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                                                                    Exhibit 10.7

                                                                  Execution Copy


                              EMPLOYMENT AGREEMENT



     This EMPLOYMENT AGREEMENT (this "Agreement") is made and entered on
December 19, 1997 effective as  of the 12th day of January, 1998, by and among
U.S. Timberlands Services Company, L.L.C., a Delaware limited liability company
(the "Company"), and Robert E.L. Michie, Jr. ("Executive").

Recitals:
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     A.   The Company desires to employ Executive as its Vice President--
Operations, and Executive desires to accept such employment, on the terms and
conditions set forth in this Agreement.

     B.   The Company serves as both the general partner of U.S. Timberlands
Company, L.P., a Delaware limited partnership ("UST"), and the managing member
of U.S. Timberlands Klamath Falls, L.L.C., a Delaware limited liability company
("USTK," and together with UST and any subsidiary entities of USTK and UST, the
"UST Group").

Agreements:
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     NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants hereinafter set forth, the parties agree as follows:

Section  1.    Employment.

     The Company hereby employs Executive, and Executive hereby accepts
employment with the Company, on the terms and conditions set forth in this
Agreement.

Section  2.    Term.

     Subject to the provisions of Section 6, Executive's employment by the
Company under this Agreement shall be for a term (the "Term") commencing on
January 12, 1998 and expiring on December 31, 2002.

Section  3.    Executive's Duties.

     3.1 Duties. Executive shall hold the position of the Company's Vice
President--Operations. Subject to the control of the board of directors or other
governing body of the Company (the "Board") and the Chairman, and any
limitations set forth in the operating agreement of the Company (the "Company
Agreement") and in the agreements of limited partnership, operating agreements
or charter and bylaws of the entities within the UST Group,
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Executive shall, in general, assist the President of the Company in the
supervision and control of all the day-to-day business and affairs of the
Company and the UST Group.

     3.2  Performance of Duties.  Executive shall perform Executive's duties and
responsibilities during the Company's normal business hours and at all other
times reasonably necessary to comply with the terms and conditions of this
Agreement.  Executive shall devote the time and attention required to the
performance of Executive's duties and responsibilities for and on behalf of the
Company on the terms set forth in this Section 3.2.  In addition, Executive may
from time to time serve as a consultant to and/or as a member of the board of
directors of other entities, provided that the Board in good faith determines
that such activities do not unreasonably interfere with the business of the
Company and the UST Group and the performance of Executive's duties hereunder.
The parties acknowledge that Executive currently serves as a board member or
advisory member of various civic and charitable organizations and may continue
to participate in these activities, subject to the limitations set forth in the
first two sentences of this Section 3.2; provided, however, that such continued
participation shall in no event be deemed a violation of the limitations of the
first two sentences of this Section 3.2 unless and until Executive shall have
been notified in writing thereof and afforded a reasonable opportunity to cure
the violation.

     3.3  Principal Place of Employment.  Executive's principal place of
employment shall be at the Company's principal executive offices from time to
time.  The Company shall provide Executive, at such location, with a private
office, secretarial services and such other facilities and support services as
are appropriate to the positions of Vice President--Operations and necessary or
appropriate in the performance of Executive's assigned duties.

Section  4.    Compensation and Other Benefits.

     Executive shall be entitled to receive from the Company the following
compensation and benefits for the services to be rendered by Executive
hereunder:

     4.1  Salary and Bonuses. During the Term, the Company shall pay Executive
an annual base salary of $175,000, payable in equal installments during the year
in accordance with the Company's customary practices for senior executives
("Base Salary"). The amount of Executive's Base Salary may be increased from
time to time by the Board, and, once increased, such higher amount shall become
the Base Salary for all purposes of this Agreement and may not thereafter be
reduced. The Company shall also pay to Executive, to the extent earned, an
annual cash bonus, not to exceed 100% of Base Salary, which shall be based on
the performance of Executive and the UST Group's business as determined annually
by the Compensation Committee of the Board in its discretion; provided that for
each of 1998 and 1999 such cash bonus shall be a minimum of 50% of Base Salary.
The Company shall have the right to deduct and withhold from Executive's
compensation all taxes and charges that are currently or that hereafter may be
required by law to be so deducted and withheld.

     The Company shall establish a program whereby Executive may, at his option,
defer receipt of any or all of the Base Salary and bonuses otherwise payable to
him under this Agreement.  Any amounts so deferred shall be placed in a "rabbi"
trust, with a bank or other financial institution

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reasonably satisfactory to Executive as trustee providing the maximum security
to Executive without causing the constructive receipt of income for federal
income tax purposes (the "Deferred Compensation Trust") and distributed,
together with interest or other earnings thereon, according to a payment
schedule to be designated by Executive. Terms of the Deferred Compensation Trust
shall be reasonably satisfactory to the Executive and provide maximum
flexibility under applicable Internal Revenue Service regulations. The Company
shall bear the costs of administering the Deferred Compensation Trust.

     4.2  Long Term Incentive Plan. Executive shall be entitled to participate
in the Long Term Incentive Plan ("LTIP") adopted by the Company on the terms and
conditions set forth therein. Concurrently with the effectiveness of this
Agreement, Executive will be granted Unit Options (as defined in the LTIP)
pursuant to the LTIP in an amount equal to 7.5% of the number of Unit Options
initially available to be granted under the LTIP and substantially in the form
of the grant agreement attached hereto as Attachment A.

     4.3  Participation in Benefit Plans.  During the Term, Executive shall be
eligible to participate in all employee benefit plans and arrangements now in
effect or which may hereafter be established that are generally applicable to
other senior executives of the Company, including, without limitation, all life,
group insurance, and medical and dental care plans and all disability,
retirement, 401(k) and other employee benefit plans of the Company, as long as
any such plan or arrangement remains generally applicable to other senior
executives of the Company.  Executive shall also be entitled to the same
vacation benefits as are generally available to senior executives of the
Company, provided in any case that Executive shall have a minimum of four weeks'
vacation per year.

     4.4  Reimbursement of Expenses.  The Company shall reimburse Executive for
reasonable expenses incurred by Executive in the performance of Executive's
duties hereunder in accordance with the policy of the Company for reimbursement
of expenses as adopted by the Board from time to time and generally applicable
to all senior executives of the Company.  Executive shall furnish the Company
with the supporting documentation required under the Company's policy in
connection with the reimbursement of such expenses.

     4.5  Automobile/Commuting Allowance. Executive shall be entitled to receive
a monthly automobile/commuting allowance of up to $1,000.00 payable on the first
of each month during the Term, which will fully reimburse Executive for the cost
of either (i) leasing or purchasing, and the insurance therefor, of an
automobile for Executive's business use or (ii) commuting to Executive's
principal place of employment. Executive shall purchase and maintain automobile
insurance covering the automobile with such limits as may be required by the
Company from time to time.

Section  5.    [Intentionally Omitted].

Section  6.    Termination.

     6.1  Termination by the Company Without Cause.  The Company may terminate
Executive's employment other than for Cause or Executive becoming Disabled (as
such terms are

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defined below) at any time during the Term if the Board determines, in its sole
discretion, that the continued employment of Executive is not in the continued
interests of the Company. In the event the Company terminates Executive's
employment pursuant to this Section 6.1, then Executive shall be paid on
termination (i) any unpaid Base Salary earned hereunder prior to the termination
date, (ii) all unused vacation time accrued by Executive as of the termination
date in accordance with the Company's vacation policy for senior executives,
(iii) all unpaid amounts of compensation in which Executive is vested as of the
termination date under any and all incentive compensation plans or programs of
the Company, (iv) any expenses in respect of which Executive has requested, and
is entitled to, reimbursement in accordance with Section 4.6, (v) a prorated
bonus for the year of such termination calculated based on the bonus being equal
to 100% of Base Salary, and (vi) an amount equal to the amount of Base Salary
that Executive would receive if Executive's employment had continued without
change through the remainder of the Term or for 12 months, whichever is less
(items (i) through (iv) above being the "Earned Amounts").

     6.2  Termination by the Company for Cause.  The Company may terminate this
Agreement at any time, in the discretion of the Board, in the event of (i) any
conviction of Executive for a felony, (ii any material breach by Executive of a
material written agreement between Executive and the Company or the UST Group,
including this Agreement, (ii any breach caused by Executive of the limited
partnership agreement or operating agreement of any member of the UST Group, or
the charter or bylaws of any corporation within the UST Group, provided that
Executive had prior written notice of such agreement or other document and any
amendment thereto (including a copy of the full text thereof) and provided that
such breach has a material adverse effect on the Company, (iv any willful
conduct by Executive materially injurious to the Company or the UST Group or
their respective businesses, (v) any willful failure by Executive to comply with
any material policies, procedures, or directives of the Board, provided that,
Executive shall first be given notice from the Board of such failure and such
failure shall not have been cured within ten days after such notice or, if such
failure is not capable of being cured within ten days, Executive shall not have
commenced and be diligently pursuing in good faith efforts to cure such default,
or (vi any fraud, misappropriation of funds, embezzlement, or other similar acts
of misconduct by Executive with respect to the Company or the UST Group.  In the
event the Company terminates Executive's employment pursuant to this Section 6.2
for Cause, then Executive shall be paid on termination the Earned Amounts.  For
purposes of this Agreement, no act or failure to act on Executive's part shall
be deemed "willful" unless done, or omitted to be done, in bad faith or without
the reasonable belief that the act or failure to act was in the best interests
of the Company or the UST Group.  Any act or failure to act on the basis of
authority given by resolution duly adopted by the Board or on the basis of
advice given by legal counsel for the Company shall be conclusively presumed to
have been done, or omitted to be done, in good faith and in the best interests
of the Company or the UST Group.  No termination of Executive's employment shall
be for Cause unless such termination shall have been authorized in advance by a
resolution adopted by the Board and delivered to Executive, following a meeting
of the Board at which Executive (together with his counsel) shall have been
afforded a reasonable opportunity to refute the purported grounds for
termination for Cause.

     6.3  Termination Upon Death or Disability of Executive. This Agreement
shall terminate upon the death of Executive, or upon Executive becoming Disabled
(as defined below). In the event of a termination of this Agreement pursuant to
this Section 6.3, Executive (or Executive's estate, if

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applicable) shall be paid on termination the Earned Amounts. For purposes of
this Agreement, "Disabled" shall mean that Executive shall have qualified for
and be receiving benefits under the Company's long-term disability insurance
plan or, if there is no such plan, that Executive shall have qualified for and
be receiving disability benefits under the federal Social Security Act.

     6.4  Voluntary Resignation for Good Reason. Executive may resign
Executive's employment with the Company at any time and, if such resignation is
for "Good Reason", Executive shall be entitled to the same payments and benefits
that Executive would receive under Section 6.1 (i)-(vi) if Executive's
employment were being terminated by the Company other than for Cause or
Executive becoming Disabled. "Good Reason" shall mean any one or more of the
following: (i) failure of the Company to appoint or re-appoint Executive to the
offices of Vice President-- Operations or to more senior offices; (ii failure of
the Company, by act, omission, amendment to the instruments governing its
organization and operation or otherwise, to vest in Executive the position,
duties and responsibilities contemplated by this Agreement; (ii failure by the
Company to pay when due any portion of the compensation payable to Executive
hereunder; (iv any material breach by the Company of any material provision of
this Agreement; or (v) on or following a Change of Control (as such term is
defined in the Company's LTIP as the same may be amended from time to time),
either Executive is assigned any duties or responsibilities materially
inconsistent with, or diminished from, Executive's duties and responsibilities
with the Company and the UST Group immediately prior to the Change of Control,
or, Executive's status, duties, responsibilities, titles or offices with the
Company and the UST Group are materially diminished from those in effect
immediately prior to the Change of Control, as determined in the good faith
opinion of Executive; provided, however, Good Reason shall exist with respect to
a matter described above that is capable of being corrected by the Company only
if such matter is not corrected by the Company within a reasonable period
following its receipt of written notice of such matter from Executive, and in no
event shall a termination by Executive occurring more than 60 days following any
such written notice be for Good Reason.

Section  7.    Covenant Not to Compete; Confidentiality.

     7.1  Noncompetition. Unless granted written permission by the Board and
subject to any further restrictions contained in the agreements of limited
partnership within the UST Group, while employed by the Company and for a period
of 12 months after the termination of such employment, Executive covenants that
Executive shall not (i) own (as a proprietor, partner, or stockholder of greater
than 4.9 percent of outstanding equity securities, interests or otherwise) an
interest in, or (ii) participate (as an officer, director, or in any other
capacity) in the management, operation, or control of, or (iii) perform services
as or act in the capacity of any employee, independent contractor, consultant,
or agent of any enterprise which engages in one or more of the following
activities in a state in which the Company or the UST Group is then conducting
business and in which the Company or the UST Group commenced conducting business
prior to the commencement of such activities therein by Executive:

          (a) acquisition, exchange, operation or sale of timber-producing real
     property or rights to harvest timber, a principal purpose of which is
     producing logs or other forest products;

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          (b) harvesting of timber other than harvesting which is incidental to
     the ownership or operation of real property not owned or operated for a
     principal purpose of producing logs or other forest products;

          (c) sale, exchange or purchase of logs other than sales, exchanges or
     purchases which are incidental to the ownership or operation of real
     property not owned or operated for a principal purpose of producing logs or
     other forest products;

          (d) acquisition or sale of any facilities used to convert logs into
     lumber, plywood or other wood products;

          (e) conversion of logs into lumber, plywood or other wood products;

          (f) marketing and sale of lumber, plywood or other wood products;

          (g) import or export of logs, lumber, plywood or other wood products
     to or from the United States;

          (h) manufacture, marketing or sale of manufactured, engineered, or
     substitute wood products to the extent such products compete with products
     produced by the Company or any member of the UST Group; or

          (i) any and all other activities relating to the United States forest
     products industry to the extent such activities compete with activities of
     the Company or any member of the UST Group;

The noncompetition restrictions set forth in this Section 7.1 shall not apply in
the event of a termination of this Agreement pursuant to Section 6.1 or 6.4 nor,
in the event of Executive's termination due to Executive becoming Disabled in
accordance with Section 6.3, shall they apply following Executive ceasing to be
Disabled unless the Company offers to re-employ Executive on terms  and
conditions at least as favorable as those set forth in this Agreement.

     7.2  Confidentiality. Executive acknowledges that in the course of
Executive's employment by the Company, Executive will be furnished and have
access to certain information concerning the business, financial condition,
operations, assets and liabilities of the Company and the UST Group that is
confidential or proprietary in nature. All such information (irrespective of the
form of communication) is hereinafter collectively referred to as the
"Information." Until the date of termination of Executive's employment
hereunder, and for a period of 18 months thereafter, Executive agrees to keep
the Information confidential and agrees that Executive will use the Information
solely for the purpose of performing Executive's duties hereunder or as
otherwise authorized by the Company. This Agreement shall be inoperative as to
such portions of the Information which (a) are or become generally available to
the public other than as a result of a disclosure by Executive in violation of
this Agreement, (b) become available to Executive on a non-confidential basis
from a source other than the Company or the UST Group that is not bound by an
obligation of confidentiality to such entity or entities, or (c) are required to
be disclosed by an order

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or decree of a court or other tribunal of competent jurisdiction, provided the
Company is given prompt notice of, and the opportunity to contest disclosure
under, such order or decree. Upon termination of this Agreement, Executive will
return the Information furnished by the Company or the UST Group and any
documents that contain, reflect, or are based upon, in whole or in part, the
Information.

     7.3  Equitable Relief.  Executive acknowledges and agrees that it would be
difficult to measure damage to the Company or the UST Group from any breach by
Executive of Section 7.1 or 7.2 and that monetary damages would be an inadequate
remedy for any such breach. Accordingly, Executive agrees that if Executive
shall breach Section 7.1 or 7.2, the Company shall be entitled, in addition to
all other remedies it may have at law or in equity, to an injunction or other
appropriate orders or equitable relief to restrain any such breach, without
showing or proving any actual damage sustained by the Company or the UST Group.
Executive further agrees to waive any requirement for the securing or posting of
any bond in connection with such remedies.

     7.4  Executive's Acknowledgment. Executive hereby expressly acknowledges
and agrees that (i) the restrictions and obligations set forth in and imposed by
this Section 7 will not prevent Executive from obtaining gainful employment in
Executive's field of expertise or cause Executive undue hardship, and (ii) in
view and consideration of the substantial benefits Executive will receive from
the Company pursuant to this Agreement and the Company Agreement, the
restrictions and obligations imposed on Executive under this Section 7 are
reasonable and necessary to protect the legitimate business interests of the
Company and its members and the UST Group.

Section  8.    Indemnification.

          (a) During the Term and for a period of six years thereafter, the
     Company shall cause Executive to be covered by and named as an insured
     under any policy or contract of insurance obtained by it to insure its
     directors and officers against personal liability for acts or omissions in
     connection with service as an officer or director of the Company or service
     in other capacities at the request of the Company.  The coverage provided
     to Executive pursuant to this Section 8 shall be of a scope and on terms
     and conditions at least as favorable as the coverage (if any) provided to
     any other officer or director of the Company.

          (b) To the maximum extent permitted under applicable law, during the
     Term and for a period of six years thereafter, the Company shall indemnify
     Executive against and hold Executive harmless from any costs, liabilities,
     losses and exposures to the fullest extent and on the most favorable terms
     and conditions that similar indemnification is offered to any director or
     officer of the Company or any subsidiary or affiliate thereof.

Section  9.    Representations and Warranties.

    9.1  By Executive. Executive represents and warrants to the Company that (i)
Executive is under no contractual or other restriction or obligation which would
prevent the performance of Executive's duties hereunder or interfere with the
rights of the Company hereunder and (ii) this Agreement has been duly executed
and delivered by Executive, is the legal, valid and binding

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obligation of Executive, and is enforceable against Executive in accordance with
its terms, except that no representation or warranty is made with respect to the
provisions of Section 7.

     9.2  By the Company. The Company represents and warrants to Executive that
(i) it has all requisite limited liability company power and authority to
execute, deliver and perform this Agreement, (ii) all necessary proceedings of
the Company have been duly taken to authorize the execution, delivery and
performance of this Agreement, and (iii) this Agreement has been duly
authorized, executed and delivered by the Company, is the legal, valid and
binding obligation of the Company, and is enforceable against the Company in
accordance with its terms.

Section  10.   Life Insurance.

     If requested by the Company, Executive shall submit to such physical
examinations by a physician and otherwise take such actions and execute and
deliver such documents as may be reasonably necessary to enable the Company to
obtain life insurance on the life of Executive for the benefit of the Company,
but in no event shall Executive's failure to qualify for such coverage, as a
result of the outcome of the medical examination or otherwise, be grounds for a
termination of Executive's employment.

Section  11.   Notices.

     Any notice given pursuant to this Agreement shall be in writing and shall
be deemed given on the earlier of the date (i) the notice is personally
delivered to the party to be notified, (ii) that is three days after the notice
is mailed, postage prepaid, certified with return receipt requested, addressed
as follows, or at such other address as a party may from time to time designate
by notice to the other party, (iii) the notice is delivered at the party's
address via courier service, or (iv) the notice is received by fax or
telecopier:

     To the Company:     U.S. Timberlands Services Company, L.L.C.
                         625 Madison Avenue - Suite 10-B
                         New York, New York 10022
                         Attn:  John M. Rudey
                         Facsimile No: (212) 758-4009

     To Executive:       Robert E. L. Michie, Jr.
                         1410 Westview Place NW
                         Olympia, Washington  98502

Section  12.   General Provisions.

     12.1  Remedies on Default. In the event either party breaches this
Agreement, the other party shall be entitled to pursue all remedies available at
law or in equity. Except as otherwise provided herein, in the event this
Agreement is breached by either party, the non-breaching party shall not
terminate this Agreement without notice and a reasonable opportunity to cure
such breach.

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     12.2  Assignment; Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the Company and any successor of the Company, by merger
or otherwise. Except as provided in the preceding sentence, this Agreement, and
the rights and obligations of the parties hereunder, are personal and neither
this Agreement, nor any right, benefit, or obligation of either party hereto,
shall be subject to voluntary or involuntary assignment, alienation or transfer,
whether by operation of law or otherwise, without the prior written consent of
the other party. Subject to the foregoing, the provisions of this Agreement
shall be binding upon and inure to the benefit of the parties and their
respective heirs, personal representatives, administrators, successors, and
permitted assigns.

     12.3  Waiver. Failure of any party at any time to require performance of
any provision of this Agreement shall not limit such party's right to enforce
such provision, nor shall any waiver of any breach of any provision of this
Agreement constitute a waiver of any succeeding breach of such provision or a
waiver of such provision itself. No attempted or purported waiver of any
provision of this Agreement shall be effective unless set forth in writing and
signed by the party to be bound.

     12.4  Amendment. This Agreement may not be modified or amended except by
the written agreement of the parties.

     12.5  Severability. The agreements and covenants contained in this
Agreement are severable, and in the event any of the agreements and covenants
contained in this Agreement should be held to be invalid by any court or
tribunal of competent jurisdiction, this Agreement shall be interpreted as if
such invalid agreements and covenants were not contained herein; provided,
however, that if in any legal proceeding a court shall hold unenforceable the
covenants contained in Section 7 by reason of their extent or duration or
otherwise, any such covenant shall be reduced in scope to the extent required by
law and enforced in its reduced form.

     12.6  Integration.  This Agreement contains the entire agreement and
understanding of the parties with respect to the employment of Executive by the
Company and supersedes all prior and contemporaneous agreements (oral or
written) between them with respect to such subject matter.

     12.7  Attorneys' Fees. If any legal action or other proceeding is brought
for the enforcement or interpretation of this Agreement, or because of an
alleged dispute or breach in connection with any of the provisions of this
Agreement, if Executive is the successful or prevailing party, Executive shall
be entitled to recover from the Company reasonable attorneys' fees and other
costs incurred by Executive in connection with that action or proceeding, and in
any petition for appeal or review therefrom, in addition to any other relief to
which Executive may be entitled. The Company shall reimburse Executive for the
reasonable attorney's fees and expenses Executive has incurred in the
negotiation of this Agreement.

     12.8  Third Party Beneficiaries. This Agreement does not create, and shall
not be construed as creating, any rights enforceable by any person not a party
to this Agreement.

     12.9  Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.

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     12.10  Survival. In the event of termination of this Agreement by either
party, this Agreement shall become void and there shall be no liability on the
part of Executive or the Company except to the extent such termination results
from the breach by a party hereto of its obligations hereunder (in which case
Section 12.1 shall apply); provided that Sections 6.1, 6.2, 6.3, 6.4, 7, 8, 11
and 12.7 shall survive the termination of this Agreement.

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

     The Company:        U.S. TIMBERLANDS SERVICES COMPANY, L.L.C.,
                         a Delaware limited liability company


                             /s/ John M. Rudey
                         By: _______________________________________
                              Name:  John M. Rudey
                              Title:  Chairman


                             /s/ Robert E. L. Michie
     Executive:              _______________________________________
                              Robert E. L. Michie

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