Date)
      _____________________________________________________________________________________


    

    


    
      
        	 
      	
                POPE
      RESOURCES, A DELAWARE LIMITED

              
	 
      	
                PARTNERSHIP

              
	 
      	 
      
	
                Date:
      ___________________________________

              	
                By:
      _________________________________________________

              
	 
      	
                Authorized
      Agent

              
	
                CONFIRMATION

              	 
      
	
                Lender
      confirms that the above actions were taken or modified as provided for
      below:

              	 
      
	 	 
	 	 
	 	 
	 	 
	 
      	 
      
	 	 
	 
      	
                NORTHWEST
      FARM CREDIT SERVICES, PCA

              
	 
      	 
      
	
                Date:
      ___________________________________

              	
                By:
      _________________________________________________

              
	 
      	
                Authorized
      Agent

              


      

    

     

     

    12