Document:

<PAGE>
                                                                  EXECUTION COPY

                                                                    Exhibit 10.1

================================================================================

                                 $1,200,000,000

                        FIVE-YEAR COMPETITIVE ADVANCE AND
                       REVOLVING CREDIT FACILITY AGREEMENT

                           Dated as of March 22, 2005

                                      among

                            WEYERHAEUSER COMPANY, and

                 WEYERHAEUSER REAL ESTATE COMPANY, as Borrowers,

       THE LENDERS, THE SWING LINE BANKS AND INITIAL FRONTING BANKS NAMED
                                     HEREIN,

               JPMORGAN CHASE BANK, N.A., as Administrative Agent,

                      CITIBANK, N.A., as Syndication Agent,

            BANK OF AMERICA, N.A., DEUTSCHE BANK SECURITIES INC. and
          THE BANK OF TOKYO-MITSUBISHI, LTD., as Documentation Agents,

                                       and

                 MORGAN STANLEY BANK, as Co-Documentation Agent

================================================================================

         J.P. MORGAN SECURITIES INC. and CITIGROUP GLOBAL MARKETS INC.,
                    as Lead Arrangers and Joint Book Runners
<PAGE>
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                            PAGE
                                                                            ----
<S>                                                                         <C>
ARTICLE I DEFINITIONS....................................................     1
   Section 1.01   Defined Terms..........................................     1
   Section 1.02   Terms Generally........................................    15
   Section 1.03   Accounting Terms; GAAP.................................    15

ARTICLE II THE CREDITS...................................................    15
   Section 2.01   Commitments............................................    15
   Section 2.02   Loans..................................................    16
   Section 2.03   Conversion and Continuation of Loans...................    18
   Section 2.04   Fees...................................................    19
   Section 2.05   Repayment of Loans; Evidence of Debt...................    21
   Section 2.06   Interest on Loans......................................    22
   Section 2.07   Default Interest.......................................    24
   Section 2.08   Alternate Rate of Interest.............................    24
   Section 2.09   Termination and Reduction of Commitments...............    24
   Section 2.10   Prepayment.............................................    25
   Section 2.11   Reserve Requirements; Change in Circumstances..........    25
   Section 2.12   Change in Legality.....................................    27
   Section 2.13   Indemnity..............................................    28
   Section 2.14   Pro Rata Treatment.....................................    29
   Section 2.15   Sharing of Setoffs.....................................    29
   Section 2.16   Payments...............................................    30
   Section 2.17   Taxes..................................................    30
   Section 2.18   Mitigation Obligations; Replacement of Lenders.........    33
   Section 2.19   Competitive Bid Procedure..............................    34
   Section 2.20   Letters of Credit......................................    36
   Section 2.21   Swing Line Loans.......................................    40

ARTICLE III REPRESENTATIONS AND WARRANTIES...............................    41
   Section 3.01   Organization; Powers...................................    41
   Section 3.02   Authorization..........................................    41
   Section 3.03   Enforceability.........................................    42
   Section 3.04   Consents and Approvals.................................    42
   Section 3.05   Financial Statements...................................    42
   Section 3.06   No Material Adverse Change.............................    42
   Section 3.07   Title to Properties; Possession Under Leases...........    43
   Section 3.08   Subsidiaries...........................................    43
   Section 3.09   Litigation; Compliance with Laws.......................    43
   Section 3.10   Agreements.............................................    43
   Section 3.11   Federal Reserve Regulations............................    43
   Section 3.12   Investment Company Act; Public Utility Holding
                  Company Act............................................    44
   Section 3.13   Tax Returns............................................    44
</TABLE>

                                      (i)
<PAGE>
<TABLE>
<S>                                                                         <C>
   Section 3.14   No Material Misstatements..............................    44
   Section 3.15   Compliance with ERISA..................................    44
   Section 3.16   Environmental Matters..................................    45
   Section 3.17   Maintenance of Insurance...............................    45

ARTICLE IV CONDITIONS OF LENDING AND ISSUANCE OF LETTERS OF CREDIT.......    45
   Section 4.01   All Borrowings and Issuances...........................    45
   Section 4.02   Closing Date...........................................    46

ARTICLE V AFFIRMATIVE COVENANTS..........................................    47
   Section 5.01   Existence; Businesses and Properties...................    48
   Section 5.02   Insurance..............................................    48
   Section 5.03   Obligations and Taxes..................................    48
   Section 5.04   Financial Statements, Reports, etc.....................    49
   Section 5.05   Litigation and Other Notices...........................    50
   Section 5.06   ERISA..................................................    51
   Section 5.07   Maintaining Records; Access to Properties and
                  Inspections............................................    51
   Section 5.08   Use of Proceeds........................................    52
   Section 5.09   Environmental Matters..................................    52
   Section 5.10   OCBM Agreement.........................................    53
   Section 5.11   Further Assurances.....................................    53

ARTICLE VI NEGATIVE COVENANTS............................................    54
   Section 6.01   Covenants of Weyerhaeuser..............................    54
   Section 6.02   Covenants with respect to WRECO........................    56

ARTICLE VII EVENTS OF DEFAULT............................................    60
   Section 7.01   Events of Default......................................    60

ARTICLE VIII THE ADMINISTRATIVE AGENT....................................    62
   Section 8.01   The Administrative Agent...............................    62
   Section 8.02   Other Agents...........................................    65

ARTICLE IX MISCELLANEOUS.................................................    65
   Section 9.01   Notices................................................    65
   Section 9.02   Survival of Agreement..................................    66
   Section 9.03   Binding Effect.........................................    66
   Section 9.04   Successors and Assigns.................................    67
   Section 9.05   Expenses; Indemnity....................................    69
   Section 9.06   Right of Setoff........................................    70
   Section 9.07   Applicable Law.........................................    70
   Section 9.08   Waivers; Amendment.....................................    71
   Section 9.09   Interest Rate Limitation...............................    71
   Section 9.10   Entire Agreement.......................................    72
   Section 9.11   WAIVER OF JURY TRIAL...................................    72
   Section 9.12   Severability...........................................    72
</TABLE>

                                      (ii)
<PAGE>
<TABLE>
<S>                                                                         <C>
   Section 9.13   Counterparts...........................................    72
   Section 9.14   Headings...............................................    72
   Section 9.15   Jurisdiction; Consent to Service of Process............    72
   Section 9.16   Domicile of Loans......................................    73
   Section 9.17   Restricted and Unrestricted Subsidiaries...............    73
   Section 9.18   USA PATRIOT Act........................................    75
</TABLE>

                                    EXHIBITS

<TABLE>
<S>           <C>
Exhibit A     Form of Revolving Borrowing Request
Exhibit B     Form of Administrative Questionnaire
Exhibit C     Form of Assignment and Acceptance
Exhibit D-1   Form of Certification of Financial Statements for Weyerhaeuser
Exhibit D-2   Form of Certification of Financial Statements for WRECO
Exhibit D-3   Form of Compliance Certificate for Weyerhaeuser
Exhibit D-4   Form of Compliance Certificate for WRECO
Exhibit E     Form of Subordinated Debt
Exhibit F     Form of Promissory Note
Exhibit G     Form of Swing Line Borrowing Request
</TABLE>

                                    SCHEDULES

<TABLE>
<S>             <C>
Schedule 2.01   Commitments
Schedule 2.20   Existing Letters of Credit
Schedule 3.08   Subsidiaries of Weyerhaeuser and WRECO
Schedule 9.01   Notices
</TABLE>

                                     (iii)
<PAGE>
          FIVE-YEAR COMPETITIVE ADVANCE AND REVOLVING CREDIT FACILITY AGREEMENT
dated as of March 22, 2005 among WEYERHAEUSER COMPANY, a Washington corporation
("Weyerhaeuser"), WEYERHAEUSER REAL ESTATE COMPANY, a Washington corporation
("WRECO," together with Weyerhaeuser, the "Borrowers" and each, individually, a
"Borrower"), the lenders listed in Schedule 2.01 (together with each assignee
that becomes a party hereto pursuant to Section 9.04, a "Lender," and
collectively, the "Lenders"), JPMORGAN CHASE BANK, N.A., a national banking
association ("JPMorgan Chase Bank") and CITIBANK, N.A., a national banking
association ("Citibank"), as initial fronting banks (collectively, in such
capacities, the "Initial Fronting Banks"), JPMORGAN CHASE BANK and CITIBANK, as
swing line banks (in such capacities, the "Swing Line Banks"), JPMORGAN CHASE
BANK as administrative agent for the Lenders (in such capacity, and its
successors in such capacity, the "Administrative Agent"), CITIBANK, as
syndication agent (in such capacity, the "Syndication Agent"), BANK OF AMERICA,
N.A., DEUTSCHE BANK SECURITIES INC. and THE BANK OF TOKYO-MITSUBISHI, LTD., as
documentation agents (collectively, in such capacities, the "Documentation
Agents"), and MORGAN STANLEY BANK, as co-documentation agent (in such capacity,
the "Co-Documentation Agent").

                                   WITNESSETH:

          WHEREAS, the Borrowers have entered into that certain Third Amended
and Restated 364-Day Revolving Credit Facility Agreement, dated as of March 23,
2004 (the "Existing 364-Day Revolving Credit Agreement") with JPMorgan Chase
Bank, as administrative agent, Morgan Stanley Senior Funding, Inc., as
syndication agent, The Bank of Tokyo-Mitsubishi, Ltd. and Deutsche Bank
Securities Inc. as co-documentation agents, and the lenders party thereto from
time to time.

          WHEREAS, the Borrowers have requested that the Lenders enter into this
Five-Year Competitive Advance and Revolving Credit Agreement (a) to refinance
the Existing 364-Day Revolving Credit Agreement, (b) to pay costs and expenses
related to such re-financing, (c) to provide the Borrowers and their
Subsidiaries with financing for general corporate purposes and to back-stop
commercial paper issuances and (d) to provide for the issuance of Letters of
Credit for the account of Weyerhaeuser which are to be utilized for general
corporate purposes.

          WHEREAS, WRECO will derive a substantial benefit from the credit
extended to Weyerhaeuser.

          NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree as
follows:

                                    ARTICLE I

                                   DEFINITIONS

          Section 1.01 Defined Terms. As used in this Agreement, the following
terms shall have the meanings specified below:
<PAGE>
                                                                               2

          "Adjusted Net Worth" shall mean, as of the date of any computation
thereof, the aggregate amount of capital stock (less treasury stock), surplus
and retained earnings of WRECO and its Restricted Subsidiaries, after deducting
(i) goodwill, patents, trade names, trademarks, unamortized debt discount and
expense, deferred assets (other than prepaid taxes and insurance), experimental
or organizational expense, any reappraisal, revaluation or write-up assets, and
such other assets as are properly classified as "intangible assets" of WRECO and
its Restricted Subsidiaries in accordance with GAAP, (ii) all minority interests
in the capital stock and surplus of the Restricted Subsidiaries of WRECO, (iii)
all Investments in Unrestricted Subsidiaries of WRECO, and (iv) all Investments
of WRECO and its Restricted Subsidiaries in any joint venture, partnership or
similar entity (not including any Investments in any Restricted Subsidiary of
WRECO) entered into for the purpose of acquiring, developing, constructing,
owning, operating, selling or leasing any Real Estate Assets.

          "Administrative Agent Fees" shall have the meaning given such term in
Section 2.04(b).

          "Administrative Questionnaire" shall mean an Administrative
Questionnaire in the form of Exhibit B hereto.

          "Affiliate" shall mean, when used with respect to a specified 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.

          "Aggregate Credit Exposure" shall mean the aggregate amounts of the
Lenders' Credit Exposures.

          "Agreement" shall mean this Five-Year Competitive Advance and
Revolving Credit Facility Agreement, together with all amendments, supplements
and modifications hereof.

          "Applicable Margin" shall have the meaning given such term in Section
2.06(d).

          "Applicable Percentage" of any Lender at any time shall mean the
percentage of the Total Commitment represented by such Lender's Commitment. In
the event the Commitments shall have expired or been terminated, the Applicable
Percentage shall be determined on the basis of the Commitments most recently in
effect, but giving effect to assignments pursuant to Section 9.04.

          "Applicable Utilization Fee Percentage" shall have the meaning given
such term in Section 2.06(e).

          "Assignment and Acceptance" shall mean an assignment and acceptance
entered into by a Lender and an assignee (with the consent of any party whose
consent is required by Section 9.04), and accepted by the Administrative Agent,
which acceptance shall be governed by the terms of Section 9.04, substantially
in the form of Exhibit C.

          "Base Rate" shall mean, for any day, a rate per annum equal to the
higher of (i) the Prime Rate and (ii) 1/2 of 1% plus the Federal Funds Rate,
each as in effect from time to time. If for any reason the Administrative Agent
shall have determined (which determination shall be
<PAGE>
                                                                               3

conclusive absent manifest error) that it is unable to ascertain the Federal
Funds Rate, including the inability or failure of the Administrative Agent to
obtain sufficient quotations in accordance with the terms thereof, the Base Rate
shall be determined without regard to clause (ii) of the first sentence of this
definition, until the circumstances giving rise to such inability no longer
exist. Any change in the Base Rate due to a change in the Prime Rate or the
Federal Funds Rate shall be effective on the effective date of such change in
the Prime Rate or the Federal Funds Rate, respectively.

          "Base Rate Borrowing" shall mean a Borrowing comprised of Base Rate
Loans.

          "Base Rate Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Base Rate in accordance with the provisions of
Article II.

          "Board" shall mean the Board of Governors of the Federal Reserve
System of the United States.

          "Borrower" and "Borrowers" shall have the respective meanings given
such terms in the introductory paragraph hereto.

          "Borrowing" shall mean a group of Loans of a single Type made by the
Lenders (or, in the case of a Competitive Borrowing, by the Lender or Lenders
whose Competitive Bids have been accepted pursuant to Section 2.19) on a single
date and as to which a single Interest Period is in effect.

          "Borrowing Request" shall mean a Revolving Borrowing Request or a
Swing Line Borrowing Request, as the case may be.

          "Business Day" shall mean any day (other than a day which is a
Saturday, Sunday or legal holiday in the State of New York) on which banks are
open for business in New York City; provided, however, that, when used in
connection with a Eurodollar Loan, the term "Business Day" shall also exclude
any day on which banks are not open for dealings in dollar deposits in the
London interbank market.

          "Capital Base" shall mean, as of the date of any computation thereof,
the sum of (i) Adjusted Net Worth plus (ii) the amount of WRECO/Weyerhaeuser
Subordinated Debt then outstanding not to exceed Adjusted Net Worth.

          "Capital Lease Obligations" of any person shall mean the obligations
of such person to pay rent or other amounts under any lease of (or other
arrangement conveying the right to use) real or personal property, or a
combination thereof, which obligations are required to be classified and
accounted for as capital leases on a balance sheet of such person under GAAP
and, for purposes of this Agreement, the amount of such obligations at any time
shall be the capitalized amount thereof at such time determined in accordance
with GAAP.

          A "Change in Control" shall be deemed to have occurred with respect to
(a) Weyerhaeuser if, (i) any person or group (within the meaning of Rule 13d-5
of the SEC as in effect on the date hereof) shall own directly or indirectly,
beneficially or of record, shares representing more than 20% of the aggregate
ordinary voting power represented by the issued
<PAGE>
                                                                               4

and outstanding capital stock of Weyerhaeuser, (ii) a majority of the seats
(other than vacant seats) on the board of directors of Weyerhaeuser shall at any
time have been occupied by persons who were neither (A) nominated by the
management of Weyerhaeuser in accordance with its charter and by-laws, nor (B)
appointed by directors so nominated, or (iii) any person or group shall
otherwise directly or indirectly Control Weyerhaeuser, and (b) WRECO if
Weyerhaeuser shall fail to own directly or indirectly, beneficially or of
record, shares representing at least 79% of the aggregate ordinary voting power
represented by the issued and outstanding capital stock of WRECO.

          "Class," when used in reference to any Loan or Borrowing, refers to
whether such Loan, or the Loans comprising such Borrowing, is a Revolving Loan
or Competitive Loan.

          "Closing Date" shall mean the first date on which the conditions
precedent set forth in Section 4.02 shall have been satisfied.

          "Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations promulgated and rulings issued thereunder.
Section references to the Code are to the Code, as in effect at the date of this
Agreement and any subsequent provisions of the Code, amendatory thereof,
supplemental thereto or substituted therefor.

          "Commitment" shall mean, with respect to each Lender, the commitment
of such Lender hereunder as set forth in Schedule 2.01 or in the Assignment and
Acceptance pursuant to which such Lender shall have assumed its Commitment, as
applicable, as such Lender's Commitment may be permanently reduced, increased or
terminated from time to time pursuant to Section 2.09, Section 2.18, Article VII
or Section 9.04.

          "Competitive Bid" shall mean an offer by a Lender to make a
Competitive Loan in accordance with Section 2.19.

          "Competitive Bid Rate" shall mean, with respect to any Competitive
Bid, the Margin or the Fixed Rate, as applicable, offered by the Lender making
such Competitive Bid.

          "Competitive Bid Request" shall mean a request by the Borrower for
Competitive Bids in accordance with Section 2.19.

          "Competitive Borrowing" shall mean a Borrowing consisting of
Competitive Loans or concurrent Competitive Loans from the Lender or Lenders
whose Competitive Bids for such Borrowing have been accepted by the Borrower
under the bidding procedure described in Section 2.19.

          "Competitive Loan" shall mean a Loan made pursuant to Section 2.19.

          "Control" shall mean 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 ownership of voting securities or by contract, and
"Controlling" and "Controlled" shall have meanings correlative thereto.
<PAGE>
                                                                               5

          "Credit Exposure" shall mean, with respect to each Lender, at any
time, the aggregate principal amount at such time of all outstanding Revolving
Loans of such Lender to the Borrowers, plus the aggregate amount at such time of
such Lender's L/C Exposure, plus the aggregate amount at such time of such
Lender's Swing Line Exposure.

          "Default" shall mean any event or condition which upon notice, lapse
of time or both would constitute an Event of Default.

          "Dollars," "dollars" or "$" shall mean lawful money of the United
States of America.

          "Domestic Subsidiary" shall mean any subsidiary organized under the
laws of any State of the United States of America, substantially all the assets
of which are located, and substantially all the business of which is conducted,
in the United States of America.

          "Environmental Claims" shall mean any and all administrative,
regulatory, or judicial actions, suits, demand letters, claims, liens, notices
of noncompliance or violation, investigations, or proceedings relating in any
way to any Environmental Law (hereinafter referred to as "claims") or any permit
issued under any such Environmental Law, including without limitation (a) any
and all claims by Governmental Authorities for enforcement, cleanup, removal,
response, remedial, or other actions or damages pursuant to any applicable
Environmental Law, and (b) any and all claims by any third party seeking
damages, contribution, indemnification, cost recovery, compensation, or
injunctive relief resulting from Hazardous Materials or arising from alleged
injury or threat of injury to health, safety, or the environment.

          "Environmental Laws" shall mean any and all Federal, state, local and
foreign statutes, laws, regulations, ordinances, codes, rules (including rules
of common law), judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions now or
hereafter in effect relating to the environment, health, safety, Hazardous
Materials (including, without limitation, the manufacture, processing,
distribution, use, treatment, storage, Release, and transportation thereof) or
to industrial hygiene or the environmental conditions on, under or about real
property, including, without limitation, soil, groundwater, and indoor and
outdoor ambient air conditions.

          "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and rulings
issued thereunder. Section references to ERISA are to ERISA, as in effect at the
date of this Agreement and any subsequent provisions of ERISA, amendatory
thereof, supplemental thereto or substituted therefor.

          "ERISA Affiliate" shall mean any trade or business (whether or not
incorporated) that, together with Weyerhaeuser or WRECO, is treated as a single
employer under Section 414(b) or (c) of the Code or, solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code.

          "Eurodollar Borrowing" shall mean a Borrowing comprised of Eurodollar
Loans.
<PAGE>
                                                                               6

          "Eurodollar Loan" shall mean any Loan bearing interest at a rate
determined by reference to the Eurodollar Rate in accordance with the provisions
of Article II.

          "Eurodollar Rate" shall mean, with respect to any Eurodollar Borrowing
for any Interest Period, the rate appearing on Page 3750 of the Telerate Service
(or on any successor or substitute page of such Service, or any successor to or
substitute for such Service, providing rate quotations comparable to those
currently provided on such page of such Service, as determined by the
Administrative Agent from time to time for the purpose of providing quotations
of interest rates applicable to dollar deposits in the London interbank market)
at approximately 11:00 a.m., London time, two Business Days prior to the
commencement of such Interest Period, as the rate for dollar deposits with a
maturity comparable to such Interest Period. In the event that such rate is not
available at such time for any reason, then the "Eurodollar Rate" with respect
to such Eurodollar Borrowing for such Interest Period shall be the rate at which
dollar deposits of $5,000,000 and for a maturity comparable to such Interest
Period are offered by the principal London office of the Administrative Agent in
immediately available funds in the London interbank market at approximately
11:00 a.m., London time, two Business Days prior to the commencement of such
Interest Period.

          "Event of Default" shall have the meaning given such term in Article
VII.

          "Existing 364-Day Revolving Credit Agreement" shall have the meaning
given such term in the preliminary statements hereto.

          "Existing Letters of Credit" shall have the meaning given such term in
Section 2.20(a).

          "Facility Fees" shall have the meaning given such term in Section
2.04(a).

          "Federal Funds Rate" shall mean, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day which is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for the day of such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.

          "Fees" shall mean the Facility Fees, the Fronting Fee, the L/C
Participation Fee and the Administrative Agent Fees.

          "Financial Officer" of any corporation shall mean the chief financial
officer, principal accounting officer, treasurer or controller of such
corporation.

          "Fixed Rate" shall mean, with respect to any Competitive Loan (other
than a Eurodollar Competitive Loan), the fixed rate of interest per annum
specified by the Lender making such Competitive Loan in its related Competitive
Bid.

          "Fixed Rate Borrowing" shall mean a Borrowing comprised of Fixed Rate
Loans.
<PAGE>
                                                                               7

          "Fixed Rate Loan" shall mean a Competitive Loan bearing interest at a
Fixed Rate.

          "Fronting Banks" shall mean the Initial Fronting Banks and any other
Lender designated by Weyerhaeuser to the extent such Lender has expressly agreed
to perform all of the obligations that, by the terms of this Agreement, are
required to be performed as the Fronting Banks, as such consent by such Lender
may be evidenced from time to time by documentation reasonably acceptable to
Weyerhaeuser, such Lender and the Administrative Agent.

          "Fronting Fee" shall have the meaning given such term in Section
2.04(c).

          "GAAP" shall mean generally accepted accounting principles, applied on
a consistent basis.

          "Governmental Authority" shall mean the government of the United
States of America, any other nation or any political subdivision thereof,
whether state or local, and any agency, authority, instrumentality, regulatory
body, court, central bank or other entity exercising executive, legislative,
judicial, taxing, regulatory or administrative powers or functions of or
pertaining to government.

          "Guarantee" of or by any person shall mean any obligation, contingent
or otherwise, of such person guaranteeing or having the economic effect of
guaranteeing any Indebtedness of any other person (the "primary obligor") in any
manner, whether directly or indirectly, and including any obligation of such
person, direct or indirect, (a) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Indebtedness or to purchase (or to advance
or supply funds for the purchase of) any security for the payment of such
Indebtedness, (b) to purchase or lease property, securities or services for the
purpose of assuring the owner of such Indebtedness of the payment of such
Indebtedness, (c) to maintain working capital, equity capital or other financial
statement condition or liquidity of the primary obligor so as to enable the
primary obligor to pay such Indebtedness or (d) as an account party in respect
of any letter of credit or letter of guaranty issued to support such
Indebtedness or obligation; provided, however, that the term Guarantee shall not
include endorsements for collection or deposit, in either case in the ordinary
course of business.

          "Hazardous Materials" shall mean (a) any petroleum or petroleum
products, flammable substances, explosives, radioactive materials, hazardous
wastes, substances or contaminants, toxic wastes, substances or contaminants, or
any other wastes, substances, contaminants or pollutants prohibited, limited or
regulated by any Governmental Authority; (b) asbestos in any form that is or
could become friable, urea formaldehyde foam insulation, transformers or other
equipment that contains dielectric fluid containing levels of polychlorinated
biphenyls or radon gas; (c) any chemicals, materials or substances defined as or
included in the definition of "hazardous substances," "hazardous wastes,"
"hazardous materials," "extremely hazardous wastes," "restricted hazardous
wastes," "toxic substances," "toxic pollutants," "contaminants," or
"pollutants," or words of similar import, under any applicable Environmental
Law; and (d) any other chemical, material, or substance, exposure to which is
prohibited, limited, or regulated by any Governmental Authority.
<PAGE>
                                                                               8

          "Indebtedness" of any person shall mean, without duplication, (a) all
obligations of such person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (c) all obligations of such person
upon which interest charges are customarily paid, (d) all obligations of such
person under conditional sale or other title retention agreements relating to
property or assets purchased by such person, (e) all obligations of such person
issued or assumed as the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (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 property owned or acquired by such person, whether or not the
obligations secured thereby have been assumed, (g) all Guarantees by such person
of Indebtedness of others, (h) all Capital Lease Obligations of such person, and
(i) all obligations of such person as an account party in respect of letters of
credit, letters of guaranty and bankers' acceptances. The Indebtedness of any
person shall include the Indebtedness of any partnership in which such person is
a general partner.

          "Initial Fronting Banks" shall have the meaning given such term in the
introductory paragraph hereto.

          "Interest Period" shall mean, (a) as to any Eurodollar Borrowing, the
period commencing on the date of such Borrowing or on the date of conversion of
a Borrowing of a different Type to a Eurodollar Borrowing or on the last day of
the immediately preceding Interest Period applicable to such Borrowing or
conversion thereof, as the case may be, and ending on the numerically
corresponding day (or, if there is no numerically corresponding day, on the last
day) in the calendar month that is 1, 2, 3 or 6 months thereafter, as the
applicable Borrower may elect, and (b) with respect to any Fixed Rate Borrowing,
the period (which shall not be less than seven days nor more than 360 days)
commencing on the date specified in the applicable Competitive Bid Request;
provided, however, that if any Interest Period would end on a day other than a
Business Day, such Interest Period shall be extended to the next succeeding
Business Day unless, in the case of Eurodollar Loans, such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day; provided further that no
Interest Period for any Loan shall extend beyond the Termination Date. Interest
shall accrue from and including the first day of an Interest Period to but
excluding the last day of such Interest Period.

          "Investments" shall mean all investments in any Person, computed in
accordance with GAAP, made by stock purchase, capital contribution, loan,
advance, extension of credit, or creation or assumption of any other contingent
liability or Guarantee in respect of any obligation of such Person, or
otherwise; provided, however, that in computing any investment in any Person (i)
all expenditures for such investment shall be taken into account at the actual
amounts thereof in the case of expenditures of cash and at the fair value
thereof (as determined in good faith by the Board of Directors of WRECO) or
depreciated cost thereof (in accordance with GAAP), whichever is greater, in the
case of expenditures of property, (ii) there shall not be included any Real
Estate Assets, or any account or note receivable from such other Person arising
from transactions in the ordinary course of business, and (iii) a Guarantee or
other contingent liability of any kind in respect of any Indebtedness or other
obligation of such Person shall be deemed an Investment equal to the amount of
such Indebtedness or obligation.
<PAGE>
                                                                               9

          "L/C Disbursement" shall mean a payment or disbursement made by any
Fronting Bank pursuant to a Letter of Credit.

          "L/C Exposure" shall mean, at any time, the sum of (a) the aggregate
undrawn amount of all outstanding Letters of Credit at such time (assuming
compliance at such time with all conditions to drawing) plus (b) the aggregate
principal amount of all L/C Disbursements that have not yet been converted to
Loans in accordance with Section 2.02(f) or reimbursed by Weyerhaeuser at such
time. The L/C Exposure of any Lender at any time shall mean its Applicable
Percentage of the aggregate L/C Exposure at such time.

          "L/C Participation Fee" shall have the meaning given such term in
Section 2.04(c).

          "Lead Arrangers" shall mean, collectively, J.P. Morgan Securities
Inc., and Citigroup Global Markets Inc.

          "Lender" and "Lenders" shall have the respective meanings given such
terms in the introductory paragraph hereto.

          "Lender Affiliate" shall mean, (a) with respect to any Lender, (i) an
Affiliate of such Lender or (ii) any entity (whether a corporation, partnership,
trust or otherwise) that is engaged in making, purchasing, holding or otherwise
investing in bank loans and similar extensions of credit in the ordinary course
of its business and is administered or managed by a Lender or an Affiliate of
such Lender and (b) with respect to any Lender that is a fund which invests in
bank loans and similar extensions of credit, any other fund that invests in bank
loans and similar extensions of credit and is managed by the same investment
advisor as such Lender or by an Affiliate of such investment advisor.

          "Letter of Credit" shall mean any letter of credit issued pursuant to
Section 2.20.

          "Lien" shall mean, with respect to any asset, (a) any mortgage, deed
of trust, lien, pledge, encumbrance, charge or security interest in or on such
asset, (b) the interest of a vendor or a lessor under any conditional sale
agreement, capital lease or title retention agreement relating to such asset and
(c) in the case of securities, any purchase option, call or similar right of a
third party with respect to such securities.

          "Loan" shall mean a Revolving Loan, a Swing Line Loan or a Competitive
Loan.

          "Loan Documents" shall mean this Agreement, the OCBM Agreement, any
Letter of Credit and any application therefor and any notes issued in accordance
with Section 2.05.

          "Mandatory Convertible Debt Securities" with respect to Weyerhaeuser,
shall mean all obligations of Weyerhaeuser evidenced by bonds, notes,
debentures, or other similar instruments, which by their terms convert
mandatorily into equity interests of Weyerhaeuser no later than three years from
the date of issuance of such bonds, notes, debentures, or other similar
instruments; provided that at no time shall the aggregate outstanding principal
amount of such obligations included in the definition of "Mandatory Convertible
Debt Securities," prior to their conversion, exceed $1,500,000,000.
<PAGE>
                                                                              10

          "Margin" means, with respect to any Competitive Loan bearing interest
at a rate based on the Eurodollar Rate, the marginal rate of interest, if any,
to be added to or subtracted from the Eurodollar Rate to determine the rate of
interest applicable to such Loan, and specified by the Lender making such Loan
in its related Competitive Bid.

          "Margin Stock" shall have the meaning given such term under Regulation
U.

          "Material Adverse Effect" shall mean (a) a materially adverse effect
on the business, financial condition, operations or properties of Weyerhaeuser
and its Subsidiaries, taken as a whole, (b) a materially adverse effect on the
ability of Weyerhaeuser or any of its Subsidiaries to perform its obligations
under any Loan Documents to which it is or will be a party, or (c) a materially
adverse effect on the rights and remedies available to the Administrative Agent
and the Lenders under the Loan Documents.

          "Moody's" shall mean Moody's Investors Service, Inc., a corporation
organized and existing under the laws of the State of Delaware, and its
successors and assigns, and if such corporation shall for any reason no longer
perform the functions of a securities rating agency, "Moody's" shall be deemed
to refer to any other nationally recognized rating agency designated by
Weyerhaeuser and the Required Lenders.

          "OCBM Agreement" shall mean the Ownership and Capital Base Maintenance
Agreement, dated as of March 22, 2005, and entered into by Weyerhaeuser.

          "PBGC" shall mean the Pension Benefit Guaranty Corporation established
pursuant to Section 4002 of ERISA, or any successor thereto.

          "Person" shall mean any natural person, corporation, business trust,
joint venture, joint stock company, trust, unincorporated organization,
association, company, partnership or government, or any agency or political
subdivision thereof.

          "Plan" shall mean any multiemployer or single-employer plan as defined
in Section 4001 of ERISA covered by Title IV of ERISA, which is maintained or
contributed to by (or to which there is an obligation to contribute of), or at
any time during the five calendar years preceding the date of this Agreement was
maintained or contributed to by (or to which there was an obligation to
contribute of), Weyerhaeuser or an ERISA Affiliate.

          "Prime Rate" shall mean the rate of interest per annum publicly
announced from time to time by the Administrative Agent as its prime rate in
effect at its principal office in New York City; each change in the Prime Rate
shall be effective on the date such change is publicly announced as effective.
The Prime Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer.

          "Rating" shall mean, as of any date, the rating by Moody's and S&P in
effect on such date, of the Senior Unsecured Long-Term Debt of Weyerhaeuser.

          "Real Estate Assets" shall mean all assets of WRECO and its Restricted
Subsidiaries (determined, unless the context otherwise requires, on a
consolidated basis for WRECO and its Restricted Subsidiaries) of the types
described below, acquired and held for the
<PAGE>
                                                                              11

purpose of, and arising out of, the development and/or sale or rental thereof in
the ordinary course of business: (i) improved and unimproved land, buildings and
other structures and improvements and fixtures located thereon, and (ii)
contracts, mortgages, notes receivables and other choses in action.

          "Register" shall have the meaning given such term in Section 9.04(c).

          "Regulation D" shall mean Regulation D of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Regulation T" shall mean Regulation T of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Regulation U" shall mean Regulation U of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Regulation X" shall mean Regulation X of the Board as from time to
time in effect and all official rulings and interpretations thereunder or
thereof.

          "Reinvestment Proceeds" shall have the meaning given such term in
Section 2.10(b).

          "Related Parties" shall mean, with respect to any specified Person,
such Person's Affiliates and the respective directors, officers, employees,
agents and advisors of such Person and such Person's Affiliates.

          "Release" shall mean disposing, discharging, injecting, spilling,
leaking, dumping, emitting, escaping, emptying, seeping, placing, and the like,
into or upon any land or water or air, or otherwise entering into the
environment.

          "Reportable Event" shall mean an event described in Section 4043(c) of
ERISA with respect to a Plan as to which the 30-day notice requirement has not
been waived by statute, regulation or otherwise.

          "Required Lenders" shall mean, at any time, Lenders having Credit
Exposures and unused Commitments representing more than 50% of the sum of the
Aggregate Credit Exposure and unused Commitments at such time; provided that,
for the purpose of declaring the Loans to be due and payable pursuant to Article
VII, and for all purposes after the Loans become due and payable pursuant to
Article VII or the Commitments expire or terminate, (i) the outstanding
Competitive Loans of the Lenders shall be added to their respective Credit
Exposures and to the Aggregate Credit Exposure and (ii) notwithstanding Section
2.14, the entire amount of Competitive Loans of each Lender shall reduce the
unused Commitment of such Lender and shall not reduce the unused Commitment of
any other Lender in determining the Required Lenders.

          "Restricted Subsidiary" shall mean, (i) with respect to Weyerhaeuser,
each Subsidiary that has not been designated as an Unrestricted Subsidiary on
Schedule 3.08 Part I and thereafter not designated by a Financial Officer of
Weyerhaeuser as an Unrestricted
<PAGE>
                                                                              12

Subsidiary after the Closing Date pursuant to Section 9.17 and (ii) with respect
to WRECO, each Subsidiary that has not been designated as an Unrestricted
Subsidiary on Schedule 3.08 Part II or thereafter designated by a Financial
Officer of WRECO as an Unrestricted Subsidiary after the Closing Date pursuant
to Section 9.17. On the Closing Date, the Company and its subsidiaries shall be
deemed Restricted Subsidiaries unless a Financial Officer of Weyerhaeuser shall
have designated any of such entities as an Unrestricted Subsidiary after the
Closing Date.

          "Revolving Borrowing" shall mean a Borrowing consisting of Revolving
Loans.

          "Revolving Borrowing Request" shall mean a request made pursuant to
Section 2.02(e) in the form of Exhibit A.

          "Revolving Loan" shall mean a Loan made by the Lenders to a Borrower
pursuant to Section 2.01.

          "S&P" shall mean Standard & Poor's Ratings Services, a division of the
McGraw-Hill Companies, Inc., a corporation organized and existing under the laws
of the State of New York, and its successors and assigns, and if such
corporation shall for any reason no longer perform the functions of a securities
rating agency, "S&P" shall be deemed to refer to any other nationally recognized
rating agency designated by Weyerhaeuser and the Required Lenders.

          "SEC" shall mean the Securities and Exchange Commission or any
successor.

          "Senior Debt" shall mean all Indebtedness of any Person (other than
WRECO) which is not expressed to be subordinate and junior in right of payment
to any other Indebtedness of such Person, and, with respect to WRECO, shall mean
all Indebtedness of WRECO other than Subordinated Debt.

          "Senior Unsecured Long-Term Debt" shall mean the unsecured bonds,
debentures, notes or other Indebtedness of Weyerhaeuser, designated on its
financial statements as senior long-term indebtedness. In the event more than
one issue of Senior Unsecured Long Term Debt shall be outstanding at any
relevant time and different credit ratings shall have been issued by S&P or
Moody's for such issues, Senior Unsecured Long-Term Debt shall be deemed to
refer to the lowest rated issue.

          "Statutory Reserves" shall mean a fraction (expressed as a decimal),
the numerator of which is the number one, and the denominator of which is the
number one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board and any other banking authority to which the
Administrative Agent is subject with respect to the Eurodollar Rate, for
eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in
Regulation D of the Board). Such reserve percentages shall include those imposed
pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute
eurocurrency funding and to be subject to such reserve requirements without
benefit of or credit for proration, exemptions or offsets that may be available
from time to time to any Lender under such Regulation D or any comparable
regulation. The Statutory Reserves shall be adjusted automatically on and as of
the effective date of any change in any reserve percentage.
<PAGE>
                                                                              13

          "Subordinated Debt" shall mean and include (i) Subordinated Promissory
Notes of WRECO, in substantially the form annexed as Exhibit E hereto, and (ii)
any other Indebtedness of WRECO now or hereafter created, issued or assumed
which at all times is evidenced by a written instrument or instruments
containing or having applicable thereto subordination provisions substantially
the same as those in said Exhibit E hereto, providing for the subordination of
such Indebtedness to such other Indebtedness of WRECO as shall be specified or
characterized in such subordination provisions.

          "subsidiary" shall mean, with respect to any Person (herein referred
to as the "parent"), any corporation, partnership, association or other business
entity (a) of which securities or other ownership interests representing more
than 50% of the equity or more than 50% of the ordinary voting power to elect a
majority of the board of directors or more than 50% of the general partnership
interests are, at the time any determination is being made, owned, controlled or
held, or (b) which is, at the time any determination is made, otherwise
Controlled, by the parent or one or more subsidiaries of the parent or by the
parent and one or more subsidiaries of the parent.

          "Subsidiary" shall mean any subsidiary of Weyerhaeuser or WRECO,
provided that there shall be excluded from this definition (i) Nelson Forests
Joint Venture, a joint venture formed under the laws of New Zealand, and (ii)
Wapawekka Lumber Ltd., a limited partnership formed under the laws of
Saskatchewan, for so long as such business entities shall not be Controlled by
Weyerhaeuser or any of its subsidiaries.

          "Swing Line Banks" shall have the meaning given such term in the
introductory paragraph hereto.

          "Swing Line Borrowing" shall mean a Borrowing consisting of Swing Line
Loans.

          "Swing Line Borrowing Request" shall mean a request made pursuant to
Section 2.21(b) in the form of Exhibit G.

          "Swing Line Exposure" shall mean, at any time, the aggregate principal
amount of all Swing Line Loans outstanding at such time made by the Swing Line
Banks. The Swing Line Exposure of any Lender at any time shall mean its
Applicable Percentage of the aggregate Swing Line Exposure at such time.

          "Swing Line Loan" shall mean a Loan made by (i) the Swing Line Banks
pursuant to Section 2.21(a), or (ii) any Lender pursuant to Section 2.21(c).

          "Termination Date" shall mean March 22, 2010.

          "Total Adjusted Shareholders' Interest" shall mean, at any time, the
amount of the preferred, preference and common shares accounts plus (or minus in
the case of a deficit) the amount of other capital and retained earnings, in
accordance with GAAP, of Weyerhaeuser and its consolidated Subsidiaries, less
treasury common shares and the aggregate net book value
<PAGE>
                                                                              14

(after deducting any reserves applicable thereto) of all items of the following
character which are included in the consolidated assets of Weyerhaeuser and its
consolidated Subsidiaries:

          (a) investments in Unrestricted Subsidiaries; and

          (b) without duplication, investments by Weyerhaeuser and its
consolidated Subsidiaries in WRECO and its consolidated Subsidiaries.

No effect shall be given for any increases or decreases attributable to
unrealized foreign exchange gains or losses resulting from the application of
FASB Statement 52.

          "Total Commitment" shall mean at any time the aggregate amount of the
Commitments as in effect at such time, and on the date hereof shall mean
$1,200,000,000.

          "Total Funded Indebtedness" with respect to Weyerhaeuser shall mean,
at any time, the aggregate principal amount of all Indebtedness (other than
Guarantees by such Person of Indebtedness of others) for borrowed money or for
the deferred purchase price of property and Capital Lease Obligations of
Weyerhaeuser and its consolidated Subsidiaries, excluding (a) the Indebtedness
of Unrestricted Subsidiaries, (b) without duplication, the Indebtedness of WRECO
and its consolidated Subsidiaries, and (c) 80% of the aggregate principal amount
of the Mandatory Convertible Debt Securities outstanding at such time.

          "Transactions" shall have the meaning given such term in Section 3.02.

          "Transferee" shall have the meaning given such term in Section 2.17.

          "Type," when used in respect of any Loan or Borrowing, shall refer to
the Rate by reference to which interest on such Loan or on the Loans comprising
such Borrowing is determined. For purposes hereof, "Rate" shall include the
Eurodollar Rate, the Base Rate and the Fixed Rate applicable to any Loan.

          "Unfunded Current Liability" of any Plan shall mean the amount, if
any, by which the present value of the accrued benefits under the Plan as of the
close of its most recent plan year, determined in accordance with Statement of
Financial Accounting Standards No. 35, based upon the actuarial assumptions used
by the Plan's actuary in the most recent annual valuation of the Plan, exceeds
the fair market value of the assets allocable thereto, determined in accordance
with Section 412 of the Code.

          "Unrestricted Subsidiary" shall mean, (i) with respect to
Weyerhaeuser, each Subsidiary that has been designated as an Unrestricted
Subsidiary on Schedule 3.08 Part I and any Subsidiary which has been designated
by a Financial Officer of Weyerhaeuser as an Unrestricted Subsidiary after the
Closing Date pursuant to Section 9.17, and (ii) with respect to WRECO, each
Subsidiary that has been designated as an Unrestricted Subsidiary on Schedule
3.08 Part II and any Subsidiary which has been designated by a Financial Officer
of WRECO as an Unrestricted Subsidiary after the Closing Date pursuant to
Section 9.17.

          "Utilization Fee" shall have the meaning given such term in Section
2.06(e).
<PAGE>
                                                                              15

          "Weyerhaeuser" shall have the meaning given such term in the
introductory paragraph hereto.

          "WRECO" shall have the meaning given such term in the introductory
paragraph hereto.

          "WRECO/Weyerhaeuser Subordinated Debt" shall mean the Subordinated
Promissory Notes issued by WRECO to Weyerhaeuser described in clause (i) of the
definition of "Subordinated Debt" and in substantially the form annexed as
Exhibit E hereto.

          Section 1.02 Terms Generally. The definitions in Section 1.01 shall
apply equally to both 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."
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Agreement unless the context shall otherwise require. For purposes of this
Agreement, Loans may be classified and referred to by Class (e.g., a "Revolving
Loan") or by Type (e.g., a "Eurodollar Loan") or by Class and Type (e.g., a
"Eurodollar Revolving Loan"). Borrowings also may be classified and referred to
by Class (e.g., a "Revolving Borrowing") or by Type (e.g., a "Eurodollar
Borrowing") or by Class and Type (e.g., a "Eurodollar Revolving Borrowing").

          Section 1.03 Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time; provided
that, if either Borrower notifies the Administrative Agent that such Borrower
requests an amendment to any provision hereof to eliminate the effect of any
change occurring after the date hereof in GAAP or in the application thereof on
the operation of such provision (or if the Administrative Agent notifies either
Borrower that the Required Lenders request an amendment to any provision hereof
for such purpose), regardless of whether any such notice is given before or
after such change in GAAP or in the application thereof, then such provision
shall be interpreted on the basis of GAAP as in effect and applied immediately
before such change shall have become effective until such notice shall have been
withdrawn or such provision amended in accordance herewith.

                                   ARTICLE II

                                   THE CREDITS

          Section 2.01 Commitments. Subject to the terms and conditions and
relying upon the representations and warranties herein set forth, each Lender
agrees, severally and not jointly, to make Loans to each Borrower requesting a
Borrowing, at any time and from time to time on and after the date hereof and
until the earlier of the Termination Date and the termination of the Commitment
of such Lender, in an aggregate principal amount at any time outstanding not to
exceed such Lender's Commitment at such time, minus, in each case, the amount by
which the Competitive Loans outstanding at such time shall be deemed pursuant to
Section 2.14 to have utilized such Lender's Commitment, subject, however, to the
conditions that:
<PAGE>
                                                                              16

          (a) at no time shall the outstanding aggregate principal amount of all
Loans made by all Lenders and the Swing Line Banks plus the aggregate L/C
Exposure of such Lenders at such time exceed the Total Commitment;

          (b) at no time shall the outstanding aggregate principal amount of all
Loans made by all Lenders to WRECO exceed $400,000,000; and

          (c) at all times the outstanding aggregate principal amount of all
Revolving Loans made by each Lender shall equal the product of (i) the
Applicable Percentage of such Lender times (ii) the outstanding aggregate
principal amount of all Revolving Loans made pursuant to Section 2.02.

          Each Lender's Commitment is set forth opposite its name in Schedule
2.01, or in the case of each assignee that becomes a party hereto pursuant to
Section 9.04 or any subsequent assignments pursuant to Section 9.04, on the
Register maintained by the Administrative Agent pursuant to Section 9.04(c).

          Within the foregoing limits, each Borrower may borrow, pay or prepay
and reborrow hereunder, on and after the Closing Date and prior to the
Termination Date, subject to the terms, conditions and limitations set forth
herein, on a several and not joint basis.

          Section 2.02 Loans. (a) Each Revolving Loan shall be made as part of a
Revolving Borrowing consisting of Revolving Loans made by the Lenders ratably in
accordance with their respective Commitments; provided, however, that the
failure of any Lender to make any Revolving Loan shall not in and of itself
relieve any other Lender of its obligation to lend hereunder (it being
understood, however, that no Lender shall be responsible for the failure of any
other Lender to make any Revolving Loan required to be made by such other
Lender). Each Competitive Loan shall be made in accordance with the procedures
set forth in Section 2.19. The Loans (other than Swing Line Loans) comprising
any Revolving Borrowing (other than a Swing Line Borrowing) shall be in an
aggregate principal amount which is an integral multiple of $1,000,000 and not
less than $25,000,000 (or an aggregate principal amount equal to the remaining
balance of the available Commitments).

          (b) Each Revolving Borrowing shall be comprised entirely of Eurodollar
Loans or Base Rate Loans, as the applicable Borrower may request pursuant to
paragraph (e) hereof and each Competitive Borrowing shall be comprised entirely
of Eurodollar Loans or Fixed Rate Loans as the applicable Borrower may request
in accordance with Section 2.19. Each Lender may at its option make any
Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such
Lender to make such Loan; provided that any exercise of such option shall not
(i) affect the obligation of the applicable Borrower to repay such Loan in
accordance with the terms of this Agreement and (ii) entitle such Lender to any
amounts pursuant to Sections 2.11 or 2.12 to which amounts such Lender would not
be entitled if such Lender had made such Loan itself through its domestic
branch. Borrowings of more than one Type may be outstanding at the same time;
provided, however, that neither Borrower shall be entitled to request any
Revolving Borrowing which, if made, would result in an aggregate of more than
twenty (20) separate Revolving Loans from any Lender being outstanding hereunder
at any one time. For purposes of the foregoing, Revolving Loans (other than
Revolving Loans which are Base Rate Loans) having
<PAGE>
                                                                              17

different Interest Periods, regardless of whether they commence on the same
date, shall be considered separate Revolving Loans.

          (c) Each Lender shall make each Loan (other than a Swing Line Loan) to
be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to the Administrative Agent in New York, New York,
not later than 12:00 noon (or in the case of Base Rate Loans, 2:00 p.m.), New
York City time, and the Administrative Agent shall by 3:00 p.m., New York City
time, credit the amounts so received to the general deposit account of the
applicable Borrower maintained with the Administrative Agent or, if a Borrowing
(other than a Swing Line Borrowing) shall not occur on such date because any
condition precedent herein specified shall not have been met, return the amounts
so received to the respective Lenders. Competitive Loans shall be made by the
Lender or Lenders whose Competitive Bids therefor are accepted pursuant to
Section 2.19 in the amount so accepted, and Revolving Loans shall be made by the
Lenders pro rata in accordance with Section 2.14. Unless the Administrative
Agent shall have received notice from a Lender prior to the date and time of any
Revolving Borrowing that such Lender will not make available to the
Administrative Agent such Lender's portion of such Revolving Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
this paragraph (c) and the Administrative Agent may, in reliance upon such
assumption, make available to the applicable Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have made
such portion available to the Administrative Agent, such Lender and the
applicable Borrower severally agree to repay to the Administrative Agent
forthwith on demand such corresponding amount together with interest thereon,
for each day from the date such amount is made available to the applicable
Borrower until the date such amount is repaid to the Administrative Agent at (i)
in the case of the applicable Borrower, the interest rate applicable at the time
to the Revolving Loans comprising such Borrowing and (ii) in the case of such
Lender, the Federal Funds Rate. If such Lender shall repay to the Administrative
Agent such corresponding amount, such amount shall constitute such Lender's
Revolving Loan as part of such Revolving Borrowing for purposes of this
Agreement.

          (d) Notwithstanding any other provision of this Agreement, no Borrower
shall be entitled to request any Revolving Borrowing with an Interest Period
ending after the Termination Date.

          (e) In order to request a Revolving Borrowing, the Borrower requesting
such Borrowing shall hand deliver or telecopy to the Administrative Agent a
Revolving Borrowing Request in the form of Exhibit A (a) in the case of a
Eurodollar Borrowing, not later than 12:00 noon, New York City time, three
Business Days before a proposed borrowing and (b) in the case of a Base Rate
Borrowing, not later than 12:00 noon, New York City time, on the day of a
proposed borrowing. Such notice shall be irrevocable and shall in each case
specify (i) whether the Revolving Borrowing then being requested is to be a
Eurodollar Borrowing or a Base Rate Borrowing; (ii) the date of such Revolving
Borrowing (which shall be a Business Day) and the amount thereof; and (iii) if
such Revolving Borrowing is to be a Eurodollar Borrowing, the Interest Period
with respect thereto. If no election as to the Type of Revolving Borrowing is
specified in any such notice, then the requested Revolving Borrowing shall be a
Base Rate Borrowing. If no Interest Period with respect to any Eurodollar
Borrowing is specified in any such notice, then the applicable Borrower shall be
deemed to have selected an Interest Period of
<PAGE>
                                                                              18

one month's duration. The Administrative Agent shall promptly advise the Lenders
of any notice given pursuant to this Section 2.02(e) and of each Lender's
portion of the requested Borrowing.

          (f) If a Fronting Bank shall not have received the payment required to
be made by Weyerhaeuser pursuant to Section 2.20(e) within the time specified in
such Section, such Fronting Bank will promptly notify the Administrative Agent
of the L/C Disbursement and the Administrative Agent will promptly notify each
Lender of such L/C Disbursement and its Applicable Percentage thereof. Not later
than 2:00 p.m., New York City time, on such date (or, if such Lender shall have
received such notice later than 12:00 noon, New York City time, on any day, no
later than 10:00 a.m., New York City time, on the immediately following Business
Day), each Lender will make available the amount of its Applicable Percentage of
such L/C Disbursement (it being understood that such amount shall be deemed to
constitute a Base Rate Loan of such Lender and such payment shall be deemed to
have reduced the L/C Exposure) in immediately available funds, to the
Administrative Agent in New York, New York, and the Administrative Agent will
promptly pay to the applicable Fronting Bank amounts so received by it from the
Lenders. The Administrative Agent will promptly pay to the applicable Fronting
Bank any amounts received by it from Weyerhaeuser pursuant to Section 2.20(e)
prior to the time that any Lender makes any payment pursuant to this paragraph
(f), and any such amounts received by the Administrative Agent thereafter will
be promptly remitted by the Administrative Agent to the Lenders that shall have
made such payments and to the applicable Fronting Bank, as their interests may
appear. If any Lender shall not have made its Applicable Percentage of such L/C
Disbursement available to the Administrative Agent as provided above, such
Lender agrees to pay interest on such amount, for each day from and including
the date such amount is required to be paid in accordance with this paragraph to
but excluding the date such amount is paid, to the Administrative Agent for the
account of the applicable Fronting Bank at, for the first such day, the Federal
Funds Rate, and for each day thereafter, the Base Rate.

          Section 2.03 Conversion and Continuation of Loans. (a) Each Borrower
shall, with respect to its respective Revolving Borrowings, have the right at
any time, upon prior irrevocable written notice to the Administrative Agent
given in the manner and at the times specified in Section 2.02(e) with respect
to the Type of Revolving Borrowing into which conversion or continuation is to
be made, to convert any of its Revolving Borrowings into a Revolving Borrowing
of a different Type and to continue any of its Eurodollar Revolving Borrowings
into a subsequent Interest Period of any permissible duration, subject to the
terms and conditions of this Agreement and to the following:

          (i) each conversion or continuation shall be made pro rata among the
     Lenders in accordance with the respective principal amounts of Revolving
     Loans comprising the converted or continued Revolving Borrowing;

          (ii) if less than all the outstanding principal amount of any
     Revolving Borrowing shall be converted or continued, the aggregate
     principal amount of such Revolving Borrowing converted and/or continued
     shall in each case not be less than the minimum amount set forth in Section
     2.02;
<PAGE>
                                                                              19

          (iii) if a Eurodollar Borrowing is converted at any time other than on
     the last day of the Interest Period applicable thereto, the applicable
     Borrower shall pay any amount due pursuant to Section 2.13;

          (iv) if such Revolving Borrowing is to be converted into a Eurodollar
     Borrowing or if a Eurodollar Borrowing is to be continued, no Interest
     Period selected shall extend beyond the Termination Date;

          (v) interest accrued to the day immediately preceding each date of
     conversion or continuation shall be payable on each Revolving Borrowing (or
     part thereof) that is converted or continued concurrently with such
     conversion or continuation; and

          (vi) Competitive Borrowings may not be converted or continued.

          (b) Each notice given pursuant to Section 2.03(a) shall be irrevocable
and shall refer to this Agreement and specify (i) the identity and the amount of
the Revolving Borrowing that the applicable Borrower requests to be converted or
continued; (ii) whether such Borrowing (or any part thereof) is to be converted
or continued as a Base Rate Borrowing or a Eurodollar Borrowing; (iii) if such
notice requests a conversion, the date of such conversion (which shall be a
Business Day); and (iv) if such Borrowing (or any part thereof) is to be
converted into or continued as a Eurodollar Borrowing, the Interest Period with
respect thereto. If no Interest Period is specified in any such notice with
respect to any conversion to or continuation as a Eurodollar Revolving
Borrowing, then the applicable Borrower shall be deemed to have selected an
Interest Period of one month's duration, in the case of a Eurodollar Borrowing.
The Administrative Agent shall advise the Lenders of any notice given pursuant
to Section 2.03(a) and of each Lender's portion of any converted or continued
Revolving Borrowing.

          (c) If the applicable Borrower shall not have given notice in
accordance with this Section 2.03 to continue any Eurodollar Revolving Borrowing
into a subsequent Interest Period (and shall not otherwise have given notice in
accordance with this Section 2.03 to convert such Eurodollar Borrowing), such
Borrowing shall automatically be converted into a Base Rate Borrowing. In the
event of the occurrence and continuation of a Default or an Event of Default (i)
all Eurodollar Revolving Borrowings of each Borrower shall be converted into
Base Rate Borrowings on the last day of the Interest Period then in effect, and
(ii) no Base Rate Borrowing may be converted into a Borrowing of another Type so
long as a Default or Event of Default continues to exist.

          Section 2.04 Fees. (a) The Borrowers jointly and severally agree to
pay to each Lender, through the Administrative Agent, on each March 31, June 30,
September 30 and December 31 and on the date on which the Commitment of such
Lender shall be terminated as provided herein, a facility fee (each, a "Facility
Fee," and collectively, the "Facility Fees"), calculated as specified below, on
the amount of the Commitment of such Lender, whether used or unused, during the
preceding quarter (or shorter period commencing with the Closing Date or ending
with the Termination Date applicable to such Lender or any date on which the
Commitment of such Lender shall be terminated). All Facility Fees shall be
computed on the basis of a year of 365 or 366 days and shall be payable for the
actual number of days elapsed
<PAGE>
                                                                              20

(including the first day but excluding the last day). The Facility Fee due to
each Lender shall commence to accrue on the Closing Date and shall cease to
accrue on the earlier of the Termination Date applicable to such Lender and the
termination of the Commitment of such Lender as provided herein, provided that,
to the extent that any Lender has any Credit Exposure which remains outstanding
after the Termination Date, the Facility Fee due to such Lender shall continue
to accrue on such Credit Exposure and shall be payable upon demand.

          The Facility Fee for each Lender shall be calculated as a per annum
rate in an amount equal to the product of such Lender's Commitment hereunder and
the applicable percentage specified in the table below, to be determined based
upon the Ratings received from S&P and Moody's by Weyerhaeuser:

<TABLE>
<CAPTION>
                  LEVEL 1     LEVEL 2   LEVEL 3   LEVEL 4     LEVEL 5
               ------------   -------   -------   -------   ----------
<S>            <C>            <C>       <C>       <C>       <C>
S&P:           A- or better     BBB+      BBB       BBB-    Below BBB-
Moody's:       A3 or better     Baa1      Baa2      Baa3    Below Baa3
Facility Fee       0.09%       0.11%     0.125%    0.175%     0.225%
</TABLE>

          The Facility Fees shall change effective as of the date on which the
applicable rating agency announces any change in its Ratings. In the event
either S&P or Moody's shall withdraw or suspend its Ratings, the remaining
Rating announced by either S&P or Moody's, as the case may be, shall apply. In
the event neither agency shall provide a Rating, the Facility Fees shall be
based on the lowest rating provided above. If the Ratings by S&P and Moody's are
split so that two consecutive Levels (as defined in the table above) apply, the
higher of those Ratings shall determine the applicable percentage to calculate
the Facility Fee. If the Ratings by S&P and Moody's are split so that the
applicable Levels in the table above are separated by only one intermediate
Level, then such intermediate Level shall determine the applicable percentage to
calculate the Facility Fee. If the Ratings by S&P and Moody's are split so that
the applicable Levels in the table above are separated by two intermediate
Levels, then the intermediate Level representing the lowest Rating shall
determine the applicable percentage to calculate the Facility Fee. The Facility
Fees shall be calculated by the Administrative Agent, which calculation absent
manifest error shall be final and binding on all parties.

          (b) Weyerhaeuser agrees to pay the Administrative Agent, for its own
account, the administration fees (the "Administrative Agent Fees") at the times
and in the amounts agreed upon in the letter agreement dated as of February 15,
2005, among Weyerhaeuser, WRECO, J.P. Morgan Securities Inc. and the
Administrative Agent.

          (c) Weyerhaeuser agrees to pay (i) to the Administrative Agent for pro
rata distribution to each Lender (an "L/C Participation Fee"), for the period
from the Closing Date until the later of the Termination Date and the date on
which there ceases to be any L/C Exposure outstanding (or such earlier date as
all Letters of Credit shall be canceled or expire and the Total Commitment shall
be terminated), on that portion of the average daily L/C Exposure attributable
to Letters of Credit issued for the account of Weyerhaeuser (excluding the
portion thereof attributable to unreimbursed L/C Disbursements), at the rate per
annum equal to the Applicable Margin for Eurodollar Loans from time to time in
effect for the Borrower and (ii) to each Fronting Bank for its own account a
fronting fee (a "Fronting Fee"), which shall accrue at
<PAGE>
                                                                              21

such rate as is mutually agreed between the applicable Fronting Bank and
Weyerhaeuser on the average daily amount of the L/C Exposure attributable to
Letters of Credit issued by such Fronting Bank for the account of Weyerhaeuser
(excluding any portion thereof attributable to unreimbursed L/C Disbursements)
during the period from and including the Closing Date to but excluding the later
of the date of termination of the Commitments and the date on which there ceases
to be any L/C Exposure attributable to Letters of Credit issued by such Fronting
Bank for the account of Weyerhaeuser, as well as such Fronting Bank's standard
fees with respect to the issuance, amendment, renewal or extension of any Letter
of Credit or processing of drawings thereunder. L/C Participation Fees and
Fronting Fees accrued under this paragraph are payable quarterly in arrears on
the last day of each calendar quarter and on the date on which the Total
Commitment shall be terminated as provided herein. All L/C Participation Fees
and Fronting Fees payable under this paragraph shall be computed on the basis of
the number of days actually elapsed over a year of 365 or 366 days.

          (d) All Fees shall be paid on the dates due, in immediately available
funds, to the Administrative Agent for prompt distribution, if and as
appropriate, among the Lenders. Once paid, none of the Fees shall be refundable
under any circumstances.

          Section 2.05 Repayment of Loans; Evidence of Debt. (a) The outstanding
principal balance of (i) each Revolving Loan shall be payable on the Termination
Date, (ii) each Swing Line Loan shall be payable on the earlier of the maturity
date specified in the applicable Swing Line Borrowing Request (which maturity
shall not be later than the seventh day after the requested date of such
Borrowing) and the Termination Date, and (iii) each Competitive Loan shall be
payable on the last day of the Interest Period applicable to such Competitive
Loan and on the Termination Date. Each Loan shall bear interest from the date
thereof on the outstanding principal balance thereof as set forth in Section
2.06.

          (b) Each Lender shall, and is hereby authorized by the Borrowers to,
maintain in accordance with its usual practice an account or accounts evidencing
the indebtedness of each Borrower to such Lender resulting from each Loan made
by such Lender, including the amounts of principal and interest payable and paid
to such Lender from time to time hereunder.

          (c) The Administrative Agent shall maintain accounts in which it shall
record (i) the amount of each Loan made hereunder, the Class and Type thereof
and the Interest Period applicable thereto, (ii) the amount of any principal or
interest due and payable or to become due and payable from each Borrower to each
Lender hereunder and (iii) the amount of any sum received by the Administrative
Agent hereunder for the account of the Lenders and each Lender's share thereof.

          (d) The entries made in the accounts maintained pursuant to paragraph
(b) or (c) of this Section shall be prima facie evidence of the existence and
amounts of the obligations recorded therein; provided that the failure of any
Lender or the Administrative Agent to maintain such accounts or any error
therein shall not in any manner affect the obligation of each Borrower to repay
its Loans in accordance with the terms of this Agreement.

          (e) Any Lender may request that Revolving Loans made by it be
evidenced by a promissory note, substantially in the form of Exhibit F attached
hereto. In such event, the
<PAGE>
                                                                              22

applicable Borrower shall promptly, and in no event more than ten (10) Business
Days after a request therefor, prepare, execute and deliver to such Lender a
promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns). Thereafter, the Loans
evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 9.04) be represented by one or
more promissory notes in such form payable to the order of the payee named
therein (or, if such promissory note is a registered note, to such payee and its
registered assigns).

          Section 2.06 Interest on Loans. (a) Subject to the provisions of
Section 2.07, the Loans comprising (i) each Eurodollar Revolving Borrowing shall
bear interest (computed on the basis of the actual number of days elapsed over a
year of 360 days) at a rate per annum equal to the Eurodollar Rate for the
Interest Period in effect for such Borrowing plus the Applicable Margin,
determined pursuant to paragraph (d) below, and (ii) Eurodollar Competitive
Loan, at the Eurodollar Rate for the Interest Period in effect for such
Borrowing plus (or minus, as applicable) the Margin applicable to such
Borrowing.

          (b) Subject to the provisions of Section 2.07 the Loans comprising
each Base Rate Borrowing shall bear interest (computed on the basis of the
actual number of days elapsed over a year of 365 or 366 days, as the case may
be) at a rate per annum equal to the Base Rate plus the Applicable Margin.

          (c) Interest on each Eurodollar Loan shall, except as otherwise
provided in this Agreement, be payable on the last day of the Interest Period
applicable thereto and, in case of a Eurodollar Loan with an Interest Period of
more than three months' duration, each day that would have been an interest
payment date for such Loan had successive Interest Periods of three months'
duration been applicable to such Loan, and on the Termination Date or any
earlier date on which this Agreement is, pursuant to its terms and conditions,
terminated. Interest on each Base Rate Loan shall be payable quarterly in
arrears on the last Business Day of each March, June, September and December,
except as otherwise provided in this Agreement and on the Termination Date or
any earlier date on which this Agreement is, pursuant to its terms and
conditions, terminated. The applicable Eurodollar Rate or Base Rate for each
Interest Period or day within an Interest Period, as the case may be, shall be
determined by the Administrative Agent, and such determination shall be
conclusive absent manifest error. Interest on each Fixed Rate Loan shall be
payable on the last day of the Interest Period applicable to the Borrowing of
which such Loan is a part and, in the case of a Fixed Rate Borrowing with an
Interest Period of more than three months' duration (unless otherwise specified
in the applicable Competitive Bid Request), each day prior to the last day of
such Interest Period, and any other dates that are specified in the applicable
Competitive Bid Request as interest payment dates with respect to such
Borrowing, and on the Termination Date or any earlier date on which this
Agreement is, pursuant to its terms and conditions, terminated.

          (d) As used herein, "Applicable Margin" shall mean the sum of (i) the
applicable percentage per annum specified in the table below, to be determined
based upon the Ratings received by Weyerhaeuser from S&P and Moody's, and (ii)
the Utilization Fee. The applicable percentage referred to in clause (i) of the
immediately preceding sentence shall be determined based upon the Ratings, as
follows:
<PAGE>
                                                                              23

<TABLE>
<CAPTION>
                      LEVEL 1     LEVEL 2   LEVEL 3   LEVEL 4     LEVEL 5
                   ------------   -------   -------   -------   ----------
<S>                <C>            <C>       <C>       <C>       <C>
S&P:               A- or better     BBB+      BBB       BBB-    Below BBB-
Moody's:           A3 or better     Baa1     Baa2       Baa3    Below Baa3
Eurodollar Loan:       0.260%       0.34%    0.375%    0.575%     0.775%
Base Rate Loan:       0.0000%     0.0000%   0.0000%   0.0000%     0.000%
</TABLE>

          The Applicable Margin shall change effective as of the date on which
the applicable rating agency announces any change in its Ratings. In the event
either S&P or Moody's shall withdraw or suspend its Ratings, the remaining
Rating announced by either S&P or Moody's, as the case may be, shall apply. In
the event neither agency shall provide a Rating, the Applicable Margin shall be
based on the lowest rating provided above. If the Ratings by S&P and Moody's are
split so that two consecutive Levels (as defined in the table above) apply, the
higher of those Ratings shall determine the Applicable Margin. If the Ratings by
S&P and Moody's are split so that the applicable Levels in the table above are
separated by only one intermediate Level, then such intermediate Level shall
determine the Applicable Margin. If the Ratings by S&P and Moody's are split so
that the applicable Levels in the table above are separated by two intermediate
Levels, then the intermediate Level representing the lowest Rating shall
determine the Applicable Margin. The Applicable Margin shall be calculated by
the Administrative Agent, which calculation absent manifest error shall be final
and binding on all parties.

          (e) As used herein, "Utilization Fee" shall mean (i) with respect to
any date on which the sum of (A) the Aggregate Credit Exposure plus (B) the
aggregate principal amount of outstanding Competitive Loans is equal to or
exceeds 50% of the Total Commitment, the applicable percentage specified in the
table below (the "Applicable Utilization Fee Percentage"), to be determined
based upon the Ratings received by Weyerhaeuser from S&P and Moody's, and (ii)
at all other times, 0.000%. The applicable percentage referred to in clause (i)
of the immediately preceding sentence shall be determined based upon the
Ratings, as follows:

<TABLE>
<CAPTION>
                     LEVEL 1     LEVEL 2   LEVEL 3   LEVEL 4     LEVEL 5
                  ------------   -------   -------   -------   ----------
<S>               <C>            <C>       <C>       <C>       <C>
S&P:              A- or better     BBB+       BBB      BBB-    Below BBB-
Moody's:          A3 or better     Baa1      Baa2      Baa3    Below Baa3
Applicable
Utilization Fee
Percentage:          0.125%       0.125%    0.125%    0.125%     0.250%
</TABLE>

          The Applicable Utilization Fee Percentage shall change effective as of
the date on which the applicable rating agency announces any change in its
Ratings. In the event either S&P or Moody's shall withdraw or suspend its
Ratings, the remaining Rating announced by either S&P or Moody's, as the case
may be, shall apply. In the event neither agency shall provide a Rating, the
Applicable Utilization Fee Percentage shall be based on the lowest rating
provided above. If the Ratings by S&P and Moody's are split so that two
consecutive Levels (as defined in the table above) apply, the higher of those
Ratings shall determine the Applicable Utilization
<PAGE>
                                                                              24

Fee Percentage. If the Ratings by S&P and Moody's are split so that the
applicable Levels in the table above are separated by only one intermediate
Level, then such intermediate Level shall determine the Applicable Utilization
Fee Percentage. If the Ratings by S&P and Moody's are split so that the
applicable Levels in the table above are separated by two intermediate Levels,
then the intermediate Level representing the lowest Rating shall determine the
Applicable Utilization Fee Percentage. The Applicable Utilization Fee Percentage
shall be calculated by the Administrative Agent, which calculation absent
manifest error shall be final and binding on all parties.

          (f) Subject to the provisions of Section 2.07, the Loans comprising
each Fixed Rate Borrowing will bear interest at the Fixed Rate applicable to
such Loans.

          Section 2.07 Default Interest. If a Borrower shall default in the
payment of the principal of or interest on any of its Loans or any other amount
becoming due hereunder (other than any L/C Disbursement that has been made by a
Fronting Bank and not yet due pursuant to the terms of Section 2.20(e)), whether
by scheduled maturity, notice of prepayment, acceleration or otherwise, such
Borrower shall on demand from time to time by the Administrative Agent pay
interest, to the extent permitted by law, on such defaulted amount up to (but
not including) the date of actual payment (after as well as before judgment) at
a rate per annum equal to the rate of interest applicable thereto at maturity or
due date plus 2%.

          Section 2.08 Alternate Rate of Interest. In the event, and on each
occasion, that on the day two Business Days prior to the commencement of any
Interest Period for a Eurodollar Borrowing the Administrative Agent (or, in the
case of a Eurodollar Competitive Loan, the Lender that is required to make such
Loan) shall have determined in good faith that dollar deposits in the principal
amounts of the Eurodollar Loans comprising such Borrowing are not generally
available in the London interbank market, or that the rates at which such dollar
deposits are being offered will not adequately and fairly reflect the cost to
the Required Lenders (or, in the case of a Eurodollar Competitive Loan, the
Lender that is required to make such Loan) of making or maintaining their
Eurodollar Loans during such Interest Period, or that reasonable means do not
exist for ascertaining the Eurodollar Rate, the Administrative Agent (or, in the
case of a Eurodollar Competitive Loan, the Lender that is required to make such
Loan) shall, as soon as practicable thereafter, give written notice of such
determination to the Borrowers and the Lenders. In the event of any such
determination, until the Administrative Agent shall have advised the Borrowers
and the Lenders that the circumstances giving rise to such notice no longer
exist, (i) any request by the Borrowers for a Eurodollar Revolving Borrowing
pursuant to Section 2.02 shall be deemed to be a request for a Base Rate
Borrowing, (ii) any request by the Borrowers for a conversion to, or a
continuation of, a Eurodollar Revolving Borrowing pursuant to Section 2.03 shall
be deemed to be a request for, respectively, a continuation as, or a conversion
to, a Base Rate Borrowing, and (iii) any request for a Eurodollar Competitive
Borrowing shall be ineffective; provided, that if the circumstances giving rise
to such notice do not affect all Lenders, then requests for Eurodollar
Competitive Borrowings may be made to Lenders that are not affected thereby.
Each determination by the Administrative Agent hereunder shall be conclusive
absent manifest error.

          Section 2.09 Termination and Reduction of Commitments. (a) The unused
Commitments of each Lender shall be automatically terminated on the Termination
Date.
<PAGE>
                                                                              25

          (b) Subject to Section 2.10(b), upon at least three Business Days'
prior irrevocable written notice to the Administrative Agent, the Borrowers may
at any time in whole permanently terminate, or from time to time in part
permanently reduce, the Total Commitment; provided, however, that (i) each
partial reduction shall be in an integral multiple of $1,000,000 and in a
minimum principal amount of $25,000,000 and (ii) no such termination or
reduction shall be made which would reduce the Total Commitment to an amount
less than the sum of the aggregate outstanding principal amount of Loans and the
aggregate L/C Exposure.

          (c) Subject to Section 2.18, each reduction in the Total Commitment
hereunder shall be made ratably among the Lenders in accordance with their
respective Commitments. The Borrowers jointly and severally agree to pay to the
Administrative Agent for the account of the Lenders, on the date of each
termination or reduction, the Facility Fees on the amount of the Commitments so
terminated or reduced accrued through the date of such termination or reduction.

          Section 2.10 Prepayment. (a) Voluntary Prepayments. Except as provided
in the next sentence below, each of the Borrowers shall have the right at any
time and from time to time to prepay any of its respective Revolving Borrowings,
in whole or in part, upon giving written notice (or telephone notice promptly
confirmed by written notice) to the Administrative Agent: (i) before 12:00 noon,
New York City time, three Business Days prior to prepayment, in the case of
Eurodollar Loans and (ii) before 12:00 noon, New York City time, one Business
Day prior to prepayment, in the case of Base Rate Loans; provided, however, that
each partial prepayment shall be in an amount which is an integral multiple of
$1,000,000 and not less than $25,000,000. The Borrowers shall not have the right
to prepay any Competitive Loan without the prior consent of the Lender thereof.

          (b) Mandatory Prepayments. On the date of any termination or reduction
of the Commitments pursuant to Section 2.09, the Borrowers shall pay or prepay
so much of their respective Borrowings as shall be necessary in order that the
aggregate principal amount of Loans outstanding and the aggregate L/C Exposure
does not exceed the Total Commitment, after giving effect to such termination or
reduction.

          (c) Each notice of prepayment under paragraph (a) above shall specify
the prepayment date and the principal amount of each Borrowing (or portion
thereof) to be prepaid, shall be irrevocable and shall commit the applicable
Borrower to prepay such Borrowing (or portion thereof) by the amount stated
therein on the date stated therein. All prepayments under this Section 2.10
shall be subject to Section 2.13 but otherwise without premium or penalty. All
prepayments under this Section 2.10 shall be accompanied by accrued interest on
the principal amount being prepaid to the date of payment.

          Section 2.11 Reserve Requirements; Change in Circumstances. (a) It is
understood that the cost to each Lender (including the Administrative Agent, any
Swing Line Bank and any Fronting Bank) of making or maintaining any of the
Eurodollar Loans or Letters of Credit may fluctuate as a result of the
applicability of reserve requirements imposed by the Board at the ratios
provided for in Regulation D. Each Borrower agrees to pay to each of such
Lenders from time to time, as provided in paragraph (d) below, such amounts as
shall be necessary to compensate such Lender for the portion of the cost of
making or maintaining
<PAGE>
                                                                              26

Eurodollar Loans to such Borrower (or issuing Letters of Credit for the account
of Weyerhaeuser) resulting from any such reserve requirements provided for in
Regulation D as in effect on the date thereof, it being understood that the
rates of interest applicable to Eurodollar Loans have been determined on the
assumption that no such reserve requirements exist or will exist and that such
rates do not reflect costs imposed on the Lenders in connection with such
reserve requirements. It is agreed that for purposes of this paragraph (a) the
Eurodollar Loans made hereunder shall be deemed to constitute Eurocurrency
Liabilities as defined in Regulation D and to be subject to the reserve
requirements of Regulation D without the benefit of or credit for proration,
exemptions or offsets which might otherwise be available to the Lenders from
time to time under Regulation D.

          (b) Notwithstanding any other provision herein, if after the date of
this Agreement any change in applicable law or regulation or in the
interpretation or administration thereof by any governmental authority charged
with the interpretation or administration thereof (whether or not having the
force of law) shall change the basis of taxation of any payments to any Lender
(including the Administrative Agent, any Swing Line Bank and any Fronting Bank)
of the principal of or interest on any Eurodollar Loan or Fixed Rate Loan made
by such Lender, of any payments related to the Letters of Credit or any Fees or
other amounts payable hereunder (other than changes in respect of taxes imposed
on the overall net income of such Lender by the jurisdiction in which such
Lender has its principal office or by any political subdivision or taxing
authority therein), or shall impose, modify or deem applicable any reserve,
special deposit or similar requirement against assets of, deposits with or for
the account of or credit extended by such Lender, or shall impose on such Lender
or the London interbank market any other condition affecting this Agreement, any
Eurodollar Loan or Fixed Rate Loan made by such Lender or any Letter of Credit
issued by any Fronting Bank hereunder, and the result of any of the foregoing
shall be to increase the cost to such Lender of making or maintaining any
Eurodollar Loan or Fixed Rate Loan (or issuing any Letter of Credit) or to
reduce the amount of any sum received or receivable by such Lender hereunder
(whether of principal, interest or otherwise) in respect thereof by an amount
deemed by such Lender to be material, then the applicable Borrower will pay to
such Lender upon demand such additional amount or amounts as will compensate
such Lender for such additional costs actually incurred or reduction actually
suffered.

          (c) If after the date hereof any Lender (including the Administrative
Agent, the Swing Line Banks and any Fronting Bank) shall have determined that
the general applicability of any law, rule, regulation or guideline adopted
pursuant to or arising out of the July 1988 report of the Basle Committee on
Banking Regulations and Supervisory Practices entitled "International
Convergence of Capital Measurement and Capital Standards," or the adoption after
the date hereof of any other generally applicable law, rule, regulation or
guideline regarding capital adequacy, or any change in any of the foregoing or
in the interpretation or administration of any of the foregoing by any
governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by any Lender (or any
lending office of such Lender) or any Lender's holding company with any request
or directive regarding capital adequacy (whether or not having the force of law)
of any such authority, central bank or comparable agency, has or would have the
effect of reducing the rate of return on such Lender's capital or on the capital
of such Lender's holding company, if any, as a consequence of this Agreement,
the Loans made by such Lender pursuant hereto (or the Letters of Credit issued
hereunder) to a level below that which such Lender or such Lender's
<PAGE>
                                                                              27

holding company could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's policies and the policies of such
Lender's holding company with respect to capital adequacy) by an amount deemed
by such Lender to be material, then from time to time, the applicable Borrower
shall pay to such Lender such additional amount or amounts as will compensate
such Lender or such Lender's holding company for any such reduction suffered.

          (d) A certificate of a Lender (including the Administrative Agent, the
Swing Line Banks and any Fronting Bank) setting forth a reasonably detailed
explanation of such amount or amounts as shall be necessary to compensate such
Lender (or participating banks or other entities pursuant to Section 9.04) as
specified in paragraph (a), (b) or (c) above, as the case may be, shall be
delivered to the Borrowers and shall be conclusive absent manifest error. The
Borrowers shall pay each Lender the amount shown as due on any such certificate
delivered by it within 10 days after the receipt of the same.

          (e) Failure on the part of any Lender to demand compensation for any
increased costs or reduction in amounts received or receivable or reduction in
return on capital with respect to any period shall not constitute a waiver of
such Lender's right to demand compensation with respect to such period or any
other period; provided that the Borrowers shall not be required to compensate a
Lender pursuant to this Section 2.11 for any increased costs or reductions
incurred more than 180 days prior to the date that such Lender notifies the
Borrowers of such increased costs or reductions in accordance with paragraph (d)
above and of such Lender's intention to claim compensation thereof; provided
further that, if the circumstances giving rise to such increased costs or
reductions is retroactive, then the 180-day period referred to above shall be
extended to include the period of retroactive effect thereof.

          (f) Notwithstanding any other provision of this Section 2.11, no
Lender shall demand compensation for any increased costs or reduction referred
to above if it shall not be the general policy or practice of such Lender to
demand such compensation in similar circumstances under comparable provisions of
other credit agreements, if any (it being understood that this sentence shall
not in any way limit the discretion of any Lender to waive the right to demand
such compensation in any given case).

          Section 2.12 Change in Legality. (a) Notwithstanding any other
provision herein contained, if any change in any law or regulation or in the
interpretation thereof by any governmental authority charged with the
administration or interpretation thereof shall make it unlawful for any Lender
(including the Administrative Agent, any Swing Line Bank and any Fronting Bank)
to make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written notice
to the Borrowers and to the Administrative Agent, such Lender may:

          (i) declare that Eurodollar Loans will not thereafter be made by such
     Lender hereunder and any request by either Borrower for a Eurodollar
     Revolving Borrowing or a conversion to or continuation of a Eurodollar
     Revolving Borrowing shall, as to such Lender only, be deemed a request for
     a Base Rate Loan unless such declaration shall be subsequently withdrawn;
     and
<PAGE>
                                                                              28

          (ii) require that all outstanding Eurodollar Revolving Loans made by
     it be converted into Base Rate Loans, in which event all such Eurodollar
     Revolving Loans shall be automatically converted into Base Rate Loans as of
     the effective date of such notice as provided in paragraph (b) below.

In the event any Lender shall exercise its rights under (i) or (ii) above, all
payments and prepayments of principal which would otherwise have been applied to
repay the Eurodollar Revolving Loans that would have been made by such Lender or
the converted Eurodollar Revolving Loans of such Lender shall instead be applied
to repay the Base Rate Loans made by such Lender in lieu of, or resulting from
the conversion of, such Eurodollar Revolving Loans.

          (b) For purposes of this Section 2.12, a notice to a Borrower by any
Lender shall be effective as to each Eurodollar Revolving Loan, if lawful, on
the last day of the Interest Period currently applicable to such Eurodollar
Revolving Loan; in all other cases such notice shall be effective on the date of
receipt by such Borrower.

          Section 2.13 Indemnity. Each Borrower shall indemnify each Lender
against any loss or expense which such Lender sustains or incurs as a
consequence of (a) any failure by such Borrower to fulfill on the date of any
borrowing or any issuance of Letters of Credit hereunder the applicable
conditions set forth in Article IV, (b) any failure by such Borrower to borrow
or continue any Loan hereunder or to proceed with the issuance of a Letter of
Credit hereunder after irrevocable notice of such borrowing, continuation or
issuance has been given pursuant to Section 2.02, 2.03, 2.19, 2.20 or 2.21, as
applicable, (c) any payment, prepayment or conversion of a Eurodollar Loan
required by any other provision of this Agreement or otherwise made or deemed
made to or by such Borrower on a date other than the last day of the Interest
Period applicable thereto; provided that such Borrower shall not be required to
indemnify a Lender pursuant to this clause (c) for any loss or expense to the
extent any such loss or expense shall have been incurred pursuant to (i) Section
2.11, 2.12 or 2.17 or (ii) Section 2.10(a) more than six months prior to the
date that the applicable Lender shall have notified such Borrower of its
intention to claim compensation therefor, (d) any default in payment or
prepayment of the principal amount of any Loan to such Borrower or any part
thereof or interest accrued thereon, as and when due and payable (at the due
date thereof, whether by scheduled maturity, acceleration, irrevocable notice of
prepayment or otherwise), (e) the failure of such Borrower to borrow any
Competitive Loan after accepting the Competitive Bid to make such Loan, or (f)
the occurrence of any Event of Default including, in each such case, any loss or
reasonable expense sustained or incurred or to be sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain such Loan or any part thereof as a Eurodollar Loan. Such loss or
reasonable expense shall include an amount equal to the excess, if any, as
reasonably determined by such Lender, of (i) its cost of obtaining the funds for
the Loan being paid, prepaid, converted or not borrowed (based, in the case of a
Eurodollar Loan, on the Eurodollar Rate) for the period from the date of such
payment, prepayment or conversion or failure to borrow to the last day of the
Interest Period for such Loan (or, in the case of a failure to borrow, the
Interest Period for such Loan which would have commenced on the date of such
failure) over (ii) the amount of interest (as reasonably determined by such
Lender) that would be realized by such Lender in reemploying the funds so paid,
prepaid or converted or not borrowed for such period or Interest Period, as the
case may be. A certificate of any Lender setting forth a reasonably detailed
<PAGE>
                                                                              29

explanation of any amount or amounts which such Lender is entitled to receive
pursuant to this Section shall be delivered to such Borrower and shall be
conclusive absent manifest error.

          Section 2.14 Pro Rata Treatment. Except in the case of any Competitive
Borrowing or as required under Sections 2.12 or 2.18, each Borrowing, each
payment or prepayment of principal of any Borrowing, each payment of interest on
the Loans, each payment of the Facility Fees, each reduction of the Commitments
and each conversion of any Borrowing to a Borrowing of any Type, shall be
allocated pro rata among the Lenders in accordance with their respective
Commitments (or, if such Commitments shall have expired or been terminated, in
accordance with the respective principal amounts of their outstanding Revolving
Loans). Each payment of interest of any Competitive Borrowing shall be allocated
pro rata among the Lenders participating in such Borrowing in accordance with
the respective amounts of accrued and unpaid interest on their outstanding
Competitive Loans comprising such Borrowing. For the purpose of determining the
available Commitments of the Lenders at any time, each outstanding Competitive
Borrowing shall be deemed to have utilized the Commitments of the Lenders
(including those Lenders that have not made Loans as part of such Competitive
Borrowing) pro rata in accordance with such respective Commitments. Each Lender
agrees that in computing such Lender's portion of any Borrowing to be made
hereunder, the Administrative Agent may, in its discretion, round each Lender's
percentage of such Borrowing to the next higher or lower whole dollar amount.

          Section 2.15 Sharing of Setoffs. Each Lender agrees that if it shall,
through the exercise of a right of banker's lien, setoff or counterclaim against
a Borrower, or pursuant to a secured claim under Section 506 of Title 11 of the
United States Code or other security or interest arising from, or in lieu of,
such secured claim, received by such Lender under any applicable bankruptcy,
insolvency or other similar law or otherwise, or by any other means, obtain
payment (voluntary or involuntary) in respect of any Loans (other than (i)
Competitive Loans or (ii) pursuant to Sections 2.09, 2.11 and 2.12) as a result
of which the unpaid principal portion of its Loans (other than Competitive
Loans) shall be proportionately less than the unpaid principal portion of the
Loans (other than Competitive Loans) of any other Lender, it shall be deemed
simultaneously to have purchased from such other Lender at face value, and shall
promptly pay to such other Lender the purchase price for, a participation in the
Loans (other than Competitive Loans) of such other Lender, so that the aggregate
unpaid principal amount of the Loans (other than Competitive Loans) and
participations in the Loans held by each Lender shall be in the same proportion
to the aggregate unpaid principal amount of all Loans (other than Competitive
Loans) then outstanding as the principal amount of its Loans (other than
Competitive Loans) prior to such exercise of banker's lien, setoff or
counterclaim or other event was to the principal amount of all Loans (other than
Competitive Loans) outstanding prior to such exercise of banker's lien, setoff
or counterclaim or other event; provided, however, that, if any such purchase or
purchases or adjustments shall be made pursuant to this Section 2.15 and the
payment giving rise thereto shall thereafter be recovered, such purchase or
purchases or adjustments shall be rescinded to the extent of such recovery and
the purchase price or prices or adjustment restored without interest. Each
Borrower expressly consents to the foregoing arrangements and agrees that any
Lender holding a participation in a Loan (other than a Competitive Loan) deemed
to have been so purchased may exercise any and all rights of banker's lien,
setoff or counterclaim with respect to any and all moneys owing by such Borrower
<PAGE>
                                                                              30

to such Lender by reason thereof as fully as if such Lender had made a Loan
(other than a Competitive Loan) directly to such Borrower in the amount of such
participation.

          Section 2.16 Payments. (a) The Borrowers shall make each payment
(including principal of or interest on any Borrowing or any Fees or other
amounts payable with respect to the Letters of Credit or otherwise) hereunder
and under any other Loan Document without setoff, counterclaim or deduction of
any kind not later than 12:00 (noon), New York City time, on the date when due
in dollars to the Administrative Agent at its offices at 270 Park Avenue, New
York, New York, in immediately available funds.

          (b) Whenever any payment (including principal of or interest on any
Borrowing or any Fees or other amounts payable with respect to the Letters of
Credit or otherwise) hereunder or under any other Loan Document shall become
due, or otherwise would occur, on a day that is not a Business Day, such payment
may be made on the next succeeding Business Day, and such extension of time
shall in such case be included in the computation of interest or Fees, if
applicable.

          Section 2.17 Taxes. (a) Any and all payments by a Borrower hereunder
shall be made, in accordance with Section 2.16, free and clear of and without
deduction for any and all present or future taxes, levies, imposts, deductions,
charges or withholdings, and all liabilities with respect thereto, excluding any
income, franchise, branch profits or similar tax imposed on or measured by the
net income or net profits of the Administrative Agent, the Swing Line Banks, any
Fronting Bank or any Lender (or any transferee or assignee that acquires a Loan
(any such entity a "Transferee")) by the United States or any jurisdiction under
the laws of which it is organized or doing business or any political subdivision
thereof (all such nonexcluded taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If
either Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder to the Lenders (or any Transferee), the Swing Line
Banks, any Fronting Bank or the Administrative Agent, (i) the sum payable shall
be increased by the amount necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.17) such Lender (or Transferee), the Swing Line Banks, any
Fronting Bank or the Administrative Agent (as the case may be) shall receive an
amount equal to the sum it would have received had no such deductions been made,
(ii) such Borrower shall make such deductions and (iii) such Borrower shall pay
the full amount deducted to the relevant taxing authority or other Governmental
Authority in accordance with applicable law.

          (b) In addition, each Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies which arise from any payment made by such Borrower hereunder or
under any other Loan Document or from the execution, delivery or registration of
or performance under this Agreement or any other Loan Document, or otherwise
with respect to such Borrower's role in this Agreement or any other Loan
Document (hereinafter referred to as "Other Taxes").

          (c) Each Borrower will indemnify each Lender (or Transferee), each
Swing Line Bank, each Fronting Bank and the Administrative Agent for the full
amount of Taxes and Other Taxes (including any Taxes or Other Taxes imposed by
any jurisdiction on amounts
<PAGE>
                                                                              31

payable by such Borrower under this Section 2.17) paid by such Lender (or
Transferee), such Swing Line Bank, such Fronting Bank or the Administrative
Agent, as the case may be, and any liability (including penalties, interest and
expenses) arising therefrom or with respect thereto, whether or not such Taxes
or Other Taxes were correctly or legally asserted by the relevant taxing
authority or other Governmental Authority. Each Borrower shall also indemnify
each Lender (or any Transferee), each Fronting Bank and the Administrative Agent
for the full amount of taxes imposed on or measured by the net income or
receipts of such Lender (or any Transferee), such Swing Line Bank, such Fronting
Bank or the Administrative Agent, as the case may be, as such Lender (or
Transferee), such Fronting Bank or the Administrative Agent shall determine are
payable in respect of amounts paid by such Borrower to or on behalf of such
Lender (or any Transferee), such Swing Line Bank, such Fronting Bank or the
Administrative Agent, as the case may be, pursuant to this Section 2.17. Such
indemnification shall be made within 30 days after the date any Lender (or
Transferee), the Swing Line Banks, any Fronting Bank or the Administrative
Agent, as the case may be, makes written demand therefor. If any Lender (or
Transferee), any Fronting Bank or the Administrative Agent becomes entitled to a
refund of Taxes or Other Taxes for which such Lender (or Transferee), such Swing
Line Bank, such Fronting Bank or the Administrative Agent has received payment
from a Borrower hereunder, such Lender (or Transferee), such Swing Line Bank,
such Fronting Bank or Administrative Agent, as the case may be, shall, at the
expense of such Borrower, use its reasonable efforts (consistent with internal
policy, and legal and regulatory restrictions) to obtain such refund. If a
Lender (or Transferee), the Swing Line Banks, a Fronting Bank or the
Administrative Agent receives a refund or is entitled to claim a tax credit in
respect of any Taxes or Other Taxes for which such Lender (or Transferee), such
Swing Line Bank, such Fronting Bank or the Administrative Agent has received
payment from a Borrower hereunder it shall promptly notify such Borrower of such
refund or credit and shall, within 30 days after receipt of a request by such
Borrower (or promptly upon receipt, if such Borrower has requested application
for such refund or credit pursuant hereto), repay such refund or amount of
credit to such Borrower, net of all out-of-pocket expenses of such Lender (or
Transferee), such Swing Line Bank, such Fronting Bank or the Administrative
Agent, as applicable, and without interest; provided that each Borrower, upon
the request of such Lender (or Transferee), such Swing Line Bank, such Fronting
Bank or the Administrative Agent, agrees to return such refund or amount of
credit (plus penalties, interest or other charges) to such Lender (or
Transferee), such Swing Line Bank, such Fronting Bank or the Administrative
Agent in the event such Lender (or Transferee), such Swing Line Bank, such
Fronting Bank or the Administrative Agent is required to repay such refund or
such credit is denied or subsequently determined to be unavailable.

          (d) Within 30 days after the date of any payment of Taxes or Other
Taxes withheld by either Borrower in respect of any payment to any Lender (or
Transferee), the Swing Line Banks, any Fronting Bank or the Administrative
Agent, such Borrower will furnish to the Administrative Agent, at its address
referred to in Section 9.01, the original or a certified copy of a receipt
evidencing payment thereof to the proper Governmental Authority.

          (e) Without prejudice to the survival of any other agreement contained
herein, the agreements and obligations contained in this Section 2.17 shall
survive the payment in full of the principal of and interest on all Loans made
hereunder.
<PAGE>
                                                                              32

          (f) Each Lender (or Transferee), each Swing Line Bank or each Fronting
Bank, which is organized under the laws of a jurisdiction outside the United
States shall, on or prior to the date of its execution and delivery of this
Agreement or, in the case of a Transferee, on the date on which it becomes a
Lender and in the case of any Lender, any Swing Line Bank or any Fronting Bank,
on or prior to the date such Lender, such Swing Line Bank or such Fronting Bank
changes its funding office, and from time to time thereafter as requested in
writing by either Borrower (but only so long thereafter as such Lender, such
Swing Line Bank or such Fronting Bank remains lawfully able to do so), shall
deliver to the Borrowers and the Administrative Agent such certificates,
documents or other evidence, as required by the Code or Treasury Regulations
issued pursuant thereto, including Internal Revenue Service Form W-8BEN or Form
W-8ECI and any other certificate or statement of exemption required by Treasury
Regulation Section 1.1441-4(a) or 1.1441-6(c) or any subsequent version thereof,
properly completed and duly executed by such Lender (or Transferee), such Swing
Line Bank or such Fronting Bank establishing that any payment under the Loan
Documents is (i) not subject to withholding under the Code because such payment
is effectively connected with the conduct by such Lender (or Transferee) or such
Fronting Bank of a trade or business in the United States, or (ii) fully or
partially exempt from United States tax under a provision of an applicable tax
treaty, or (iii) not subject to withholding under the portfolio interest
exception under Section 881(c) of the Code (and, if such Lender (or Transferee),
such Swing Line Bank or such Fronting Bank delivers a Form W-8BEN claiming the
benefits of exemption from United States withholding tax under Section 881(c), a
certificate representing that such Lender (or Transferee), such Swing Line Bank
or such Fronting Bank is not a "bank" for purposes of Section 881(c) of the
Code, is not a 10-percent shareholder (within the meaning of Section
871(h)(3)(B) of the Code) of either Borrower and is not a controlled foreign
corporation related to either Borrower (within the meaning of Section 864(d)(4)
of the Code). Unless the Borrowers and the Administrative Agent have received
forms or other documents reasonably satisfactory to them indicating that
payments hereunder are not subject to United States withholding tax or are
subject to such tax at a rate reduced by an applicable tax treaty, each
applicable Borrower or the Administrative Agent shall withhold taxes from such
payments at the applicable statutory rate in the case of payments to or for any
Lender (or Transferee), any Swing Line Bank or any Fronting Bank organized under
the laws of a jurisdiction outside the United States. If a Lender (or
Transferee), a Swing Line Bank or a Fronting Bank is unable to deliver one of
these forms or if the forms provided by a Lender (or Transferee) or a Fronting
Bank, at the time such Lender (or Transferee), such Swing Line Bank or such
Fronting Bank, first becomes a party to this Agreement or at the time a Lender
(or Transferee), a Swing Line Bank or a Fronting Bank, changes its funding
office (other than at the request of a Borrower) indicate a United States
interest withholding tax rate in excess of zero, withholding tax at such rate
shall be considered excluded from Taxes unless and until such Lender (or
Transferee), such Swing Line Bank or such Fronting Bank, provides the
appropriate forms certifying that a lesser rate applies, whereupon withholding
tax at such lesser rate only shall be considered excluded from Taxes for periods
governed by such appropriate forms; provided, however, that if at the effective
date of a transfer pursuant to which a Lender (or Transferee), a Swing Line Bank
or a Fronting Bank becomes a party to this Agreement, the Lender (or
Transferee), the Swing Line Banks or the Fronting Banks assignor was entitled to
payments under Section 2.17(a) in respect of United States withholding tax with
respect to interest paid at such date, then, to such extent, the term Taxes
shall include (in addition to withholding taxes that may be imposed in the
future or other amounts otherwise includable in
<PAGE>
                                                                              33

Taxes) United States withholding tax, if any, applicable with respect to the
Lender (or Transferee), the Swing Line Banks or the Fronting Banks, assignee on
such date.

          (g) The Borrowers shall not be required to pay any additional amounts
to any Lender (or Transferee), the Swing Line Banks or any Fronting Bank in
respect of United States withholding tax pursuant to paragraph (a) above for any
period in respect of which the obligation to pay such additional amounts would
not have arisen but for a failure by such Lender (or Transferee), such Swing
Line Bank or such Fronting Bank, to comply with the provisions of paragraph (f)
above unless such failure results from (i) a change in applicable law,
regulation or official interpretation thereof or (ii) an amendment, modification
or revocation of any applicable tax treaty or a change in official position
regarding the application or interpretation thereof, in each case after the
Closing Date (and, in the case of a Transferee, after the date of assignment or
transfer).

          (h) Any Lender (or Transferee), any Swing Line Bank or any Fronting
Bank claiming any additional amounts payable pursuant to this Section 2.17 shall
use reasonable efforts (consistent with internal policy, and legal and
regulatory restrictions) to file any certificate or document requested by the
Borrowers or to change the jurisdiction of its applicable lending office if the
making of such a filing or change would avoid the need for or reduce the amount
of any such additional amounts which may thereafter accrue and would not, in the
reasonable determination of such Lender (or Transferee), such Swing Line Bank or
such Fronting Bank be materially disadvantageous to such Lender (or Transferee),
such Swing Line Bank or such Fronting Bank or require the disclosure of
information that such Lender (or Transferee), such Swing Line Bank or such
Fronting Bank reasonably considers to be confidential.

          Section 2.18 Mitigation Obligations; Replacement of Lenders. (a) If
any Lender (including the Administrative Agent, any Swing Line Bank or any
Fronting Bank) requests compensation under Section 2.11, or if it becomes
unlawful for any Lender (including the Administrative Agent, any Swing Line Bank
or any Fronting Bank) to make or maintain Eurodollar Loans under Section 2.12,
or if a Borrower is required to pay any additional amount to any Lender, the
Administrative Agent, any Swing Line Bank, any Fronting Bank or any Governmental
Authority for the account of any Lender, the Administrative Agent or any
Fronting Bank pursuant to Section 2.17, then such Lender, the Administrative
Agent, such Swing Line Bank or such Fronting Bank shall, at the request of such
Borrower, use reasonable efforts to designate a different lending office for
funding or booking its Loans or for the issuance of Letters of Credit hereunder
or to assign its rights and obligations hereunder to another of its offices,
branches or affiliates, if, in the judgment of such Lender, the Administrative
Agent, such Swing Line Bank or such Fronting Bank, as the case may be, such
designation or assignment (i) would eliminate or reduce amounts payable pursuant
to Section 2.11 or 2.17 or no longer make it unlawful for such Lender, the
Administrative Agent, such Swing Line Bank or such Fronting Bank, to make or
maintain Eurodollar Loans under Section 2.12, as the case may be, in the future
and (ii) would not subject such Lender, the Administrative Agent, such Swing
Line Bank or such Fronting Bank, as the case may be, to any unreimbursed cost or
expense and would not otherwise be disadvantageous to such Lender, the
Administrative Agent, such Swing Line Bank or such Fronting Bank, as the case
may be. The Borrowers hereby agree, jointly and severally, to pay all
<PAGE>
                                                                              34

reasonable costs and expenses incurred by any Lender, the Administrative Agent,
the Swing Line Banks or any Fronting Bank in connection with any such
designation or assignment.

          (b) If any Lender or any Fronting Bank requests compensation under
Section 2.11, or if it becomes unlawful for any Lender, any Swing Line Bank or
any Fronting Bank to make or maintain Eurodollar Loans under Section 2.12, or if
a Borrower is required to pay any additional amount to any Lender, any Swing
Line Bank any Fronting Bank or any Governmental Authority for the account of any
Lender, any Swing Line Bank or any Fronting Bank pursuant to Section 2.17, or if
any Lender, any Swing Line Bank or any Fronting Bank defaults in its obligation
to fund Loans or issue Letters of Credit hereunder, then the Borrowers may, at
their sole expense and effort, upon notice to such Lender, such Swing Line Bank
or such Fronting Bank and the Administrative Agent, (i) require such Lender,
such Swing Line Bank or such Fronting Bank to assign and delegate, without
recourse (in accordance with and subject to the restrictions contained in
Section 9.04), all its interests, rights and obligations under this Agreement
(other than any outstanding Competitive Loans held by it) to an assignee that
shall assume such obligations (which assignee may be another Lender, if a Lender
accepts such assignment); provided that (x) the Borrowers shall have received
the prior written consent of the Administrative Agent, which consent shall not
unreasonably be withheld, (y) such assigning Lender, Swing Line Bank or Fronting
Bank shall have received payment of an amount equal to the outstanding principal
of its Loans (other than Competitive Loans), accrued interest thereon, accrued
fees and all other amounts payable to it hereunder, from the assignee (to the
extent of such outstanding principal and accrued interest and fees) or the
Borrowers (in the case of all other amounts) and (z) in the case of any such
assignment resulting from a claim for compensation under Section 2.11 or
payments required to be made pursuant to Section 2.17, such assignment will
result in a reduction in such compensation or payments or (ii) terminate the
Commitment of such Lender upon notice given to such Lender within forty-five
(45) days of receipt of the notice given by the Lender; provided that such
notice shall be accompanied by prepayment in full of all Loans from such Lender,
including accrued interest thereon and any breakage costs, accrued fees and all
other amounts payable to such Lender, without extension, conversion or
continuation. A Lender, a Swing Line Bank or a Fronting Bank shall not be
required to make any such assignment and delegation under clause (i) above or
terminate its Commitment under clause (ii) above if, prior thereto, as a result
of a waiver by such Lender, such Swing Line Bank or such Fronting Bank or
otherwise, the circumstances entitling the Borrowers to require such assignment
and delegation or termination of Commitment cease to apply.

          Section 2.19 Competitive Bid Procedure. (a) Subject to the terms and
conditions set forth herein, from time to time during the period from and
including the Closing Date to but excluding the Termination Date, a Borrower may
request Competitive Bids and may (but shall not have any obligation to) accept
Competitive Bids and borrow Competitive Loans; provided that the sum of (i) the
Aggregate Credit Exposure and (ii) the aggregate principal amount of outstanding
Competitive Loans at any time shall not exceed the Total Commitment. To request
Competitive Bids, a Borrower shall notify the Administrative Agent of such
request by telephone, in the case of a Eurodollar Borrowing, not later than
12:00 noon, New York City time, four Business Days before the date of the
proposed Borrowing and, in the case of a Fixed Rate Borrowing, not later than
12:00 noon, New York City time, one Business Day before the date of the proposed
Borrowing. Each such telephonic Competitive Bid Request shall be confirmed
promptly by hand delivery or telecopy to the Administrative Agent of a written
Competitive Bid
<PAGE>
                                                                              35

Request in a form approved by the Administrative Agent and signed by such
Borrower. Each such telephonic and written Competitive Bid Request shall specify
the following information in compliance with Section 2.02:

          (i) the aggregate amount of the requested Borrowing;

          (ii) the date of such Borrowing, which shall be a Business Day;

          (iii) whether such Borrowing is to be a Eurodollar Borrowing or a
     Fixed Rate Borrowing;

          (iv) the Interest Period to be applicable to such Borrowing, which
     shall be a period contemplated by the definition of the term "Interest
     Period": and

          (v) the location and number of the Borrower's account to which funds
     are to be disbursed.

Promptly following receipt of a Competitive Bid Request in accordance with this
Section 2.19, the Administrative Agent shall notify the Lenders of the details
thereof in writing (which may be by telecopy) inviting the Lenders to submit
Competitive Bids.

          (b) Each Lender may (but shall not have any obligation to) make one or
more Competitive Bids to the applicable Borrower in response to a Competitive
Bid Request. Each Competitive Bid by a Lender must be substantially in a form to
be provided by the Administrative Agent and must be received by the
Administrative Agent by telecopy, in the case of a Eurodollar Competitive
Borrowing, not later than 11:00 a.m., New York City time, three Business Days
before the proposed date of such Competitive Borrowing, and in the case of a
Fixed Rate Borrowing, not later than 11:00 a.m., New York City time, on the
proposed date of such Competitive Borrowing. Competitive Bids that do not
conform substantially to the form provided by the Administrative Agent may be
rejected by the Administrative Agent, and the Administrative Agent shall notify
the applicable Lender as promptly as practicable. Each Competitive Bid shall
specify (i) the principal amount (which shall be a minimum of $5,000,000 and an
integral multiple of $1,000,000 and which may equal the entire principal amount
of the Competitive Borrowing requested by the applicable Borrower) of the
Competitive Loan or Loans that the Lender is willing to make, (ii) the
Competitive Bid Rate or Rates at which the Lender is prepared to make such Loan
or Loans (expressed as a percentage rate per annum in the form of a decimal to
no more than four decimal places) and (iii) the Interest Period applicable to
each such Loan and the last day thereof.

          (c) The Administrative Agent shall promptly notify the applicable
Borrower in writing (which may be by telecopy) of the Competitive Bid Rate and
the principal amount specified in each Competitive Bid and the identity of the
Lender that shall have made such Competitive Bid.

          (d) Subject only to the provisions of this paragraph, the Borrower may
accept or reject any Competitive Bid. The applicable Borrower shall notify the
Administrative Agent by telephone, confirmed by telecopy in a form approved by
the Administrative Agent, whether and to what extent it has decided to accept or
reject each Competitive Bid, in the case of a Eurodollar
<PAGE>
                                                                              36

Competitive Borrowing, not later than 12:00 noon, New York City time, three
Business Days before the date of the proposed Competitive Borrowing, and in the
case of a Fixed Rate Borrowing, not later than 12:00 noon, New York City time,
on the proposed date of the Competitive Borrowing; provided that (i) the failure
of the applicable Borrower to give such notice shall be deemed to be a rejection
of each Competitive Bid, (ii) the applicable Borrower shall not accept a
Competitive Bid made at a particular Competitive Bid Rate if such Borrower
rejects a Competitive Bid made at a lower Competitive Bid Rate, (iii) the
aggregate amount of the Competitive Bids accepted by the applicable Borrower
shall not exceed the aggregate amount of the requested Competitive Borrowing
specified in the related Competitive Bid Request, (iv) to the extent necessary
to comply with clause (iii) above, the applicable Borrower may accept
Competitive Bids at the same Competitive Bid Rate in part, which acceptance, in
the case of multiple Competitive Bids at such Competitive Bid Rate, shall be
made pro rata in accordance with the amount of each such Competitive Bid, and
(v) except pursuant to clause (iv) above, no Competitive Bid shall be accepted
for a Competitive Loan unless such Competitive Loan is in a minimum principal
amount of $5,000,000 and an integral multiple of $1,000,000; provided further
that if a Competitive Loan must be in an amount less than $5,000,000 because of
the provisions of clause (iv) above, such Competitive Loan may be for a minimum
of $1,000,000 or any integral multiple thereof, and in calculating the pro rata
allocation of acceptances of portions of multiple Competitive Bids at a
particular Competitive Bid Rate pursuant to clause (iv) the amounts shall be
rounded to integral multiples of $1,000,000 in a manner determined by the
applicable Borrower. A notice given by the applicable Borrower pursuant to this
paragraph shall be irrevocable.

          (e) The Administrative Agent shall promptly notify each bidding Lender
in writing (which may be by telecopy) whether or not its Competitive Bid has
been accepted (and, if so, the amount and Competitive Bid Rate so accepted), and
each successful bidder will upon receipt of such notice become bound, subject to
the terms and conditions hereof, to make the Competitive Loan in respect of
which its Competitive Bid has been accepted.

          (f) If the Administrative Agent shall elect to submit a Competitive
Bid in its capacity as a Lender, it shall submit such Competitive Bid directly
to the applicable Borrower at least one quarter of an hour earlier than the time
by which the other Lenders are required to submit their Competitive Bids to the
Administrative Agent pursuant to paragraph (b) of this Section.

          (g) The applicable Borrower shall pay, for each Competitive Bid
Request submitted pursuant to Section 2.19(a), an auction fee to the
Administrative Agent in an amount to be agreed by and between the Borrower and
the Administrative Agent. Such auction fee shall be due and owing irrespective
of whether any Lender submits a Competitive Bid pursuant to such Competitive Bid
Request.

          Section 2.20 Letters of Credit. (a) General. Weyerhaeuser may from
time to time request the issuance of Letters of Credit for its own account (for
obligations of Weyerhaeuser or any of its Subsidiaries), denominated in dollars,
in form reasonably acceptable to the Administrative Agent and the applicable
Fronting Bank, at any time and from time to time until the earlier of (i) the
date that is five Business Days prior to the Termination Date and (ii) the
termination of the Commitments hereunder. The letters of credit identified on
Schedule 2.20
<PAGE>
                                                                              37

(the "Existing Letters of Credit") shall be deemed to be "Letters of Credit"
issued on the Closing Date for all purposes of this Agreement and the other Loan
Documents. This Section shall not be construed to impose an obligation upon any
Fronting Bank to issue any Letter of Credit that is inconsistent with the terms
and conditions of this Agreement.

          (b) Notice of Issuance, Amendment, Renewal, Extension; Certain
Conditions. In order to request the issuance of a Letter of Credit (or to amend,
renew or extend an existing Letter of Credit), Weyerhaeuser shall hand deliver
or telecopy to the applicable Fronting Bank and the Administrative Agent
(reasonably in advance of the requested date of issuance, amendment, renewal or
extension) a notice requesting the issuance of a Letter of Credit, or
identifying the Letter of Credit to be amended, renewed or extended, the date of
issuance, amendment, renewal or extension, the date on which such Letter of
Credit is to expire (which shall comply with paragraph (c) below), the amount of
such Letter of Credit, the name and address of the beneficiary thereof and such
other information as shall be necessary to prepare such Letter of Credit. A
Letter of Credit shall be issued, amended, renewed or extended only if, and upon
issuance, amendment, renewal or extension of each Letter of Credit Weyerhaeuser
shall be deemed to represent and warrant that, after giving effect to such
issuance, amendment, renewal or extension, the sum of (i) the Aggregate Credit
Exposure and (ii) the aggregate principal amount of outstanding Competitive
Loans shall not exceed the Total Commitment. The Administrative Agent shall,
from time to time at the request of any Lender and in any case once during each
fiscal quarter of Weyerhaeuser and based on the information provided to it by
the Fronting Banks, provide the Lenders with the amount of the L/C Exposure.
Each of the Fronting Banks hereby agrees to provide the Administrative Agent on
demand with all the information necessary in the computation thereof.

          (c) Expiration Date. Each Letter of Credit shall expire no later than
the earlier of (i) one year from the date of its issuance and (ii) the date that
is five Business Days prior to the Termination Date.

          (d) Participations. By the issuance of a Letter of Credit and without
any further action on the part of the applicable Fronting Bank or the Lenders,
each Fronting Bank hereby grants to each Lender, and each such Lender hereby
acquires from such Fronting Bank, a participation in each Letter of Credit
issued by such Fronting Bank equal to such Lender's Applicable Percentage from
time to time of the aggregate amount available to be drawn under such Letter of
Credit, effective upon the issuance of such Letter of Credit. In consideration
and in furtherance of the foregoing and for so long as any Letters of Credit
shall remain outstanding hereunder, each Lender hereby absolutely and
unconditionally agrees to pay to the Administrative Agent, for the account of
the applicable Fronting Bank, such Lender's proportionate share of each L/C
Disbursement made by such Fronting Bank and not reimbursed by Weyerhaeuser
forthwith on the date due as provided in Section 2.20(e). Each Lender
acknowledges and agrees that its obligation to acquire participations pursuant
to this paragraph in respect of Letters of Credit is absolute, unconditional and
irrevocable and shall not be affected by any circumstance whatsoever, including
the occurrence and continuance of a Default or an Event of Default or the
termination of the Commitments, and that each such payment shall be made without
any offset, abatement, withholding or reduction whatsoever.
<PAGE>
                                                                              38

          (e) Reimbursement. If a Fronting Bank shall make any L/C Disbursement
in respect of a Letter of Credit, Weyerhaeuser shall pay to the Administrative
Agent an amount equal to such L/C Disbursement not later than the Business Day
after Weyerhaeuser shall have received notice from such Fronting Bank that
payment of such draft has been made. Upon receipt thereof, the Administrative
Agent shall promptly distribute such reimbursement payment to such Fronting Bank
and to the extent each Lender has funded its participation therein in accordance
with paragraph (d), to such Lenders.

          (f) Obligations Absolute. Weyerhaeuser's obligations to reimburse L/C
Disbursements as provided in paragraph (e) above shall be absolute,
unconditional and irrevocable, and shall be performed strictly in accordance
with the terms of this Agreement, under any and all circumstances whatsoever,
and irrespective of:

          (i) any lack of validity or enforceability of any Letter of Credit or
     any Loan Document, or any term or provision therein;

          (ii) any amendment or waiver of or any consent to departure from all
     or any of the provisions of any Letter of Credit or any Loan Document;

          (iii) the existence of any claim, setoff, defense or other right that
     Weyerhaeuser, any other party guaranteeing, or otherwise obligated with,
     Weyerhaeuser or any subsidiary or other affiliate thereof or any other
     person may at any time have against the beneficiary under any Letter of
     Credit, any Fronting Bank, the Administrative Agent or any Lender or any
     other person, whether in connection with this Agreement, any other Loan
     Document or any other related or unrelated agreement or transaction;

          (iv) any draft or other document presented under a Letter of Credit
     proving to be forged, fraudulent, invalid or insufficient in any respect or
     any statement therein being untrue or inaccurate in any respect;

          (v) payment by any Fronting Bank under a Letter of Credit against
     presentation of a draft or other document that does not comply with the
     terms of such Letter of Credit; and

          (vi) any other act or omission to act or delay of any kind of any
     Fronting Bank, the Lenders, the Administrative Agent or any other person or
     any other event or circumstance whatsoever, whether or not similar to any
     of the foregoing, that might, but for the provisions of this Section,
     constitute a legal or equitable discharge of Weyerhaeuser's obligations
     hereunder;

provided, however, that the foregoing shall not be construed to excuse any
Fronting Bank from liability to Weyerhaeuser to the extent of any direct damages
(as opposed to consequential damages, claims in respect of which are hereby
waived by Weyerhaeuser to the extent permitted by applicable law) suffered by
Weyerhaeuser that are caused by such Fronting Bank's gross negligence or willful
misconduct in determining whether drafts and other documents presented under a
Letter of Credit comply with the terms thereof.
<PAGE>
                                                                              39

          It is understood that any Fronting Bank may accept documents that
appear on their face to be in order, without responsibility for further
investigation, regardless of any notice or information to the contrary and, in
making any payment under any Letter of Credit (i) the applicable Fronting Bank's
exclusive reliance on the documents presented to it under such Letter of Credit
as to any and all matters set forth therein, including reliance on the amount of
any draft presented under such Letter of Credit, whether or not the amount due
to the beneficiary thereunder equals the amount of such draft and whether or not
any document presented pursuant to such Letter of Credit proves to be
insufficient in any respect, if such document on its face appears to be in
order, and whether or not any other statement or any other document presented
pursuant to such Letter of Credit proves to be forged or invalid or any
statement therein proves to be inaccurate or untrue in any respect whatsoever
and (ii) any noncompliance in any immaterial respect of the documents presented
under such Letter of Credit with the terms thereof shall, in each case, be
deemed not to constitute willful misconduct or gross negligence of such Fronting
Bank.

          (g) Disbursement Procedures. Each Fronting Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under a Letter of Credit. The applicable Fronting Bank shall
as promptly as possible give telephonic notification, confirmed by telecopy, to
the Administrative Agent and Weyerhaeuser of such demand for payment and whether
such Fronting Bank has made or will make an L/C Disbursement thereunder;
provided that any failure to give or delay in giving such notice shall not
relieve Weyerhaeuser of its obligation to reimburse such Fronting Bank and the
Lenders with respect to any such L/C Disbursement. The Administrative Agent
shall promptly give each Lender notice thereof.

          (h) Interim Interest. When (x) a Fronting Bank shall make any L/C
Disbursement in respect of a Letter of Credit or (y) any Lender shall have
acquired a participation in a Letter of Credit pursuant to Section 2.20(d),
then, unless Weyerhaeuser shall reimburse such L/C Disbursement or pay for such
participation in full on the date thereof, the unpaid amount thereof shall bear
interest for the account of such Fronting Bank or such Lender, as applicable,
for each day from and including the date of such L/C Disbursement or the
acquisition of such participation, as applicable, to but excluding the earlier
of, to the extent applicable, the date of payment by Weyerhaeuser or the date on
which interest shall commence to accrue on the Base Rate Loans resulting from
such L/C Disbursement as provided in Section 2.02(f), at the rate per annum that
would apply to such amount if such amount were a Base Rate Loan.

          (i) Cash Collateralization. If any Event of Default shall occur and be
continuing, Weyerhaeuser shall, on the Business Day it receives notice from the
Administrative Agent or the Required Lenders thereof and of the amount to be
deposited, deposit in an account with the Administrative Agent, for the benefit
of the Fronting Banks and the Lenders, as applicable, an amount in cash equal to
the portion of the L/C Exposure attributable to Letters of Credit issued for the
account of Weyerhaeuser and outstanding as of such date.

          Each deposit of cash pursuant to this Section 2.20(i) shall be held by
the Administrative Agent as collateral for the payment and performance of the
obligations under this Agreement. The Administrative Agent shall have exclusive
dominion and control, including the
<PAGE>
                                                                              40

exclusive right of withdrawal, over such account. Such deposits shall not bear
interest. Moneys in such account shall automatically be applied by the
Administrative Agent to reimburse the applicable Fronting Bank and Lenders
participating pursuant to Section 2.20(d) for L/C Disbursements attributable to
Letters of Credit issued for the account of Weyerhaeuser for which such Fronting
Bank and such participating Lenders have not been reimbursed, and any remaining
amounts will either (i) be held for the satisfaction of the reimbursement
obligations of Weyerhaeuser for the L/C Exposure at such time or (ii) if the
maturity of the Loans has been accelerated, be applied to satisfy the
obligations of the Borrowers under this Agreement. If Weyerhaeuser is required
to provide an amount of cash collateral hereunder as a result of the occurrence
of an Event of Default, such amount (to the extent not applied as aforesaid)
shall be returned to Weyerhaeuser within three Business Days after all Events of
Default have been cured or waived.

          Section 2.21 Swing Line Loans. (a) A Borrower may request a Swing Line
Bank to make, and such Swing Line Bank shall make, on the terms and conditions
hereinafter set forth, Swing Line Loans to such Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date in an aggregate amount (for all outstanding Swing Line Loans) not to exceed
at any time outstanding $100,000,000; subject, however, to the conditions that
(i) at no time shall the outstanding aggregate principal amount of all Loans
made by all Lenders and the Swing Line Banks plus the L/C Exposure of all
Lenders at such time exceed the Total Commitment, (ii) at no time shall the
outstanding aggregate principal amount of all Loans made by all Lenders and the
Swing Line Banks to WRECO at such time exceed $400,000,000 and (iii) at no time
shall the outstanding aggregate principal amount of Swing Line Loans made by a
Swing Line Bank exceed $50,000,000. No Swing Line Loan shall be used for the
purpose of funding the payment of principal of any other Swing Line Loan. Each
Swing Line Borrowing shall be in an amount of $1,000,000 or an integral multiple
of $100,000 in excess thereof and shall be made as a Base Rate Loan.

          (b) In order to request a Swing Line Borrowing, a Borrower shall hand
deliver or telecopy to the relevant Swing Line Bank and the Administrative Agent
a Swing Line Borrowing Request not later than 3:00 p.m., New York City time, on
the day of a proposed borrowing. Such notice shall be irrevocable and shall in
each case specify (i) the date of such Swing Line Borrowing (which shall be a
Business Day) and the amount thereof; and (ii) the maturity of such Swing Line
Borrowing (which maturity shall be no later than the seventh day after the
requested date of such Swing Line Borrowing). Such Swing Line Bank will make the
amount thereof available to the Administrative Agent on the proposed date
thereof by wire transfer of immediately available funds to the Administrative
Agent in New York, New York, not later than 4:00 p.m., New York City time, and
the Administrative Agent shall by 5:00 p.m., New York City time, credit the
amount so received to the general deposit account of the applicable Borrower
maintained with the Administrative Agent or, if a Swing Line Borrowing shall not
occur on such date because any condition precedent herein specified shall not
have been met, return the amount so received to such Swing Line Bank.

          (c) Upon written demand by a Swing Line Bank, with a copy of such
demand to the Administrative Agent, each other Lender shall purchase from such
Swing Line Bank, and such Swing Line Bank shall sell and assign to each such
other Lender, such other Lender's Applicable Percentage of the Swing Line Loans
of such Swing Line Bank as of the date of such
<PAGE>
                                                                              41

demand, by making available to the Administrative Agent in New York, New York
for the account of such Swing Line Bank by wire transfer of immediately
available funds, an amount equal to the portion of the outstanding principal
amount of such Swing Line Loan to be purchased by such Lender. The Borrowers
hereby agree to each such sale and assignment. Each Lender agrees to purchase
its Applicable Percentage of outstanding Swing Line Loans pursuant to the first
sentence of this paragraph (c) on (i) the Business Day on which demand therefor
is made by the relevant Swing Line Bank, provided, that notice of such demand is
given to such Lender not later than 12:00 noon, New York City time, on such
Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. If and to the extent that any
Lender shall have received such notice of demand and shall not have so made the
amount of the relevant Swing Line Loans available to the Administrative Agent,
such Lender agrees to pay to the Administrative Agent forthwith on demand such
amount together with interest thereon, for each day from the date of demand by
the relevant Swing Line Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate. If such Lender shall pay to the
Administrative Agent such amount for the account of the relevant Swing Line Bank
on any Business Day, such amount so paid in respect of principal shall
constitute a Swing Line Loan made by such Lender on such Business Day for
purposes of this Agreement, and the outstanding principal amount of the Swing
Line Loans made by such Swing Line Bank shall be reduced by such amount on such
Business Day.

                                   ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

          Each of the Borrowers represents and warrants to each of the Lenders,
the Swing Line Banks and each of the Fronting Banks that:

          Section 3.01 Organization; Powers. Such Borrower and each of its
Restricted Subsidiaries (a) is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its organization, (b)
has all requisite power and authority to own its property and assets and to
carry on its business as now conducted and as proposed to be conducted, (c) is
qualified to do business in every jurisdiction where such qualification is
required, except where the failure so to qualify would not result in a Material
Adverse Effect, and (d) in the case of such Borrower, has the corporate power
and authority to execute, deliver and perform its obligations under each of the
Loan Documents and each other agreement or instrument contemplated thereby to
which it is or will be a party and to borrow hereunder.

          Section 3.02 Authorization. The execution, delivery and performance by
such Borrower of each of the Loan Documents and the borrowings and issuances of
Letters of Credit hereunder, and the consummation of the other transactions
contemplated hereby (collectively, the "Transactions") (a) have been duly
authorized by all requisite corporate and, if required, stockholder action and
(b) (i) will not violate (A) any provision of law, statute, rule or regulation,
(B) of the certificate or articles of incorporation or other constitutive
documents or by-laws of such Borrower or any of its Restricted Subsidiaries, (C)
any order of any Governmental Authority or (D) any provision of any indenture,
agreement or other instrument to which such Borrower or any of its Restricted
Subsidiaries is a party or by which any of them or any of their property is or
may be bound, (ii) will not be in conflict with, result in a breach of or
constitute
<PAGE>
                                                                              42

(alone or with notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or (iii) will not result in the
creation or imposition of any Lien upon or with respect to any property or
assets now owned or hereafter acquired by such Borrower or any of its Restricted
Subsidiaries except, in each case other than (a) and (b)(i)(B), as could not
reasonably be expected to have a Material Adverse Effect.

          Section 3.03 Enforceability. This Agreement has been duly executed and
delivered by such Borrower and constitutes, and each other Loan Document when
executed and delivered by such Borrower will constitute, a legal, valid and
binding obligation of such Borrower enforceable against such Borrower in
accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other laws affecting creditors' rights generally
and subject to general principles of equity, regardless of whether considered in
a proceeding in equity or at law.

          Section 3.04 Consents and Approvals. No action, consent or approval
of, registration or filing with, or any other action by any Governmental
Authority or any other third party is or will be required in connection with the
Transactions, except as have been made or obtained (without the imposition of
any conditions that are not acceptable to the Lenders) and are in full force and
effect (other than any action, consent, approval, registration or filing the
absence of which could not reasonably be expected, either individually or in the
aggregate with any such other consents, approvals, registrations or filings, to
result in a Material Adverse Effect). No law or regulation shall be applicable,
restraining, preventing or imposing materially adverse conditions upon the
Transactions or the rights of the Borrowers and their respective subsidiaries
freely to transfer or otherwise dispose of, or to create any Lien on, any
properties now owned or hereafter acquired by any of them except, in each case,
as could not reasonably be expected to have a Material Adverse Effect.

          Section 3.05 Financial Statements. (a) Weyerhaeuser has heretofore
furnished to the Lenders its consolidated balance sheets and statements of
earnings and statements of cash flows, together with the notes thereto, as of
and for the fiscal year ended December 26, 2004, audited by and accompanied by
the opinion of KPMG LLP, independent public accountants.

          (b) WRECO has heretofore furnished to the Lenders its consolidated
balance sheets and statements of earnings and statements of cash flows, together
with the notes thereto, as of and for the fiscal year ended December 26, 2004,
audited by and accompanied by the opinion of KPMG LLP, independent public
accountants.

          (c) Such financial statements referred to in Section 3.05(a) and (b)
present fairly in all material respects the financial position and results of
operations of Weyerhaeuser, WRECO and their respective consolidated subsidiaries
as of such dates and for such periods. Such balance sheets and the notes thereto
disclose all material liabilities, direct or contingent, of Weyerhaeuser, WRECO
and their respective consolidated subsidiaries as of the dates thereof. Such
financial statements were prepared in accordance with GAAP applied on a
consistent basis.

          Section 3.06 No Material Adverse Change. Other than changes in
operating results arising in the ordinary course of business and except as
otherwise disclosed publicly or to the Lenders prior to the date hereof, there
has been no material adverse change in the business,
<PAGE>
                                                                              43

financial condition, operations or properties of Weyerhaeuser and its
subsidiaries, taken as a whole, since December 26, 2004.

          Section 3.07 Title to Properties; Possession Under Leases. (a) Each of
such Borrowers and its Restricted Subsidiaries has good and marketable title to,
or valid leasehold interests in, all of its material properties and assets,
except for defects in title that do not interfere with its ability to conduct
its business as currently conducted or to utilize such properties and assets for
their intended purposes.

          (b) Each of such Borrowers and its Restricted Subsidiaries (i) has
complied with all obligations under all leases to which it is a party, and (ii)
enjoys peaceful and undisturbed possession under all such leases, except where
such non-compliance or lack of peaceful and undisturbed possession would not
result in a Material Adverse Effect. All leases to which the Borrowers and their
respective Restricted Subsidiaries are a party are in full force and effect,
except where such lack of force and effect would not result in a Material
Adverse Effect.

          Section 3.08 Subsidiaries. Schedule 3.08 Part I for Weyerhaeuser and
Schedule 3.08 Part II for WRECO (i) set forth as of the Closing Date a list of
all subsidiaries of Weyerhaeuser and WRECO and the percentage ownership interest
of Weyerhaeuser and WRECO therein, as applicable, and (ii) for Weyerhaeuser and
WRECO, designate those Subsidiaries which are Unrestricted Subsidiaries.

          Section 3.09 Litigation; Compliance with Laws. (a) Except as disclosed
in Weyerhaeuser's Report on Form 10-K for the fiscal year ended December 26,
2004, there are no actions, suits, investigations, litigations or proceedings
pending or, to the knowledge of the Borrowers, threatened against or affecting
the Borrowers or any of their Restricted Subsidiaries in any court or before any
arbitrator or Governmental Authority that could reasonably be expected to have a
Material Adverse Effect.

          (b) Except as disclosed in Weyerhaeuser's Report on Form 10-K for the
fiscal year ended December 26, 2004, neither such Borrower nor any of its
Restricted Subsidiaries is in violation of any law, rule or regulation, or in
default with respect to any judgment, writ, injunction or decree of any
Governmental Authority, where such violation or default could reasonably be
expected to result in a Material Adverse Effect.

          Section 3.10 Agreements. (a) Neither such Borrower nor any of its
Restricted Subsidiaries is a party to any agreement or instrument or subject to
any corporate restriction that has resulted in a Material Adverse Effect.

          (b) Neither such Borrower nor any of its Restricted Subsidiaries is in
default in any manner under any material agreement or instrument (except for any
indenture or other agreement or instrument evidencing Indebtedness) to which it
is a party or by which it or any of its properties or assets are or may be
bound, where such default could reasonably be expected to result in a Material
Adverse Effect.

          Section 3.11 Federal Reserve Regulations. (a) Neither such Borrower
nor any of its Restricted Subsidiaries is engaged principally, or as one of its
important activities, in the business of extending credit for the purpose of
purchasing or carrying Margin Stock.
<PAGE>
                                                                              44

          (b) No part of the proceeds of any Loan will be used, whether directly
or indirectly, whether immediately, incidentally or ultimately, for any purpose
which entails a violation of, or which is inconsistent with, the provisions of
the Regulations of the Board, including Regulation T, U or X.

          Section 3.12 Investment Company Act; Public Utility Holding Company
Act. Neither such Borrower nor any of its Restricted Subsidiaries is (a) an
"investment company" as defined in, or subject to regulation under, the
Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.

          Section 3.13 Tax Returns. Each of such Borrower and its Subsidiaries
has filed or caused to be filed all material Federal, state and local tax
returns required to have been filed by it and has paid or caused to be paid all
material taxes shown to be due and payable on such returns or on any assessments
received by it, except taxes that are being contested in good faith by
appropriate proceedings and for which such Borrower or Subsidiary, as the case
may be, shall have set aside on its books appropriate reserves.

          Section 3.14 No Material Misstatements. No information, report,
financial statement, exhibit or schedule furnished by or on behalf of such
Borrower to the Administrative Agent or any Lender in connection with the
negotiation of any Loan Document or included therein or delivered pursuant
thereto, when taken together with the reports and other filings with the SEC,
contains any material misstatement of fact or omits to state any material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.

          Section 3.15 Compliance with ERISA. Except as would not have a
Material Adverse Effect, subject to the following sentences of this Section
3.15, each Plan subject to ERISA or the Code, as applicable, is in compliance
with ERISA and the Code; no Reportable Event has occurred with respect to a
Plan, no Plan is insolvent or in reorganization; no Plan has an Unfunded Current
Liability in excess of $40,000,000, and all Plans collectively do not have
Unfunded Current Liabilities in excess of $91,000,000 in the aggregate, and no
Plan subject to ERISA or the Code, as applicable, has an accumulated or waived
funding deficiency, has permitted decreases in its funding standard account or
has applied for an extension of any amortization period within the meaning of
Section 412 of the Code; neither such Borrower nor any ERISA Affiliate has
incurred any liability to or on account of a Plan pursuant to Section 409,
502(i), 502(l), 515, 4062, 4063, 4064, 4069, 4201 or 4204 of ERISA or Section
4975 of the Code or expects to incur any material liability under any of the
foregoing Sections with respect to any such Plan; no condition exists which
presents a risk to such Borrower or any ERISA Affiliate of incurring a liability
to or on account of a Plan pursuant to the foregoing provisions of ERISA and the
Code; no proceedings have been instituted to terminate any Plan; no lien imposed
under the Code or ERISA on the assets of such Borrower or any ERISA Affiliate
exists or is likely to arise on account of any Plan; such Borrower and its
Subsidiaries do not maintain or contribute to any "welfare plan" (within the
meaning of Section 3(1) of ERISA) which provides life insurance or health
benefits to retirees (other than as required by Section 601 of ERISA) the
obligations with respect to which could reasonably be expected to have a
Material Adverse Effect.
<PAGE>
                                                                              45

          Section 3.16 Environmental Matters. Except as disclosed in
Weyerhaeuser's Report on Form 10-K for the fiscal year ended December 26, 2004,
filed with the SEC, (a) neither Borrower nor any of its Subsidiaries has failed
to comply with any Federal, state, local and other statutes, ordinances, orders,
judgments, rulings and regulations relating to environmental pollution or to
environmental regulation or control, where any such failure to comply, alone or
together with any other such noncompliance, could result in a Material Adverse
Effect; (b) neither Borrower nor any of its Subsidiaries has received notice of
any failure so to comply which alone or together with any other such failure
could result in a Material Adverse Effect; and (c) the Borrowers' and their
respective Subsidiaries' plants have not managed any hazardous wastes, hazardous
substances, hazardous materials, toxic substances or toxic pollutants, as those
terms are used in the Resource Conservation and Recovery Act, the Comprehensive
Environmental Response Compensation and Liability Act, the Hazardous Materials
Transportation Act, the Toxic Substance Control Act, the Clean Air Act, the
Clean Water Act or any other Environmental Law, in violation of any regulations
promulgated pursuant thereto or in any other applicable law where such violation
could reasonably result, individually or together with other violations, in a
Material Adverse Effect.

          Section 3.17 Maintenance of Insurance. Such Borrower and each of its
Restricted Subsidiaries maintains insurance (which may be self insurance) for
all of its insurable properties: (a) by financially sound and reputable insurers
to the extent of insurance obtained from third party insurers; (b) to such
extent and against such risks, including fire and other risks insured against by
extended coverage, as is customary with companies in the same or similar
businesses, including public liability insurance against claims for personal
injury or death or property damage occurring upon, in, about or in connection
with the use of any properties owned, occupied or controlled by such Borrower or
such Restricted Subsidiaries; and (c) as may be required by law.

                                   ARTICLE IV

                            CONDITIONS OF LENDING AND
                          ISSUANCE OF LETTERS OF CREDIT

          The obligations of the Lenders (including the Swing Line Banks) to
make Loans hereunder and the obligation of each Fronting Bank to issue Letters
of Credit hereunder (or to amend, renew or extend an existing Letter of Credit)
are subject to the satisfaction of the following conditions:

          Section 4.01 All Borrowings and Issuances. On the date of each
Borrowing and on the date of each issuance of a Letter of Credit (and each
amendment, renewal or extension thereof):

          (a) Notice. The Administrative Agent and, as applicable, the Swing
Line Banks or any Fronting Bank, shall have received from the applicable
Borrower a notice of such Borrowing or a notice of such issuance, amendment,
renewal or extension as required by Section 2.02, 2.03, 2.19, 2.20 or 2.21, as
applicable.
<PAGE>
                                                                              46

          (b) Representations. The representations and warranties of the
Borrowers set forth in Sections 3.01, 3.02, 3.03, 3.04, 3.07, 3.10(b), 3.11 and
3.12 shall be true and correct in all material respects on and as of such date
with the same effect as though made on and as of such date at the time of and
immediately after such Borrowing or at the time of and immediately after the
issuance, amendment, renewal or extension of a Letter of Credit hereunder.

          (c) Compliance, etc. The Borrowers shall be in compliance with all the
terms and provisions set forth herein and in each other Loan Document on their
part to be observed or performed, and, as applicable, at the time of and
immediately after such Borrowing or at the time of and immediately after the
issuance, amendment, renewal or extension of a Letter of Credit hereunder, no
Event of Default or Default shall have occurred and be continuing.

          Each Borrowing and each issuance of a Letter of Credit hereunder (or
an amendment, renewal or extension thereof) shall be deemed to constitute a
representation and warranty by the Borrowers on the date of such Borrowing,
issuance, amendment, renewal or extension, as the case may be, as to the matters
specified in paragraphs (b) and (c) of this Section 4.01.

          Section 4.02 Closing Date. In addition to all the conditions set forth
in Section 4.01, on or before the Closing Date:

          (a) Opinions. The Administrative Agent shall have received a favorable
written opinion of (i) Perkins Coie, special counsel for the Borrowers, dated
the Closing Date and addressed to the Lenders, in form and substance reasonably
satisfactory to the Administrative Agent and (ii) Lorrie Scott, Esq., Senior
Legal Counsel to Weyerhaeuser, as counsel for Weyerhaeuser, dated the Closing
Date and addressed to the Lenders, in form and substance reasonably satisfactory
to the Administrative Agent.

          (b) Legal Matters. All legal matters (including any documentation)
related to this Agreement and the Transactions shall be satisfactory to the
Lenders and to Simpson Thacher & Bartlett LLP, special counsel for the
Administrative Agent.

          (c) Articles, etc. The Administrative Agent shall have received (i) a
copy of the certificate or articles of incorporation, including all amendments
thereto, of each of the Borrowers, certified as of a recent date by the
Secretary of State of their respective States of incorporation, and certificates
as to the good standing of each of the Borrowers, as of a recent date, from each
such Secretary of State; (ii) a certificate from each of the Borrowers of their
respective Secretary or Assistant Secretary dated the Closing Date and
certifying (A) that attached thereto is a true and complete copy of the by-laws
of such Borrower as in effect on the Closing Date and at all times since a date
prior to the date of the resolutions described in clause (B) below, (B) that
attached thereto is a true and complete copy of resolutions duly adopted by the
Board of Directors of such Borrower authorizing the execution, delivery and
performance of such Borrower of any and all documents and agreements to be
entered into with respect to the Loan Documents and the borrowings to be made
thereunder, and that such resolutions have not been modified,
<PAGE>
                                                                              47

rescinded or amended and are in full force and effect, (C) that the certificate
or articles of incorporation of such Borrower have not been amended since the
date of the last amendment thereto shown on the certificates of good standing
furnished pursuant to clause (i) above, and (D) as to the incumbency and
specimen signature of each officer executing any Loan Document or any other
document or agreement delivered in connection with the Transactions on behalf of
such Borrower; (iii) a certification of another officer as to the incumbency and
specimen signature of the Secretary or Assistant Secretary executing the
certificate pursuant to (ii) above; and (iv) such other documents as the Lenders
or Simpson Thacher & Bartlett LLP, special counsel for the Administrative Agent,
may reasonably request.

          (d) Officers' Certificates. The Administrative Agent shall have
received a certificate from each Borrower, dated the Closing Date and signed by
a Financial Officer of such Borrower, confirming (i) compliance with the
condition precedent set forth in paragraph (c) of Section 4.01, and (ii) that
the representations and warranties of such Borrower set forth herein are true
and correct in all material respects on and as of the Closing Date (except for
representations and warranties expressly stated to relate to a specific earlier
date, in which case such representations and warranties are true and correct in
all material respects as of such earlier date), immediately prior to, and after
giving effect to, the initial Borrowing and/or the initial issuance of a Letter
of Credit hereunder.

          (e) Fees. The Administrative Agent and the Lenders shall have received
all Fees and other amounts due and payable on or prior to the Closing Date.

          (f) Loan Documents. The Administrative Agent shall have received a
fully executed counterpart of this Agreement, and an executed copy of each Loan
Document (other than this Agreement).

          (g) Termination of Existing 364-Day Revolving Credit Agreement. The
Administrative Agent shall have received evidence satisfactory to it that the
commitments under the Existing 364-Day Revolving Credit Agreement shall have
expired or been terminated and all amounts then due and payable thereunder shall
have been paid.

                                    ARTICLE V

                              AFFIRMATIVE COVENANTS

          Each Borrower covenants and agrees with each Lender, each Swing Line
Bank, each Fronting Bank and the Administrative Agent that, so long as this
Agreement shall remain in effect or the principal of or interest on any Loan,
any Fees or any other expenses or amounts payable under any Loan Document shall
be unpaid, or any Letter of Credit shall remain outstanding (which has not been
collateralized (with cash or a back-to-back letter of credit issued by a
satisfactory financial institution) in a manner satisfactory to the applicable
Fronting Banks and the Administrative Agent), or any amounts drawn thereunder
shall remain unpaid, unless the Required Lenders (or, where indicated, the
Lenders) shall otherwise consent in writing, each
<PAGE>
                                                                              48

Borrower will, and will cause each of its Restricted Subsidiaries (except in the
case of Sections 5.03 (which applies to Weyerhaeuser), 5.06 (which applies to
Weyerhaeuser, WRECO and their respective ERISA Affiliates) and 5.09 (which
applies to Weyerhaeuser, WRECO and all of their respective Subsidiaries)) to:

          Section 5.01 Existence; Businesses and Properties. (a) Do or cause to
be done all things necessary to preserve, renew and keep in full force and
effect its legal existence, except as otherwise expressly permitted under
Section 6.01(c) (with respect to Weyerhaeuser) and Section 6.02(d) (with respect
to WRECO) and, with respect to Restricted Subsidiaries, where the failure to do
so could not reasonably be expected to have a Material Adverse Effect, provided,
however, that such Borrower may liquidate or dissolve any of its Subsidiaries to
the extent the assets of such Subsidiary are transferred to Weyerhaeuser or any
of its Restricted Subsidiaries.

          (b) Except in each case where the failure to do so could not
reasonably be expected to result in a Material Adverse Effect, (i) do or cause
to be done all things necessary to obtain, preserve, renew, extend and keep in
full force and effect the rights, licenses, permits, franchises, authorizations,
patents, copyrights, trademarks and trade names necessary in the conduct of its
business; (ii) maintain and operate such business in substantially the manner in
which it is presently conducted and operated; (iii) comply with all applicable
laws, rules, regulations and orders of any Governmental Authority, whether now
in effect or hereafter enacted; and (iv) at all times maintain and preserve all
property necessary in the conduct of such business and keep such property in
good repair, working order and condition and from time to time make, or cause to
be made, all necessary and proper repairs, renewals, additions, improvements and
replacements thereto necessary in order that the business carried on in
connection therewith may be properly conducted at all times.

          (c) Maintain compliance with each of its loans, contracts, leases and
other obligations (other than Indebtedness) except such as are being contested
in good faith by appropriate proceedings and for which appropriate reserves have
been established, and except for such noncompliance as could not reasonably be
expected to have, in any case or in the aggregate, a Material Adverse Effect.

          Section 5.02 Insurance. (a) Keep such of its insurable properties as
are insured with third-party insurers insured at all times by financially sound
and reputable insurers; and (b) maintain (i) insurance (which may include self
insurance), to such extent and against such risks, including fire and other
risks insured against by extended coverage, as is customary with companies in
the same or similar businesses, including public liability insurance against
claims for personal injury or death or property damage occurring upon, in, about
or in connection with the use of any properties owned, occupied or controlled by
it; and (ii) such insurance as may be required by law.

          Section 5.03 Obligations and Taxes. Pay its obligations (other than
Indebtedness) promptly and in accordance with their terms and pay and discharge
promptly when due all taxes, assessments and governmental charges or levies
imposed upon it or upon its income or profits or in respect of its property,
before the same shall become delinquent or in default, as well as all lawful
claims for labor, materials and supplies or otherwise which, if unpaid, might
give rise to a Lien upon such properties or any part thereof; provided, however,
<PAGE>
                                                                              49

that such payment and discharge shall not be required (i) with respect to any
such tax, assessment, charge, levy or claim so long as the validity or amount
thereof shall be contested in good faith by appropriate proceedings and such
Borrower or such Subsidiary shall have set aside on its books appropriate
reserves with respect thereto or (ii) if the failure to make such payments or to
discharge such Liens is not, in any case or in the aggregate, reasonably likely
to have a Material Adverse Effect.

          Section 5.04 Financial Statements, Reports, etc. In the case of each
Borrower, furnish to the Administrative Agent (which shall promptly furnish to
each Lender):

          (a) within 95 days after the end of each fiscal year, its consolidated
balance sheets and related statements of earnings and statements of cash flows,
together with the notes thereto, showing the financial position of such Borrower
and its consolidated Subsidiaries as of the close of such fiscal year and the
results of their operations and the operations of such subsidiaries during such
year, all audited by KPMG LLP or other independent public accountants of
recognized national standing acceptable to the Required Lenders and accompanied
by an opinion of such accountants (which shall not be qualified in any material
respect) to the effect that such consolidated financial statements fairly
present the financial position and results of operations of each such Borrower
and its consolidated Subsidiaries on a consolidated basis in accordance with
GAAP consistently applied, except as therein noted;

          (b) within 50 days after the end of each of the first three fiscal
quarters of each fiscal year, its consolidated balance sheets and related
statements of earnings and, with respect to Weyerhaeuser, statements of cash
flows, showing the financial position of Weyerhaeuser and its consolidated
Subsidiaries as of the close of such fiscal quarter and the results of its
operations and the operations of such consolidated Subsidiaries during such
fiscal quarter and the then elapsed portion of the fiscal year, all certified
(in the form of Exhibits D-1 and D-2, with respect to Weyerhaeuser and WRECO,
respectively) by one of its Financial Officers as fairly presenting the
financial position and results of operations of each such Borrower and its
consolidated Subsidiaries on a consolidated basis in accordance with GAAP
consistently applied, except as therein noted, subject to appropriate year-end
audit adjustments;

          (c) concurrently with any delivery of financial statements under (a)
or (b) above, a certificate (in the form of Exhibits D-3 and D-4, with respect
to Weyerhaeuser and WRECO, respectively) of the accounting firm or Financial
Officer of such Borrower opining on or certifying such statements (which
certificate, when furnished by an accounting firm, may be limited to accounting
matters and disclaim responsibility for legal interpretations) (i) certifying
that no Event of Default or Default has occurred or, if such an Event of Default
or Default has occurred, specifying the nature and extent thereof and any
corrective action taken or proposed to be taken with respect thereto, (ii) in
the case of Weyerhaeuser setting forth computations in reasonable detail
satisfactory to the Administrative Agent demonstrating compliance with the
covenants contained in Sections 6.01(d) and 6.01(e) and (iii) including a
reconciliation setting forth adjustments made to such financial statements in
order to make the calculations set forth in clause (ii) above;
<PAGE>
                                                                              50

          (d) promptly after the same become publicly available, copies of all
periodic and other reports, proxy statements and other materials filed by it or
any of its Subsidiaries with the SEC, or with any national securities exchange,
or distributed to its shareholders, as the case may be;

          (e) as soon as practicable, copies of such further financial
statements and reports as such Borrower shall send to banks with which it has
lines of credit, and all such financial statements and reports as such Borrower
shall send to its shareholders (unless all of the outstanding shares of capital
stock of such Borrower are held by one Person);

          (f) promptly, from time to time, such other information regarding the
operations, business affairs and financial condition of such Borrower or any of
its Subsidiaries, or compliance with the terms of any Loan Document, as the
Administrative Agent, any Swing Line Bank, any Fronting Bank or any Lender may
reasonably request (it being understood that neither Borrower shall be required
to provide any information or documents which are subject to confidentiality
provisions the nature of which prohibit such disclosure);

          (g) promptly, and in any event within 2 days, upon becoming aware
thereof, notice of any proposed or actual down-grade, suspension or withdrawal
of the rating provided by S&P or Moody's to Weyerhaeuser in respect of its
Senior Unsecured Long-Term Debt; and

          (h) information required to be delivered pursuant to paragraphs (a),
(b), (d) and (e) shall be deemed to have been delivered on the date on which
Weyerhaeuser provides notice to the Administrative Agent that such information
has been posted on Weyerhaeuser's website on the internet at the website address
listed on the signature pages thereof, at www.sec.gov or at another website
identified in such notice and accessible by the Lenders without charge; provided
that Weyerhaeuser shall deliver paper copies of the reports and financial
statements referred to in paragraphs (a), (b), (d) and (e) of this Section 5.04
to the Administrative Agent, any Swing Line Bank, any Fronting Bank or any
Lender who requests Weyerhaeuser to deliver such paper copies until written
notice to cease delivering paper copies is given by such Administrative Agent,
Swing Line Bank, Fronting Bank or Lender to Weyerhaeuser.

          Section 5.05 Litigation and Other Notices. Furnish to the
Administrative Agent (which shall promptly furnish to each Lender) prompt
written notice of the following:

          (a) any Event of Default or Default, specifying the nature and extent
thereof and the corrective action (if any) proposed to be taken with respect
thereto;

          (b) the filing or commencement of, or any threat or notice of
intention of any person to file or commence, any action, suit or proceeding,
whether at law or in equity or by or before any Governmental Authority, against
Weyerhaeuser, WRECO or any of
<PAGE>
                                                                              51

their respective Affiliates which, if adversely determined, could reasonably be
expected to result in a Material Adverse Effect;

          (c) any development that has resulted in a Material Adverse Effect;
and

          (d) the issuance by any Governmental Authority of any injunction,
order, decision or other restraint prohibiting, or having the effect of
prohibiting, the making of the Loans or the initiation of any litigation or
similar proceeding seeking any such injunction, order or other restraint;

provided that in each case (other than Subsection 5.05 (a)) no Borrower shall be
required to provide separate notice of any event disclosed in any report
promptly filed with the SEC.

          Section 5.06 ERISA. As soon as possible and, in any event, within 10
Business Days after Weyerhaeuser knows of the occurrence of any of the following
events which individually or in the aggregate could reasonably be expected to
have a Material Adverse Effect, Weyerhaeuser will deliver to the Administrative
Agent a certificate of the Financial Officer of Weyerhaeuser setting forth
details as to such occurrence and such action, if any, which Weyerhaeuser or an
ERISA Affiliate is required or proposes to take, together with any notices
required or proposed to be given to or filed with or by Weyerhaeuser or such
ERISA Affiliate, the PBGC, a Plan participant or the Plan administrator with
respect thereto: (a) that a Reportable Event has occurred, (b) that an
accumulated funding deficiency has been incurred or an application has been made
to the Secretary of the Treasury for a waiver or modification of the minimum
funding standard (including any required installment payments) or an extension
of any amortization period under Section 412 of the Code with respect to a Plan,
(c) that a Plan has been or is in the process of being terminated, reorganized,
partitioned or declared insolvent under Title IV of ERISA, (d) that a Plan has
an Unfunded Current Liability, (e) that proceedings have been instituted to
terminate a Plan, (f) that a proceeding has been instituted pursuant to Section
515 of ERISA to collect a delinquent contribution to a Plan, or (g) that
Weyerhaeuser or any ERISA Affiliate will or is reasonably likely to incur any
liability (including any contingent or secondary liability) to or on account of
the termination of or withdrawal from a Plan under Section 4062, 4063, 4064,
4069, 4201 or 4204 of ERISA or with respect to a Plan under Section 4975 of the
Code or Section 409, 502(i) or 502(l) of ERISA. Weyerhaeuser will, upon written
request, deliver to the Administrative Agent a complete copy of the annual
report (Form 5500) of each Plan required to be filed with the Internal Revenue
Service. In addition to any certificates or notices delivered to the
Administrative Agent pursuant to the first sentence hereof, copies of annual
reports and any other notices received by Weyerhaeuser or any ERISA Affiliate
required to be delivered to the Administrative Agent hereunder shall be
delivered to the Administrative Agent no later than 10 Business Days after the
later of the date such report or notice has been filed with the Internal Revenue
Service or the PBGC, given to Plan participants, received by Weyerhaeuser or
such ERISA Affiliate or requested in writing by the Administrative Agent.

          Section 5.07 Maintaining Records; Access to Properties and
Inspections. Maintain appropriate, accurate and complete financial records and
permit any representatives designated by the Administrative Agent or any Lender
to visit and inspect the financial records and the properties of each such
Borrower or any of its Restricted Subsidiaries at reasonable times and, with
reasonable prior notice given to Weyerhaeuser, as often as requested and until a
<PAGE>
                                                                              52

Default has occurred at the expense of the Administrative Agent or such Lender,
and to make extracts from and copies of such financial records, and permit any
representatives designated by any Lender, any Swing Line Bank, any Fronting Bank
or the Administrative Agent to discuss the affairs, finances and condition of
Weyerhaeuser, WRECO or any such Restricted Subsidiary with the officers thereof
and independent accountants (so long as a representative of Weyerhaeuser is
present, or Weyerhaeuser has consented to the absence of such a representative)
therefor (in each case subject to such Borrower's obligations under applicable
confidentiality provisions).

          Section 5.08 Use of Proceeds. Use the credit extended pursuant to this
Agreement only for the purposes set forth in the recitals to this Agreement.

          Section 5.09 Environmental Matters. (a) (i) Comply in all material
respects with all Environmental Laws applicable to the ownership or use of any
real property owned or leased by such Borrower or any of its Subsidiaries,
except where such noncompliance is not, in any case or in the aggregate,
reasonably likely to have a Material Adverse Effect, (ii) include in all
material contracts with tenants and other persons occupying such real property
provisions to ensure such tenants' compliance in all material respects with all
such Environmental Laws, and diligently enforce and prosecute its rights with
respect to such provisions, (iii) pay or cause to be paid in the case of sole
liability, or, in the case of joint liability, to seek contribution or
compensation in respect of, all costs and expenses incurred in connection with
such compliance, except in respect to costs and expenses that are being
contested in good faith and for which such Borrower or such Subsidiary, as the
case may be, shall have set aside on its books appropriate reserves, and except
where failures to make such payments are not, in any case or in the aggregate,
reasonably likely to have a Material Adverse Effect, and (iv) use its best
efforts to keep or cause to be kept all such real property free and clear of any
liens imposed pursuant to any Environmental Laws, except in respect to liens
that are being contested in good faith, and except in respect to liens the
existence of which is not, in any case or in the aggregate, reasonably likely to
have a Material Adverse Effect.

          (b) Neither such Borrower, nor any of its Subsidiaries will generate,
use, treat, store, Release, or permit the generation, use, treatment, storage or
Release of Hazardous Materials on any real property owned or leased by such
Borrower or any of its Subsidiaries, or transport or permit the transportation
of Hazardous Materials to or from any such real property, except for quantities
generated, used, treated, stored, or Released on, or transported to or from,
such real property in the ordinary course of business in material compliance
with all applicable Environmental Laws and, except for such generation, use,
treatment or storage on, or transportation to or from, any such real property of
Hazardous Materials as is not, in any case or in the aggregate, reasonably
likely to have a Material Adverse Effect.

          (c) If the Administrative Agent receives any notice from such Borrower
pursuant to subsection (d) of this Section 5.09 or if the Administrative Agent
otherwise acquires knowledge of any Environmental Claim which in the sole
determination of the Required Lenders would have a Material Adverse Effect with
respect to such Borrower then upon the written request of the Required Lenders,
such Borrower will provide, at its sole cost and expense, an environmental site
assessment report concerning any real property owned or leased by such Borrower
or an affected Subsidiary prepared by an environmental consulting firm approved
by the Required Lenders, indicating the presence or absence of Hazardous
Materials and the
<PAGE>
                                                                              53

potential costs of any removal or remedial action in connection with any
Hazardous Materials on any real property owned or leased by such Borrower or any
of its Subsidiaries.

          (d) Such Borrower will immediately advise the Administrative Agent in
writing of any of the following:

          (i) Any pending or threatened Environmental Claim against such
     Borrower or any of its Subsidiaries or any real property owned or leased by
     such Borrower or any of its Subsidiaries which if determined adversely to
     such Borrower or any of its Subsidiaries would be reasonably likely to have
     a Material Adverse Effect;

          (ii) Any condition or occurrence on any real property owned or leased
     by such Borrower or any of its Subsidiaries that (A) results in
     noncompliance by such Borrower or any of its Subsidiaries with any
     applicable Environmental Law which noncompliance is reasonably likely to
     have a Material Adverse Effect, or (B) could reasonably be anticipated to
     form the basis of an Environmental Claim against such Borrower or any of
     its Subsidiaries or any real property owned or leased by such Borrower or
     any of its Subsidiaries and which if determined adversely to such Borrower
     or any of its Subsidiaries would be reasonably likely to have a Material
     Adverse Effect;

          (iii) Any condition or occurrence on any real property owned or leased
     by such Borrower or any of its Subsidiaries or, to the actual knowledge of
     such Borrower or any of its Subsidiaries, any property adjoining or in the
     vicinity thereof that could reasonably be anticipated to cause such real
     property to be subject to any restrictions on the ownership, occupancy,
     use, or transferability thereof under any Environmental Law which
     restrictions, in any case or in the aggregate, are reasonably likely to
     have a Material Adverse Effect; and

          (iv) The taking of any removal or remedial action in response to the
     actual or alleged presence of any Hazardous Materials on any real property
     owned or leased by such Borrower or any of its Subsidiaries the taking of
     which, in any case or in the aggregate, is reasonably likely to have a
     Material Adverse Effect.

All such notices shall describe in reasonable detail the nature of the claim,
investigation, condition, occurrence, or removal or remedial action and the
action which such Borrower or any of its Subsidiaries proposes to take in
response thereto.

          Section 5.10 OCBM Agreement. With respect to Weyerhaeuser, perform,
observe and comply with each of its covenants and agreements in the OCBM
Agreement, and do or cause to be done all things necessary to keep the OCBM
Agreement in full force and effect.

          Section 5.11 Further Assurances. Promptly cause to be taken, executed,
acknowledged or delivered, at the sole expense of such Borrower, all such
further acts, documents and assurances as the Required Lenders may from time to
time reasonably request in order for such Borrower to carry out its obligations
hereunder and under the other Loan Documents.
<PAGE>
                                                                              54

                                   ARTICLE VI

                               NEGATIVE COVENANTS

          Section 6.01 Covenants of Weyerhaeuser. Weyerhaeuser covenants and
agrees with each Lender, each Swing Line Bank, each Fronting Bank and the
Administrative Agent that, so long as this Agreement shall remain in effect or
the principal of or interest on any Loan, any Fees or any other expenses or
amounts payable under any Loan Document shall be unpaid or any Letter of Credit
shall remain outstanding (which has not been collateralized (with cash or a
back-to-back letter of credit issued by a satisfactory financial institution) in
a manner satisfactory to the applicable Fronting Banks and the Administrative
Agent) or any amounts drawn thereunder shall remain unpaid, unless the Required
Lenders shall otherwise consent in writing, it will not, either directly or
indirectly:

          (a) Secured Indebtedness. (i) Issue, assume or guarantee, or permit
any of its Restricted Subsidiaries to issue, assume or guarantee, any
indebtedness for money borrowed (hereinafter in this Section 6.01(a) referred to
as "debt"), if such debt is secured by a deed of trust, mortgage, pledge,
security interest or other lien or encumbrance (any deed of trust, mortgage,
pledge, security interest or other lien or encumbrance being hereinafter in this
Section 6.01(a) referred to as a "mortgage" or collectively "mortgages") upon or
with respect to any timber or timberlands of Weyerhaeuser or such Restricted
Subsidiary located in the States of Washington, Oregon, Arkansas, Oklahoma,
Mississippi or North Carolina, or upon or with respect to any principal
manufacturing plant of Weyerhaeuser or such Restricted Subsidiary located
anywhere in the United States of America, in either case now owned or hereafter
acquired, without in any such case effectively providing, concurrently with the
issuance, assumption or guarantee of any such debt, that the Loans and Letters
of Credit (together with, if Weyerhaeuser shall so determine, any other
indebtedness of or guarantee by Weyerhaeuser or such Restricted Subsidiary
ranking equally with the Loans or Letters of Credit and then existing or
thereafter created) shall be secured equally and ratably with (or prior to) such
debt; provided, however, that the foregoing restrictions shall not be applicable
to:

               (1) mortgages upon or with respect to any property of any of its
          Restricted Subsidiaries securing debt of such Restricted Subsidiary to
          Weyerhaeuser or another Restricted Subsidiary of Weyerhaeuser;

               (2) mortgages upon or with respect to any property acquired,
          constructed or improved by Weyerhaeuser or any of its Restricted
          Subsidiaries after the date of this Agreement which are created,
          incurred or assumed contemporaneously with, or within 90 days after,
          such acquisition, construction or improvement, to secure or provide
          for the payment of any part of the purchase price of such property or
          the cost of such construction or improvement, or mortgages upon or
          with respect to any property existing at the time of acquisition
          thereof; provided, however, that in the case of any such construction
          or improvement the mortgage shall not apply to any property
          theretofore owned by Weyerhaeuser or any of its Restricted
          Subsidiaries other than any theretofore
<PAGE>
                                                                              55

          unimproved real property on which the property so constructed, or the
          improvement, is located;

               (3) any extension, renewal or replacement of any mortgage
          referred to in clause (2) above or clause (4) below; provided,
          however, that the principal amount of indebtedness secured thereby
          shall not exceed the principal amount of indebtedness so secured at
          the time of such extension, renewal or replacement, and that such
          extension, renewal or replacement shall be limited to all or part of
          the same property which secured the mortgage so extended, renewed or
          replaced; and

               (4) any mortgage existing on any timber or timberlands of any
          Person or upon or with respect to any principal manufacturing plant of
          any Person at the time of acquisition by the Borrower or any of its
          Restricted Subsidiaries of such Person.

          (ii) Notwithstanding the provisions of paragraph (a)(i) of this
     Section 6.01, Weyerhaeuser or any of its Restricted Subsidiaries may issue,
     assume or guarantee secured debt which would otherwise be subject to the
     foregoing restrictions in an aggregate amount which, together with all
     other such debt of Weyerhaeuser and its Restricted Subsidiaries and the
     Attributable Debt in respect of Sale and Lease-Back Transactions (as
     defined in Section 6.01(b)) existing at such time (other than Sale and
     Lease-Back Transactions permitted because Weyerhaeuser would be entitled to
     incur debt secured by a mortgage on the property to be leased without
     equally and ratably securing the Loans pursuant to paragraph (a)(i) of this
     Section 6.01, and other than Sale and Lease-Back Transactions the proceeds
     of which have been applied in accordance with clause (ii) of Section
     6.01(b)), does not at the time exceed five percent (5%) of Shareholders'
     Interest in Weyerhaeuser and its Restricted Subsidiaries (as hereinafter
     defined). The term "Attributable Debt" as used in this paragraph shall
     mean, as of any particular time, the present value of the obligation of the
     lessee for rental payments during the remaining term of any lease
     (including any period for which such lease has been extended or may, at the
     option of the lessor, be extended).

          (iii) For purposes of this Section 6.01(a), (A) the term "principal
     manufacturing plant" shall not include any manufacturing plant which, in
     the reasonable opinion of the Board of Directors of Weyerhaeuser, is not a
     principal manufacturing plant of Weyerhaeuser and its Restricted
     Subsidiaries; (B) the following types of transactions shall not be deemed
     to create debt secured by a mortgage: (1) the sale, mortgage or other
     transfer of timber in connection with an arrangement under which
     Weyerhaeuser or any of its Restricted Subsidiaries is obligated to cut such
     timber or a portion thereof in order to provide the transferee with a
     specified amount of money however determined; (2) the mortgage of any
     property of Weyerhaeuser or any of its Restricted Subsidiaries in favor of
     the United States, or any State, or any department, agency or
     instrumentality of either, to secure partial, progress, advance or other
     payments to Weyerhaeuser or any of its Restricted Subsidiaries pursuant to
     the provisions of any contract or statute and (3) liens existing on
     property at the time of acquisition of such property; and (C) the term
     "Shareholders' Interest in Weyerhaeuser and its Restricted Subsidiaries"
     shall mean the
<PAGE>
                                                                              56

          aggregate of capital and surplus, including surplus resulting from the
          March 1, 1913 revaluation of timber and timberlands, of Weyerhaeuser
          and its Restricted Subsidiaries, after deducting the cost of shares of
          Weyerhaeuser held in treasury.

          (b) Sale and Lease-Back. Enter into any arrangement, or permit any
Restricted Subsidiary to enter into any arrangement, with any Person providing
for the leasing by Weyerhaeuser or any of its Restricted Subsidiaries of any
real property in the United States (except for temporary leases for a term of
not more than three years), which property has been or is to be sold or
transferred by Weyerhaeuser or such Restricted Subsidiary to such Person (herein
referred to as a "Sale and Lease-Back Transaction"), unless (i) Weyerhaeuser or
such Restricted Subsidiary would be entitled to incur debt secured by a mortgage
on the property to be leased without equally or ratably securing the Loans
pursuant to Section 6.01(a), or (ii) Weyerhaeuser applies an amount equal to the
fair value (as determined by the Board of Directors of Weyerhaeuser) of the
property so leased to the retirement (other than any mandatory retirement),
within 90 days of the effective date of any such Sale and Lease-Back
Transaction, of indebtedness for borrowed money incurred or assumed by
Weyerhaeuser which by its terms matures at, or is extendible or renewable at the
option of the obligor to, a date more than 12 months after the date of the
creation of such debt.

          (c) Merger, Consolidation, etc. Be a party to a merger or
consolidation or sell, transfer or otherwise dispose of all or substantially all
of its properties or assets in a single transaction or in a series of related
transactions unless (i) such merger, consolidation, sale, transfer or
disposition is made with respect to another corporation incorporated and doing
business primarily within the United States of America which shall expressly
assume, in form and substance reasonably satisfactory to the Required Lenders,
the obligations of Weyerhaeuser under the Loan Documents and Weyerhaeuser's
Loans and Letters of Credit, and (ii) immediately after giving effect to such
merger, consolidation, sale, transfer or disposition, no Default or Event of
Default hereunder shall have occurred and be continuing.

          (d) Debt Ratio. Permit Total Funded Indebtedness to exceed 65% of the
sum of Weyerhaeuser's Total Adjusted Shareholders' Interest.

          (e) Net Worth. At any time permit Weyerhaeuser's Total Adjusted
Shareholders' Interest to be less than $5,000,000,000.

          (f) Change in Business. Engage in, or permit any Restricted Subsidiary
to engage in, any material business activities or operations substantially
different from, or unrelated to, the business activities and operations
conducted by it as of the date hereof, except for reasonable extensions,
developments and modifications thereof.

          Section 6.02 Covenants with respect to WRECO. WRECO covenants and
agrees with each Lender, each Fronting Bank and the Administrative Agent that,
so long as this Agreement shall remain in effect or the principal of or interest
on any Loan, any Fees or any other expenses or amounts payable under any Loan
Document shall be unpaid, or any Letter of Credit shall remain outstanding
(which has not been collateralized (with cash or a back-to-back
<PAGE>
                                                                              57

letter of credit issued by a satisfactory financial institution) in a manner
satisfactory to the applicable Fronting Banks and the Administrative Agent) or
any amounts drawn thereunder shall remain unpaid, unless the Required Lenders
shall otherwise consent in writing, it will not, either directly or indirectly:

          (a) Capital Base. Have a Capital Base less than $100,000,000.

          (b) Limitation on Indebtedness. Create, issue, guarantee, assume or
otherwise become liable, directly or indirectly, or permit any of its Restricted
Subsidiaries to create, issue, guarantee, assume or otherwise become liable,
directly or indirectly, in respect of any (i) Senior Debt of WRECO or
Indebtedness of any of its Restricted Subsidiaries if, immediately after giving
effect to the incurrence thereof and to the application of the proceeds thereof,
the aggregate principal amount of all consolidated Senior Debt of WRECO and its
Restricted Subsidiaries then outstanding would exceed 80% of the sum of (x) the
Capital Base plus (y) the aggregate principal amount of Senior Debt of WRECO and
its Restricted Subsidiaries then outstanding; or (ii) Subordinated Debt of WRECO
if, immediately after giving effect to the incurrence thereof and to the
application of the proceeds thereof, the aggregate principal amount of
Subordinated Debt of WRECO then outstanding would exceed 100% of Adjusted Net
Worth. For purposes of this Section and Section 6.02(c), Indebtedness of a
Person which becomes a Restricted Subsidiary on any date shall be deemed to have
been issued or incurred as of such date.

          (c) Limitation on Mortgages and Liens. Create, incur or permit to
exist any mortgage, pledge, encumbrance, lien, security interest or charge of
any kind (including liens or charges upon properties acquired or to be acquired
under conditional sales agreements or other title retention devices) on its
property or assets, whether now owned or hereafter acquired, or upon any income
or profits thereof, or permit any of its Restricted Subsidiaries to do any of
the foregoing, except:

          (i) liens, charges, encumbrances and priority claims incidental to the
     conduct of the business or the ownership of properties and assets
     (including warehousemen's, attorneys' and statutory landlords' liens) and
     liens, pledges or deposits in connection with workmen's compensation,
     unemployment insurance, old age benefit or social security obligations,
     taxes, assessments, statutory obligations or other similar charges, liens
     of contractors, mechanics and materialmen, good faith deposits in
     connection with tenders, contracts or leases to which WRECO or any of its
     Restricted Subsidiaries is a party or other deposits required to be made in
     the ordinary course of business and not in connection with the borrowing of
     money, easements, rights of way, restrictions and other similar
     encumbrances that, in the aggregate, are not substantial in amount and that
     do not in any case materially detract from the value of the property
     subject thereto or substantially interfere with the ordinary conduct of
     WRECO's business; provided in each case the obligation secured is not
     overdue or, if overdue, is being contested in good faith by appropriate
     proceedings;

          (ii) provided that no Default or Event of Default has occurred and is
     continuing, the pledge of assets for the purpose of securing any appeal or
     stay or
<PAGE>
                                                                              58

     discharge in the course of any legal proceeding and liens on or resulting
     from judgments or awards in respect of which WRECO or any of its Restricted
     Subsidiaries shall in good faith be prosecuting an appeal or proceeding for
     review;

          (iii) mortgages, liens or security interests existing as of the date
     of this Agreement securing obligations of WRECO or any of its Restricted
     Subsidiaries outstanding on such date and all renewals, extensions or
     refundings thereof (without increase in the principal amount remaining
     unpaid at the time of any such renewal, extension or refunding);

          (iv) mortgages, liens or security interests securing Indebtedness of a
     Restricted Subsidiary of WRECO to another Restricted Subsidiary of WRECO or
     to WRECO;

          (v) mortgages, conditional sale contracts, security interests or other
     arrangements for the retention of title (including financing leases), in
     addition to those permitted under subparagraphs (iii), (iv), (vi) and (vii)
     hereof, given to secure the payment of the purchase price incurred in
     connection with the acquisition of property useful and intended to be used
     in carrying on the business of WRECO or any of its Restricted Subsidiaries,
     and liens existing on such property at the time of acquisition thereof or
     at the time of acquisition by WRECO or a Restricted Subsidiary of any
     Person then owning such property whether or not such existing liens were
     given to secure the payment of the purchase price of the property to which
     they attach; provided that the lien or charge shall attach solely to the
     property acquired or purchased and any improvements then or thereafter
     placed thereon;

          (vi) mortgages, security interests and other encumbrances or liens on
     Real Estate Assets, incurred or created in the ordinary course of the
     business of WRECO and its Restricted Subsidiaries; provided that the
     aggregate principal amount of all Indebtedness so secured and at any one
     time outstanding shall not exceed 10% of the Capital Base at such time; and

          (vii) mortgages, conditional sale contracts, security interests or
     other arrangements for the retention of title (including financing leases),
     in addition to those specifically permitted by foregoing subparagraphs (i)
     through (vi) hereof, given to secure the payment of Senior Debt of WRECO or
     any of its Restricted Subsidiaries, and any renewal, extension or refunding
     of any such Senior Debt; provided that the aggregate principal amount of
     all Senior Debt of WRECO and its Restricted Subsidiaries so secured and at
     any one time outstanding shall not exceed 10% of the Capital Base at such
     time.

          In the event that any property is subjected to a lien or other
encumbrance in violation of this Section 6.02(c), WRECO will make or cause to be
made effective provision whereby the Loans shall be secured equally and ratably
with all other obligations secured thereby (provided, however, that such
violation shall constitute a default under this Agreement whether or not such
provision is made) and, if such
<PAGE>
                                                                              59

provision is not made, an equitable lien, so equally and ratably securing the
Loans, shall (to the extent permitted by law) exist on such property.

          (d) Limitation on Mergers and Consolidations. Be a party to any merger
or consolidation unless (i) WRECO or a Weyerhaeuser Subsidiary (as defined
below) having substantially all of its assets and doing business primarily in
the United States of America shall be the surviving or resulting corporation of
any such merger or consolidation and immediately after giving effect to any such
merger or consolidation such successor corporation, whether or not WRECO, shall
be entitled to incur at least $1 of additional Senior Debt under Section
6.02(b); (ii) if the surviving or resulting corporation is not WRECO, the
surviving or resulting corporation shall be a Weyerhaeuser Subsidiary
incorporated within the United States of America and shall expressly assume the
obligations of WRECO under this Agreement and the other Loan Documents to which
it is a party by supplemental agreement reasonably satisfactory to the
Administrative Agent; (iii) immediately after giving effect to any such merger
or consolidation, no Default or Event of Default shall have occurred and be
continuing; and (iv) WRECO shall have delivered to the Administrative Agent a
certificate signed by two of WRECO's officers stating that such merger or
consolidation and, if a supplemental agreement is required in connection
therewith as aforesaid, such supplemental agreement comply with the provisions
described in this paragraph. Upon the consummation of any merger or
consolidation in which the surviving or resulting corporation is not WRECO in
accordance with the foregoing provisions, the surviving or resulting corporation
shall succeed to and be substituted for, and may exercise every right and power
of and shall be subject to all of the obligations of, WRECO under this Agreement
and the other Loan Documents to which it is a party, with the same effect as if
it had been named as WRECO therein. As used in this paragraph, the term
"Weyerhaeuser Subsidiary" means a corporation at least 79% of whose issued and
outstanding shares of capital stock at the time outstanding and having ordinary
voting power for the election of a majority of the directors of such corporation
shall be owned and controlled by Weyerhaeuser or a wholly owned Subsidiary of
Weyerhaeuser.

          (e) Limitation on Sale of Assets. Sell, transfer or otherwise dispose
of all or substantially all of its properties and assets in a single transaction
or in a series of related transactions unless (i) the consideration received
therefor shall consist of cash, securities or other properties having an
aggregate fair value (as determined in good faith by the Board of Directors of
WRECO) equal to not less than the aggregate fair value (as determined in good
faith by the Board of Directors of WRECO) of the properties and assets so sold,
transferred or otherwise disposed of; (ii) immediately after giving effect
thereto WRECO shall be entitled to incur at least $1 of additional Senior Debt
under Section 6.02(b); (iii) immediately after giving effect thereto, no Default
or Event of Default shall have occurred and be continuing; and (iv) WRECO shall
have delivered to the Administrative Agent a certificate signed by two of
WRECO's officers stating that such transaction complies with the provisions
described in this paragraph.
<PAGE>
                                                                              60

                                   ARTICLE VII

                                EVENTS OF DEFAULT

          Section 7.01 Events of Default. In case of the happening of any of the
events under Sections 7.01(a) through 7.01(l) below (an "Event of Default"):

          (a) default shall be made in the payment by a Borrower of any
principal of any Loan or any reimbursement of any L/C Disbursement, when and as
the same shall become due and payable, whether at the due date thereof or at a
date fixed for prepayment thereof or by acceleration thereof or otherwise;

          (b) default shall be made in the payment by a Borrower of any interest
on any Loan or any Fee or any other amount (other than an amount referred to in
Section 7.01(a) above) due under any Loan Document, when and as the same shall
become due and payable, and such default shall continue unremedied for a period
of five days;

          (c) any representation or warranty made or deemed made by a Borrower
in or in connection with any Loan Document or the Borrowings or Letters of
Credit hereunder, or any representation, warranty, statement or information
contained in any report, certificate, financial statement or other instrument
furnished in connection with or pursuant to any Loan Document, shall prove to
have been false or misleading in any material respect when so made, deemed made
or furnished;

          (d) default shall be made in the due observance or performance by a
Borrower or any of its Subsidiaries (or its respective Restricted Subsidiaries,
if such covenant, condition or agreement applies only to Restricted
Subsidiaries) of any covenant, condition or agreement contained in Section
5.01(a), 5.05(a), 5.08 or in Article VI;

          (e) default shall be made in the due observance or performance by a
Borrower or any of its Subsidiaries (or its Restricted Subsidiaries, if such
covenant, condition or agreement applies only to Restricted Subsidiaries) of any
covenant, condition or agreement contained in any Loan Document (other than
those specified in Section 7.01(a), 7.01(b), 7.01(c) or 7.01(d)) and such
default shall continue unremedied for a period of thirty days after notice
thereof from the Administrative Agent, any Swing Line Bank, any Fronting Bank or
any Lender to such Borrower;

          (f) a Borrower or any of its Restricted Subsidiaries shall (i) fail to
pay, when and as the same shall become due and payable (and such failure shall
continue after the applicable grace period, if any, specified in the agreement
or instrument related to such Indebtedness) any principal or interest,
regardless of amount, due in respect of Indebtedness in an aggregate principal
amount in excess of $100,000,000, or (ii) fail to observe or perform any other
terms, covenants, conditions or agreements contained in any agreements or
instruments evidencing or governing Indebtedness in an aggregate principal
amount in excess of $100,000,000 (and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
related to such Indebtedness), if the effect of any failure or failures referred
to in this Section 7.01(f)(ii)
<PAGE>
                                                                              61

is to cause or permit the holder or holders of such Indebtedness or a trustee on
its or their behalf (with or without the giving of notice) to cause, such
Indebtedness to become due prior to its stated maturity;

          (g) an involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking (i) relief
in respect of a Borrower or any of its Restricted Subsidiaries, or of a
substantial part of the property or assets of such Borrower or any of its
Restricted Subsidiaries, under Title 11 of the United States Code, as now
constituted or hereafter amended, or any other Federal or state bankruptcy,
insolvency, receivership or similar law, (ii) the appointment of a receiver,
trustee, custodian, sequestrator, conservator or similar official for such
Borrower or any of its Restricted Subsidiaries or for a substantial part of the
property or assets of such Borrower or any of its Restricted Subsidiaries or
(iii) the winding-up or liquidation of such Borrower or any of its Restricted
Subsidiaries; and such proceeding or petition shall continue undismissed for 60
days or an order or decree approving or ordering any of the foregoing shall be
entered;

          (h) a Borrower or any of its Restricted Subsidiaries shall (i)
voluntarily commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter amended, or
any other Federal or state bankruptcy, insolvency, receivership or similar law,
(ii) consent to the institution of, or fail to contes t in a timely and
appropriate manner, any proceeding or the filing of any petition described in
Section 7.01(g) above, (iii) apply for or consent to the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar official for
such Borrower or any of its Restricted Subsidiaries or for a substantial part of
the property or assets of such Borrower or any of its Restricted Subsidiaries,
(iv) file an answer admitting the material allegations of a petition filed
against it in any such proceeding, (v) make a general assignment for the benefit
of creditors, (vi) become unable, admit in writing its inability or fail
generally to pay its debts as they become due or (vii) take any action for the
purpose of effecting any of the foregoing;

          (i) one or more judgments for the payment of money in an aggregate
amount in excess of $100,000,000 shall be rendered against a Borrower or any of
its Restricted Subsidiaries or any combination thereof and the same shall remain
undischarged for a period of 30 consecutive days during which execution shall
not be effectively stayed, or any action shall be legally taken by a judgment
creditor to levy upon assets or properties of such Borrower or any of its
Restricted Subsidiaries to enforce any such judgment;

          (j) any Plan shall fail to satisfy the minimum funding standard
required for any plan year or a waiver of such standard or extension of any
amortization period is sought or granted under Section 412 of the Code, any Plan
is, shall have been or is likely to be terminated or the subject of termination
proceedings under ERISA, any Plan shall have an Unfunded Current Liability, or
Weyerhaeuser has incurred or is likely to incur a liability to or on account of
a Plan under Sections 409, 502(i), 502(l), or 515 of ERISA or Section 4975 of
the Code, or Weyerhaeuser or any ERISA Affiliate has incurred or is likely to
incur a liability to or on account of a Plan under Sections 4062, 4063, 4064,
4069, 4201 or 4204 of ERISA; and there shall result from any such event or
events
<PAGE>
                                                                              62

referred to in this Section 7.01(j) the imposition of a lien upon the assets of
Weyerhaeuser or any ERISA Affiliate, the granting of a security interest, a
liability or a material risk of incurring a liability to the PBGC or the
Internal Revenue Service or a Plan or a trustee appointed under ERISA or a
liability or a material risk of incurring a liability under Sections 409, 502(i)
or 502(l) of ERISA or under Sections 4971 or 4975 of the Code; which, in the
good faith determination of the Required Lenders, will have a Material Adverse
Effect;

          (k) there shall have occurred a Change in Control of a Borrower; or

          (l) the OCBM Agreement shall cease, for any reason, to be in full
force and effect, or Weyerhaeuser shall contest the validity or enforceability
thereof or otherwise fail to comply with its obligations thereunder;

then, and in every such event (other than an event with respect to a Borrower
described in Section 7.01(g) or 7.01(h) above), and at any time thereafter
during the continuance of such event, the Administrative Agent, at the request
of the Required Lenders, shall, by notice to the Borrowers, take any or all of
the following actions, at the same or different times: (i) terminate forthwith
the Commitments of the Lenders and terminate forthwith the obligation of any
Fronting Bank to issue Letters of Credit (and require any outstanding Letters of
Credit to be cash collateralized in accordance with Section 2.20(i)) and/or (ii)
declare the Loans then outstanding to the Borrowers to be forthwith due and
payable in whole or in part, whereupon the principal of the Loans so declared to
be due and payable, together with accrued interest thereon and any unpaid
accrued Fees and all other liabilities of the Borrowers accrued hereunder and
under any other Loan Document, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any
other Loan Document to the contrary notwithstanding; and in any event with
respect to a Borrower described in Sections 7.01(g) or 7.01(h) above, the
Commitments of the Lenders and the obligation of any Fronting Bank to issue
Letters of Credit shall automatically terminate and the principal of the Loans
then outstanding, together with accrued interest thereon and any unpaid accrued
Fees and all other liabilities of the Borrowers accrued hereunder and under any
other Loan Document, shall automatically become due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Borrowers, anything contained herein or in any
other Loan Document to the contrary notwithstanding.

                                  ARTICLE VIII

                            THE ADMINISTRATIVE AGENT

          Section 8.01 The Administrative Agent. In order to expedite the
transactions contemplated by this Agreement, JPMorgan Chase Bank is hereby
appointed to act as Administrative Agent on behalf of the Lenders, the Swing
Line Banks, and the Fronting Banks. Each of the Lenders, the Swing Line Banks
and the Fronting Banks, and each assignee thereof, hereby irrevocably authorizes
the Administrative Agent to take such actions on behalf of such Lender, the
Swing Line Banks and such Fronting Bank and to exercise such powers as are
<PAGE>
                                                                              63

specifically delegated to the Administrative Agent by the terms and provisions
hereof, together with such actions and powers as are reasonably incidental
thereto.

          The Administrative Agent is hereby expressly authorized by the
Lenders, the Swing Line Banks and the Fronting Banks, without hereby limiting
any implied authority, (a) to receive on behalf of the Lenders, the Swing Line
Banks and the Fronting Banks all payments of principal of and interest on the
Loans, all reimbursements made with respect to L/C Disbursements and all other
amounts due to the Lenders, the Swing Line Banks and the Fronting Banks
hereunder, and promptly to distribute to each Lender, each Swing Line Bank and
each Fronting Bank its proper share of each payment so received; (b) to give
prompt notice on behalf of the Lenders, the Swing Line Banks and the Fronting
Banks to the Borrowers of any Event of Default specified in this Agreement of
which the Administrative Agent has actual knowledge acquired in connection with
its agency hereunder; and (c) to distribute promptly to each Lender, each Swing
Line Bank and each Fronting Bank copies of all notices, financial statements and
other materials delivered by the Borrowers pursuant to this Agreement as
received by the Administrative Agent.

          Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall be liable as such to any Lender, any Swing Line Bank
or any Fronting Bank for any action taken or omitted by any of them except for
its or his own gross negligence or willful misconduct, or be responsible for any
statement, warranty or representation herein or the contents of any document
delivered in connection herewith, or be required to ascertain or to make any
inquiry concerning the performance or observance by the Borrowers of any of the
terms, conditions, covenants or agreements contained in any Loan Document. The
Administrative Agent shall not be responsible to the Lenders, the Swing Line
Banks and the Fronting Banks for (i) the due execution, genuineness, validity,
enforceability or effectiveness of this Agreement or any other Loan Documents or
other instruments or agreements or (ii) the satisfaction of any condition set
forth in any Loan Document, other than to confirm receipt of items expressly
required to be delivered to the Administrative Agent. The duties of the
Administrative Agent shall be mechanical and administrative in nature; the
Administrative Agent shall not have by reason of this Agreement or any other
Loan Document a fiduciary relationship in respect of any Lender, any Swing Line
Bank or any Fronting Bank. The Administrative Agent shall in all cases be fully
protected in acting, or refraining from acting, in accordance with written
instructions signed by the Required Lenders, the Lenders, the Swing Line Banks
or any Fronting Bank, as the case may be, and, except as otherwise specifically
provided herein, such instructions and any action or inaction pursuant thereto
shall be binding on all of the Lenders, the Swing Line Banks and all of the
Fronting Banks. The Administrative Agent shall, in the absence of knowledge to
the contrary, be entitled to rely on any instrument or document believed by it
to be genuine and correct and to have been signed or sent by the proper person
or persons. The Administrative Agent may also rely upon any statement made to it
orally or by telephone and believed to be made by the proper Person, and shall
not incur any liability for relying thereon.

          Neither the Administrative Agent nor any of its directors, officers,
employees or agents shall have any responsibility to the Borrowers on account of
the failure of or delay in performance or breach by any Lender, any Swing Line
Bank or any Fronting Bank of any of its obligations hereunder or to any Lender,
any Swing Line Bank or any Fronting Bank on account of the failure of or delay
in performance or breach by any other Lender, any Swing Line Bank,
<PAGE>
                                                                              64

any Fronting Bank or the Borrowers of any of their respective obligations
hereunder or under any other Loan Document or in connection herewith or
therewith. The foregoing shall not limit the obligations of JPMorgan Chase Bank
(or its successors and assigns) in its capacity as Lender hereunder. The
Administrative Agent may execute any and all duties hereunder by or through
agents or employees and shall be entitled to rely upon the advice of legal
counsel (who may be counsel for a Borrower), independent accountants and other
experts selected by it with respect to all matters arising hereunder and shall
not be liable for any action taken or suffered in good faith by it in accordance
with the advice of such counsel. The exculpatory provisions of this Article VIII
shall apply to any such agent or employee, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.

          The Administrative Agent shall not have any duties or obligations
except those expressly set forth herein. Without limiting the generality of the
foregoing, the Lenders, the Swing Line Banks and the Fronting Banks hereby
acknowledge that (a) the Administrative Agent shall not be subject to any
fiduciary or other implied duties, regardless of whether a Default or Event of
Default has occurred and is continuing, (b) the Administrative Agent shall be
under no duty to take any discretionary action permitted to be taken by it
pursuant to the provisions of this Agreement unless it shall be requested in
writing to do so by the Required Lenders, the Lenders, the Swing Line Banks or
any Fronting Bank, as the case may be, and (c) except as expressly set forth
herein, the Administrative Agent shall not have any duty to disclose, and shall
not be liable for the failure to disclose, any information relating to the
Borrowers or any of their respective Subsidiaries that is communicated to or
obtained by the Administrative Agent or any of its Affiliates in any capacity.

          Subject to the appointment and acceptance of a successor
Administrative Agent as provided below, the Administrative Agent may resign at
any time by notifying the Lenders, the Swing Line Banks, the Fronting Banks and
the Borrowers. Upon any such resignation, the Required Lenders shall have the
right to appoint a successor. If no successor shall have been so appointed by
the Required Lenders and shall have accepted such appointment within 30 days
after the retiring Administrative Agent gives notice of its resignation, then
the retiring Administrative Agent may, on behalf of the Lenders, the Swing Line
Banks and the Fronting Banks, appoint a successor Administrative Agent which
shall be a bank with an office in New York, New York, having a combined capital
and surplus of at least $500,000,000 or an Affiliate of any such bank. Upon the
acceptance of any appointment as Administrative Agent hereunder by a successor
bank, such successor shall succeed to and become vested with all the rights,
powers, privileges and duties of the retiring Administrative Agent and the
retiring Administrative Agent shall be discharged from its duties and
obligations hereunder. After the Administrative Agent's resignation hereunder,
the provisions of this Article and Section 9.05 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.

          With respect to the Loans made by it hereunder, the Administrative
Agent in its individual capacity and not as Administrative Agent shall have the
same rights and powers as any other Lender and may exercise the same as though
it were not the Administrative Agent, and the Administrative Agent and its
Affiliates may accept deposits from, lend money to and
<PAGE>
                                                                              65

generally engage in any kind of business with the Borrowers or any of their
respective Subsidiaries or other Affiliate thereof as if it were not the
Administrative Agent.

          Each of the Lenders, the Swing Line Banks and each of the Fronting
Banks agrees (i) to reimburse the Administrative Agent, on demand, in the amount
of its pro rata share (based on its Commitment hereunder) of any expenses
incurred for the benefit of the Lenders, the Swing Line Banks and the Fronting
Banks by the Administrative Agent, including counsel fees and compensation of
agents and employees paid for services rendered on behalf of the Lenders, the
Swing Line Banks and the Fronting Banks, which shall not have been reimbursed by
the Borrowers and (ii) to indemnify and hold harmless the Administrative Agent
and any of its directors, officers, employees or agents, on demand, in the
amount of such pro rata share, from and against any and all losses, claims,
damages, liabilities and related expenses of any kind or nature whatsoever which
may be imposed on, incurred by or asserted against it in its capacity as the
Administrative Agent or any of them in any way relating to or arising out of
this Agreement or any other Loan Document or any action taken or omitted by it
or any of them under this Agreement or any other Loan Document, to the extent
the same shall not have been reimbursed by the Borrowers; provided that no
Lender, nor any Swing Line Bank nor any Fronting Bank shall be liable to the
Administrative Agent for any portion of such losses, claims, damages,
liabilities and related expenses resulting from the gross negligence or willful
misconduct of the Administrative Agent or any of its directors, officers,
employees, or agents.

          Each of the Lenders, the Swing Line Banks and each of the Fronting
Banks acknowledges that it has, independently and without reliance upon the
Administrative Agent, any other Lender, any Swing Line Bank or any Fronting Bank
and based on such documents and information as it has deemed appropriate, made
its own credit analysis and decision to enter into this Agreement. Each of the
Lenders, the Swing Line Banks and each Fronting Bank also acknowledges that it
will, independently and without reliance upon the Administrative Agent, any
other Lender, any Swing Line Bank or any Fronting Bank and based on such
documents and information as it shall from time to time deem appropriate,
continue to make its own decisions in taking or not taking action under or based
upon this Agreement or any other Loan Document, any related agreement or any
document furnished hereunder or thereunder.

          Section 8.02 Other Agents. Each of the Lenders, the Swing Line Banks,
each of the Fronting Banks and each of the Borrowers acknowledges (A) that each
of the Lead Arrangers in their capacity as Lead Arranger, Joint Book Runner,
Syndication Agent, Documentation Agents, and Co-Documentation Agent do not have
any responsibility or liability hereunder, and (B) that the titles "Lead
Arranger," are purely honorary in nature.

                                   ARTICLE IX

                                  MISCELLANEOUS

          Section 9.01 Notices. Notices and other communications provided for
herein shall be in writing and shall be delivered by hand or overnight courier
service, mailed or sent by telecopy to the address specified below, or such
other address as such party shall hereafter have specified by written notice to
the Administrative Agent and the Borrowers:
<PAGE>
                                                                              66

          (a) if to a Borrower by hand or courier service, to such Borrower at
33663 Weyerhaeuser Way South, Federal Way, Washington, or by facsimile to (253)
924-3543, in each case to the Attention of Vice President and Treasurer with a
copy to Secretary;

          (b) if to the Administrative Agent or a Lender, to it at its address
(or telecopy number) set forth in Schedule 9.01 or in the Assignment and
Acceptance pursuant to which such Lender became a party hereto.

          Notices and other communications to the Lenders hereunder may be
delivered or furnished by electronic communications pursuant to procedures
approved by the Administrative Agent; provided that the foregoing shall not
apply to notices pursuant to Article II unless otherwise agreed by the
Administrative Agent and the applicable Lender. The Administrative Agent or the
Borrowers may, in their discretion, agree to accept notices and other
communications to it hereunder by electronic communications pursuant to
procedures approved by it; provided that approval of such procedures may be
limited to particular notices or communications.

          All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy or other telegraphic communications equipment of the sender,
in each case delivered, sent or mailed (properly addressed) to such party as
provided in this Section 9.01 or in accordance with the latest unrevoked
direction from such party given in accordance with this Section 9.01.

          Section 9.02 Survival of Agreement. All covenants, agreements,
representations and warranties made by the Borrowers herein and in the
certificates or other instruments prepared or delivered in connection with or
pursuant to this Agreement or any other Loan Document shall be considered to
have been relied upon by the Lenders, the Swing Line Banks and the Fronting
Banks and shall survive the making of the Loans and the issuance of the Letters
of Credit, regardless of any investigation made by the Lenders, the Swing Line
Banks or the Fronting Banks or on their behalf, and shall continue in full force
and effect as long as the principal of or any accrued interest on any Loan or
any Fee or any L/C Disbursement or any other amount payable under this Agreement
or any other Loan Document is outstanding and unpaid and so long as the
Commitments and all Letters of Credit hereunder have not been terminated.

          Section 9.03 Binding Effect. This Agreement shall become effective
when it shall have been executed by the Borrowers and the Administrative Agent
and when the Administrative Agent shall have received copies hereof which, when
taken together, bear the signatures of each Lender, each Swing Line Bank and
each Initial Fronting Bank and thereafter shall be binding upon and inure to the
benefit of the Borrowers, the Administrative Agent, each Lender, each Swing Line
Bank, each Fronting Bank and their respective successors and assigns, except
that, other than as provided in Section 6.01(c) and Section 6.02(d), neither
Borrower shall have the right to assign or delegate its rights or obligations
hereunder or any interest herein without the prior consent of all the Lenders,
the Swing Line Banks and the Fronting Banks.
<PAGE>
                                                                              67

          Section 9.04 Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that, other
than as provided in Section 6.01(c) and Section 6.02(d), neither Borrower may
assign or otherwise transfer any of its rights or obligations hereunder without
the prior written consent of each Lender (and any attempted assignment or
transfer by a Borrower without such consent shall be null and void). Nothing in
this Agreement, expressed or implied, shall be construed to confer upon any
Person (other than the parties hereto, their respective successors and assigns
permitted hereby and, to the extent expressly contemplated hereby, the Related
Parties of each of the Administrative Agent and the Lenders) any legal or
equitable right, remedy or claim under or by reason of this Agreement.

          (b) Any Lender may assign to one or more assignees all or a portion of
its rights and obligations under this Agreement (including all or a portion of
its Commitment and the Loans at the time owing to it and its interests in,
rights to payment under and obligations with respect to the Letters of Credit
issued at such time); provided that (i) except in the case of an assignment to a
Lender or a Lender Affiliate, each of the Borrowers must give their prior
written consent to such assignment (which consents shall not be unreasonably
withheld or delayed), (ii) each of the Fronting Banks, the Swing Line Banks and
the Administrative Agent must give their prior written consent to such
assignment (which consents shall not be unreasonably withheld or delayed), (iii)
except in the case of an assignment to a Lender or a Lender Affiliate or an
assignment of the entire remaining amount of the assigning Lender's Commitment,
the amount of the Commitment of the assigning Lender subject to each such
assignment (determined as of the date the Assignment and Acceptance with respect
to such assignment is delivered to the Administrative Agent) shall not be less
than $5,000,000 unless each of the Borrowers and the Administrative Agent
otherwise consent, (iv) each partial assignment shall be made as an assignment
of a proportionate part of all the assigning Lender's rights and obligations
under this Agreement, except that this clause (iv) shall not apply to rights in
respect of outstanding Competitive Loans, (v) the parties to each assignment
shall execute and deliver to the Administrative Agent an Assignment and
Acceptance, together with a processing and recordation fee of $3,500, and (vi)
the assignee, if it shall not be a Lender prior to such assignment, shall
deliver to the Administrative Agent an Administrative Questionnaire; and
provided further that any consent of a Borrower otherwise required under this
paragraph shall not be required if a Default or Event of Default has occurred
and is continuing. Subject to acceptance and recording thereof pursuant to
paragraph (d) of this Section, from and after the effective date specified in
each Assignment and Acceptance the assignee thereunder shall be a party hereto
and, to the extent of the interest assigned by such Assignment and Acceptance,
have the rights and obligations of a Lender under this Agreement, and the
assigning Lender thereunder shall, to the extent of the interest assigned by
such Assignment and Acceptance, be released from its obligations under this
Agreement (and, in the case of an Assignment and Acceptance covering all of the
assigning Lender's rights and obligations under this Agreement, such Lender
shall cease to be a party hereto but shall continue to be entitled to the
benefits of Sections 2.11, 2.13, 2.17 and 9.05). Any assignment or transfer by a
Lender of rights or obligations under this Agreement that does not comply with
this paragraph shall be treated for purposes of this Agreement as a sale by such
Lender of a participation in such rights and obligations in accordance with
paragraph (e) of this Section.
<PAGE>
                                                                              68

          (c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in The City of New York a
copy of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Loans owing to, each Lender pursuant to the terms
hereof from time to time (the "Register"). The entries in the Register shall be
conclusive (absent manifest error), and the Borrowers, the Administrative Agent
and the Lenders may treat each Person whose name is recorded in the Register
pursuant to the terms hereof as a Lender hereunder for all purposes of this
Agreement, notwithstanding notice to the contrary. The Register shall be
available for inspection by the Borrowers and any Lender, at any reasonable time
and from time to time upon reasonable prior notice.

          (d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
Administrative Questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, if any, the Administrative Agent shall accept such
Assignment and Acceptance and record the information contained therein in the
Register. No assignment shall be effective for purposes of this Agreement unless
it has been recorded in the Register as provided in this paragraph.

          (e) Any Lender may, without the consent of the Borrowers, sell
participations to one or more banks or other entities (a "Participant") in all
or a portion of such Lender's rights and obligations under this Agreement
(including all or a portion of its Commitment, the Loans owing to it and its
interests in, rights to payment under and obligations with respect to the
Letters of Credit issued hereunder); provided that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Borrowers, the Administrative Agent and the other
Lenders shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this Agreement. Any
agreement or instrument pursuant to which a Lender sells such a participation
shall provide that such Lender shall retain the sole right to enforce this
Agreement and to approve any amendment, modification or waiver of any provision
of this Agreement; provided that such agreement or instrument may provide that
such Lender will not, without the consent of the Participant, agree to any
amendment, modification or waiver described in the first proviso to Section
9.08(b) that affects such Participant. Subject to paragraph (f) of this Section,
the Borrowers agree that each Participant shall be entitled to the benefits of
Sections 2.11, 2.13 and 2.17 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section.
To the extent permitted by law, each Participant also shall be entitled to the
benefits of Section 9.06 as though it were a Lender, provided such Participant
agrees to be subject to Section 2.15 as though it were a Lender.

          (f) A Participant shall not be entitled to receive any greater payment
under Section 2.11 or 2.17 than the applicable Lender would have been entitled
to receive with respect to the participation sold to such Participant, unless
the sale of the participation to such Participant is made with the Borrowers'
prior written consent.
<PAGE>
                                                                              69

          (g) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement and the other Loan
Documents (including, without limitation, any notes held by it pursuant to
Section 2.05(e)) to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, without notice to,
or consent of the Borrower or the Administrative Agent, and this Section 9.04
shall not apply to any such pledge or assignment of a security interest;
provided that no such pledge or assignment of a security interest shall release
a Lender from any of its obligations hereunder or substitute any such pledgee or
assignee for such Lender as a party hereto.

          (h) Weyerhaeuser authorizes each Lender to disclose to any Participant
or assignee and any prospective Participant or assignee any and all financial
information in such Lender's possession concerning Weyerhaeuser or any
Subsidiary of Weyerhaeuser which has been delivered to such Lender by a Borrower
pursuant to this Agreement or which has been delivered to such Lender by a
Borrower in connection with such Lender's credit evaluation of a Borrower prior
to entering into this Agreement; provided that such Participant or assignee or
prospective Participant or assignee agrees to treat any such information which
is not public as confidential in accordance with the terms of the Agreement.

          Section 9.05 Expenses; Indemnity. (a) The Borrowers jointly and
severally agree to pay all reasonable out-of-pocket expenses incurred by the
Administrative Agent in connection with the preparation of this Agreement and
the other Loan Documents or in connection with any amendments, modifications or
waivers of the provisions hereof or thereof (whether or not the transactions
hereby contemplated shall be consummated) or incurred by the Administrative
Agent, any Lender, any Swing Line Bank or any Fronting Bank in connection with
the enforcement or protection of their rights in connection with this Agreement
and the other Loan Documents or in connection with the Loans made and the
Letters of Credit issued, including the fees and disbursements of Simpson
Thacher & Bartlett LLP, special counsel for the Administrative Agent, and, in
connection with any such amendment, modification or waiver made in connection
with any such enforcement or protection, the fees and disbursements of any other
counsel for the Administrative Agent, any Lender or any Fronting Bank. The
Borrowers further agree jointly and severally that they shall indemnify the
Lenders, the Swing Line Banks and the Fronting Banks from and hold them harmless
against any documentary taxes, assessments or charges made by any Governmental
Authority by reason of the execution and delivery of this Agreement, any of the
other Loan Documents or any Letters of Credit.

          (b) Each Borrower will indemnify the Administrative Agent, each
Lender, each Swing Line Bank, each Fronting Bank and the directors, officers,
employees and agents of each of the foregoing (each such person being called an
"Indemnitee") against, and to hold each Indemnitee harmless from, any and all
losses, claims, damages, liabilities and related expenses, including reasonable
counsel fees and expenses, incurred by or asserted against any Indemnitee
arising out of, in any way connected with, or as a result of (i) the execution
or delivery by such Borrower of this Agreement or any other Loan Document or any
agreement or instrument contemplated hereby or thereby, the performance by the
parties thereto of their respective obligations thereunder or the consummation
of the Transactions and the other transactions contemplated hereby and thereby,
(ii) the use of the proceeds of the Loans by such Borrower or of the Letters of
Credit issued on behalf of Weyerhaeuser or (iii) any claim, litigation,
investigation or proceeding relating to any of the foregoing, whether or not any
Indemnitee is a
<PAGE>
                                                                              70

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 have resulted from the gross negligence or willful misconduct
of such Indemnitee.

          (c) It is understood and agreed that, to the extent not precluded by a
conflict of interest, each Indemnitee shall endeavor to work cooperatively with
Weyerhaeuser with a view toward minimizing the legal and other expenses
associated with any defense and any potential settlement or judgment. To the
extent reasonably practicable and not disadvantageous to any Indemnitee, it is
anticipated that a single counsel selected by Weyerhaeuser may be used.
Settlement of any claim or litigation involving any material indemnified amount
will require the approval of Weyerhaeuser (not to be unreasonably withheld).

          (d) The provisions of this Section 9.05 shall remain operative and in
full force and effect regardless of the expiration of the term of this
Agreement, the consummation of the transactions contemplated hereby, the
repayment of any of the Loans or L/C Disbursements, the termination of any
Letters of Credit, the invalidity or unenforceability of any term or provision
of this Agreement or any other Loan Document, or any investigation made by or on
behalf of the Administrative Agent, any Lender, any Swing Line Bank or any
Fronting Bank. All amounts due under this Section 9.05 shall be payable on
written demand therefor.

          Section 9.06 Right of Setoff. If any Event of Default shall have
occurred and be continuing, each Lender, each Swing Line Bank and each Fronting
Bank is hereby authorized at any time and from time to time, without notice to
such Borrower (any such notice being expressly waived by such Borrower), to the
fullest extent permitted by law, to set off and apply any and all deposits
(general or special, time or demand, provisional or final) at any time held and
other indebtedness at any time owing by such Lender, such Swing Line Bank or
such Fronting Bank or any of their respective Affiliates to or for the credit or
the account of such Borrower against any of and all the obligations of such
Borrower now or hereafter existing under this Agreement and any other Loan
Documents held by such Lender, such Swing Line Bank or such Fronting Bank,
irrespective of whether or not such Lender, such Swing Line Bank or such
Fronting Bank shall have made any demand under this Agreement or such other Loan
Document and although such obligations may be unmatured. The rights of each
Lender, each Swing Line Bank and each Fronting Bank under this Section 9.06 are
in addition to other rights and remedies (including other rights of setoff)
which such Lender, such Swing Line Bank or such Fronting Bank may have.

          Section 9.07 Applicable Law. THIS AGREEMENT, THE OTHER LOAN DOCUMENTS
AND THE RIGHTS AND OBLIGATIONS HEREUNDER AND THEREUNDER OF THE PARTIES HERETO
AND THERETO (OTHER THAN AS RELATED TO LETTERS OF CREDIT) SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. EACH LETTER
OF CREDIT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT OR, IF NO SUCH LAWS
OR RULES ARE DESIGNATED, THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY
CREDITS (1993 REVISION), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO.
<PAGE>
                                                                              71

500 (THE "UNIFORM CUSTOMS") AND, AS TO MATTERS NOT GOVERNED BY THE UNIFORM
CUSTOMS, THE LAWS OF THE STATE OF NEW YORK.

          Section 9.08 Waivers; Amendment. (a) No failure or delay of the
Administrative Agent, any Lender, any Swing Line Bank or any Fronting Bank in
exercising any power or right hereunder shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right or power, or any
abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Administrative Agent, the
Lenders, the Swing Line Banks and the Fronting Banks hereunder and under the
other Loan Documents are cumulative and are not exclusive of any rights or
remedies which they would otherwise have. No waiver of any provision of this
Agreement or any other Loan Document or consent to any departure by the
Borrowers therefrom shall in any event be effective unless the same shall be
permitted by paragraph (b) below, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice or demand on the Borrowers in any case shall entitle the Borrowers to any
other or further notice or demand in similar or other circumstances.

          (b) Neither this Agreement nor any provision hereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Borrowers and the Required Lenders; provided, however, that
no such agreement shall (i) change the principal amount of, or extend or advance
the maturity of or any date for the scheduled payment of any principal of or
interest on, any Loan, or extend the stated maturity of any Letter of Credit
beyond the date that is five Business Days prior to the Termination Date or
waive or excuse any such scheduled payment or any part thereof, or decrease the
rate of interest on any Loan, without the prior written consent of each Lender
affected thereby, (ii) change the Commitment or decrease or extend any date for
the payment of the Facility Fees, Utilization Fees or L/C Participation Fees of
any Lender without the prior written consent of such Lender, or (iii) amend or
modify the provisions of Section 2.14, the provisions of this Section 9.08 or
the definition of "Termination Date" or "Required Lenders," without prior
written consent of each Lender; provided further that no such agreement shall
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, any Swing Line Bank or any Fronting Bank, as the case may be, hereunder
without the prior written consent of the Administrative Agent, Swing Line Bank
or Fronting Bank, as the case may be. Each Lender shall be bound by any waiver,
amendment or modification authorized by this Section 9.08, and any consent by
any Lender pursuant to this Section 9.08 shall bind any person subsequently
acquiring a Loan from it.

          Section 9.09 Interest Rate Limitation. Notwithstanding anything herein
to the contrary, if at any time the applicable interest rate, together with all
fees and charges which are treated as interest under applicable law
(collectively the "Charges"), as provided for herein or in any other Loan
Document, or otherwise contracted for, charged, received, taken or reserved by
any Lender, shall exceed the maximum lawful rate (the "Maximum Rate") which may
be contracted for, charged, taken, received or reserved by such Lender in
accordance with applicable law, the rate of interest payable with respect to
each Loan owing to each Lender, together with all Charges payable to such
Lender, shall be limited to the Maximum Rate.
<PAGE>
                                                                              72

          Section 9.10 Entire Agreement. This Agreement and the other Loan
Documents and the letter agreements referred to in Section 2.04(b) (with respect
to the payment of fees only) constitute the entire contract between the parties
relative to the subject matter hereof. Any previous agreement among the parties
with respect to the subject matter hereof is superseded by this Agreement and
the other Loan Documents. Nothing in this Agreement or in the other Loan
Documents, expressed or implied, is intended to confer upon any party other than
the parties hereto and thereto any rights, remedies, obligations or liabilities
under or by reason of this Agreement or the other Loan Documents.

          Section 9.11 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF,
UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS.
EACH PARTY HERETO (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY
OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B)
ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, AS APPLICABLE, BY, AMONG OTHER
THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.11.

          Section 9.12 Severability. In the event any one or more of the
provisions contained in this Agreement or in any other Loan Document should be
held invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions contained herein and therein
shall not in any way be affected or impaired thereby. The parties shall endeavor
in good-faith negotiations to replace the invalid, illegal or unenforceable
provisions with valid provisions the economic effect of which comes as close as
possible to that of the invalid, illegal or unenforceable provisions.

          Section 9.13 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract, and shall become
effective as provided in Section 9.03.

          Section 9.14 Headings. The cover page, the Article and Section
headings and the Table of Contents used herein are for convenience of reference
only, are not part of this Agreement and are not to affect the construction of,
or to be taken into consideration in interpreting, this Agreement.

          Section 9.15 Jurisdiction; Consent to Service of Process. (a) Each of
the Borrowers hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
Federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this Agreement or the other Loan Documents, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State or, to the extent
permitted by law, in such Federal
<PAGE>
                                                                              73

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 Agreement shall affect any right that any Lender, the
Administrative Agent, any Swing Line Bank or any Fronting Bank may otherwise
have to bring any action or proceeding relating to this Agreement or the other
Loan Documents against either Borrower or its properties in the courts of any
jurisdiction.

          (b) Each of the Borrowers hereby irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection which it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement or the other
Loan Documents in any New York State or Federal court located in New York City.
Each of the parties hereto hereby irrevocably waives, to the fullest extent
permitted by law, the defense of an inconvenient forum to the maintenance of
such action or proceeding in any such court.

          (c) Each of the Borrowers hereby irrevocably designates, appoints and
empowers CT Corporation System, Inc. presently located at 111 Eighth Avenue, New
York, New York 10011, as its designee, appointee and attorney-in-fact to
receive, accept and acknowledge for and on its behalf, and in respect of its
property, service of any and all legal process, summons, notices and documents
which may be served in any such action or proceeding. If for any reason such
designee, appointee and attorney-in-fact shall cease to be available to act as
such, each Borrower agrees to designate a new designee, appointee and
attorney-in-fact in New York City on the terms and for purposes of this
provision satisfactory to the Administrative Agent. Each party to this Agreement
irrevocably consents to service of process in the manner provided for notices in
Section 9.01. Nothing in this Agreement will affect the right of any party to
this Agreement to serve process in any other manner permitted by law.

          Section 9.16 Domicile of Loans. Each Lender may transfer and carry its
Loans at, to or for the account of any office, subsidiary or Affiliate of such
Lender.

          Section 9.17 Restricted and Unrestricted Subsidiaries. (a) Set forth
on Schedule 3.08 Part I is a list of all of the Restricted Subsidiaries and
Unrestricted Subsidiaries of Weyerhaeuser as of the Closing Date.

          (b) Set forth on Schedule 3.08 Part II is a list of all of the
Restricted Subsidiaries and Unrestricted Subsidiaries of WRECO as of the Closing
Date.

          (c) After the Closing Date, a Financial Officer of Weyerhaeuser may,
provided that no Default or Event of Default has occurred and is continuing,
designate a Restricted Subsidiary as an Unrestricted Subsidiary by notice sent
to all of the Lenders, provided that (i) no such designation shall be effective
unless immediately after giving effect thereto there would exist no Default or
Event of Default; (ii) any such designation shall be effective not less than
five Business Days after written notice thereof shall have been provided to each
Lender; and (iii) upon such designation, Schedule 3.08 Part I shall be deemed to
be amended to reflect such designation. Any Person that becomes a Subsidiary (by
formation, acquisition, merger or otherwise) after the Closing Date shall
automatically be deemed to be a Restricted Subsidiary of
<PAGE>
                                                                              74

Weyerhaeuser as of the date it becomes a Subsidiary unless designated as an
Unrestricted Subsidiary pursuant to the terms hereof.

          (d) After the Closing Date, a Financial Officer of Weyerhaeuser may,
provided that no Default or Event of Default has occurred and is continuing,
designate an Unrestricted Subsidiary as a Restricted Subsidiary by notice sent
to all of the Lenders, provided that (w) no such designation shall be effective
unless immediately after giving effect thereto there would exist no Default or
Event of Default; (x) no such designation shall be effective unless immediately
after giving effect thereto Weyerhaeuser is in compliance with Sections 6.01(d)
and 6.01(e); (y) any such designation shall be effective not less than five
Business Days after written notice thereof shall have been provided to each
Lender; and (z) upon such designation, Schedule 3.08 Part I shall be deemed to
be amended to reflect such designation.

          (e) After the Closing Date, any Subsidiary of WRECO (i) which is
organized and existing under the laws of the United States or any state of the
United States, Puerto Rico or the Dominion of Canada or any province thereof and
(ii) of which substantially all of the physical properties are located, and
substantially all of the business is carried on, in the United States of
America, Puerto Rico or Canada may, provided that no Default or Event of Default
has occurred and is continuing, be designated as a Restricted Subsidiary by
WRECO, subject to the limitations described in Subsection 9.17(f) below. Any
Person that becomes a Subsidiary of WRECO (by formation, acquisition, merger or
otherwise) after the Closing Date shall automatically be deemed to be an
Unrestricted Subsidiary of WRECO as of the date it becomes a Subsidiary unless
designated as a Restricted Subsidiary pursuant to the terms hereof.

          (f) After the Closing Date, Weyerhaeuser may, provided that no Default
or Event of Default has occurred and is continuing, cause a Financial Officer of
WRECO to designate an Unrestricted Subsidiary as a Restricted Subsidiary by
notice sent to all of the Lenders, provided that (v) such Subsidiary satisfies
the requirements of Subsection 9.17(e) above; (w) no such designation shall be
effective unless immediately after giving effect thereto there would exist no
Default or Event of Default; (x) WRECO could incur at least $1 of additional
Senior Debt under Subsection 6.02(b); (y) any such designation shall be
effective not less than five Business Days after written notice thereof shall
have been provided to each Lender; and (z) upon such designation, Schedule 3.08
Part II shall be deemed to be amended to reflect such designation.

          (g) After the Closing Date, Weyerhaeuser may, provided that no Default
or Event of Default has occurred and is continuing, cause a Financial Officer of
WRECO to designate a Restricted Subsidiary as an Unrestricted Subsidiary by
notice sent to all of the Lenders, provided that (v) no such designation shall
be effective unless immediately after giving effect thereto there would exist no
Default or Event of Default; (w) WRECO could incur at least $1 of additional
Senior Debt under Subsection 6.02(b); (x) the aggregate amount of Real Estate
Assets owned by all Subsidiaries of WRECO, determined on a consolidated basis,
which have been or are to be, as the case may be, designated as Unrestricted
Subsidiaries during the 365 consecutive days ending on and including the
effective date of such proposed designation, shall not exceed 15% of the
aggregate amount of Real Estate Assets owned by WRECO and its Restricted
Subsidiaries as of the beginning of such 365 day period; (y) any such
designation shall be effective not less than five Business Days after written
notice thereof shall have been
<PAGE>
                                                                              75

provided to each Lender; and (z) upon such designation, Schedule 3.08 Part II
shall be deemed to be amended to reflect such designation.

          Section 9.18 USA PATRIOT Act. Each Lender hereby notifies each
Borrower that pursuant to the requirements of the USA Patriot Act (Title III of
Pub. L. 107-56 (signed into law October 26, 2001)) (the "Act"), it is required
to obtain, verify and record information that identifies each Borrower, which
information includes the name and address of such Borrower and other information
that will allow such Lender to identify such Borrower in accordance with the
Act.

                              [Signatures follow.]
<PAGE>
          IN WITNESS WHEREOF, the Borrowers, the Administrative Agent, the Swing
Line Banks, the Initial Fronting Banks and the Lenders have caused this
Agreement to be duly executed by their respective authorized officers as of the
day and year first above written.

                                  WEYERHAEUSER COMPANY, as Borrower

                                  By: /s/ Jeffrey W. Nitta
                                      ------------------------------------------
                                      Name: Jeffrey W. Nitta
                                      Title: Vice President and Treasurer

                                  WEYERHAEUSER REAL ESTATE COMPANY,
                                  as Borrower

                                  By: /s/ Jeffrey W. Nitta
                                      ------------------------------------------
                                      Name: Jeffrey W. Nitta
                                      Title: Vice President and Treasurer

                       [Credit Agreement - Signature Page]
<PAGE>
                                  JPMORGAN CHASE BANK, N.A.,
                                  individually and as an Initial Fronting Bank,
                                  a Swing Line Bank and the Administrative Agent

                                  By: /s/ William P. Rindfuss
                                      ------------------------------------------
                                      Name: William P. Rindfuss
                                      Title: Vice President

                       [Credit Agreement - Signature Page]
<PAGE>
                                  CITIBANK, N.A., individually and as an Initial
                                  Fronting Bank, a Swing Line Bank and the
                                  Syndication Agent

                                  By: /s/ Daniel J. Brill
                                      ------------------------------------------
                                      Name: Daniel J. Brill
                                      Title: Managing Director

                       [Credit Agreement - Signature Page]
<PAGE>
                                  BANK OF AMERICA, N.A., individually and as a
                                  Documentation Agent

                                  By: /s/ Michael L. Letson, Jr.
                                      ------------------------------------------
                                      Name: Michael L. Letson, Jr.
                                      Title: Vice President

                       [Credit Agreement - Signature Page]
<PAGE>
                                  DEUTSCHE BANK SECURITIES INC., as a
                                  Documentation Agent

                                  By: /s/ Christian Dallwitz
                                      ------------------------------------------
                                      Name: Christian Dallwitz
                                      Title: Director

                                  By: /s/ Rolf-Peter Mikolayczyk
                                      ------------------------------------------
                                      Name: Rolf-Peter Mikolayczyk
                                      Title: Managing Director

                       [Credit Agreement - Signature Page]
<PAGE>
                                  DEUTSCHE BANK AG NEW YORK BRANCH,
                                  as a Lender

                                  By: /s/ Michael Dietz
                                      ------------------------------------------
                                      Name: Michael Dietz
                                      Title: Director

                                  By: /s/ Christian Dallwitz
                                      ------------------------------------------
                                      Name: Christian Dallwitz
                                      Title: Director

                       [Credit Agreement - Signature Page]
<PAGE>
                                  THE BANK OF TOKYO-MITSUBISHI, LTD.,
                                  individually and as a Documentation Agent

                                  By: /s/ Tsuneto Kodama
                                      ------------------------------------------
                                      Name: Tsuneto Kodama
                                      Title: General Manager

                       [Credit Agreement - Signature Page]
<PAGE>
                                  MORGAN STANLEY BANK, individually and as
                                  a Co-Documentation Agent

                                  By: /s/ Daniel Twenge
                                      ------------------------------------------
                                      Name: Daniel Twenge
                                      Title: Vice President

                       [Credit Agreement - Signature Page]
<PAGE>
                                  LENDERS

                                  COBANK, ACB, as a Lender

                                  By: /s/ Michael Tqusignant
                                      ------------------------------------------
                                      Name: Michael Tqusignant
                                      Title: Vice President

                       [Credit Agreement - Signature Page]
<PAGE>
                                  LENDERS

                                  THE BANK OF NOVA SCOTIA, as a Lender

                                  By: /s/ Patrick G. Norris
                                      ------------------------------------------
                                  Name: Patrick G. Norris
                                  Title: Director

                                       1
<PAGE>
                                  LENDERS

                                  CIBC INC., as a Lender

                                  By: /s/ Geraldine Kerr
                                      ------------------------------------------
                                  Name: Geraldine Kerr
                                  Title: Executive Director

                                       2
<PAGE>
                                  LENDERS

                                  PNC BANK, NATIONAL ASSOCIATION, as a
                                  Lender

                                  By: /s/ Philip K. Liebscher
                                      ------------------------------------------
                                  Name: Philip K. Liebscher
                                  Title: Vice President

                                       3
<PAGE>
                                  LENDERS

                                  WACHOVIA BANK, N.A., as a Lender

                                  By: /s/ Shawn Janko
                                      ------------------------------------------
                                  Name: Shawn Janko
                                  Title: Vice President

                                       4
<PAGE>
                                  LENDERS

                                  COOPERATIEVE CENTRALE RAIFFEISEN
                                  BOERENLEENBANK, B.A. "RABOBANK
                                  NEDERLAND," NEW YORK BRANCH, as a
                                  Lender

                                  By: /s/ Andrew Sherman
                                      ------------------------------------------
                                  Name: Andrew Sherman
                                  Title: Executive Director

                                  By: /s/ Edward J. Peyser
                                      ------------------------------------------
                                  Name: Edward J. Peyser
                                  Title: Managing Director

                                       5
<PAGE>
                                  LENDERS

                                  SUMITOMO MITSUI BANKING CORPORATION,
                                  as a Lender

                                  By: /s/ Al Galluzzo
                                      ------------------------------------------
                                  Name: Al Galluzzo
                                  Title: Senior Vice President

                                       6
<PAGE>
                                  LENDERS

                                  WELLS FARGO BANK, N.A., as a Lender

                                  By: /s/ Steven J. Anderson
                                      ------------------------------------------
                                  Name: Steven J. Anderson
                                  Title: Senior Vice President

                                       7
<PAGE>
                                  LENDERS

                                  UFJ BANK LIMITED, as a Lender

                                  By: /s/ Toshiko Boyd
                                      ------------------------------------------
                                  Name: Toshiko Boyd
                                  Title: Vice President

                                       8
<PAGE>
                                  LENDERS

                                  MELLON BANK, N.A., as a Lender

                                  By: /s/ David B. Wirl
                                      ------------------------------------------
                                  Name: David B. Wirl
                                  Title: Vice President

                                       9
<PAGE>
                                  LENDERS

                                  ROYAL BANK OF CANADA, as a Lender

                                  By: /s/ Dustin Craven
                                      ------------------------------------------
                                  Name: Dustin Craven
                                  Title: Attorney-in-Fact

                                       10
<PAGE>
                                  LENDERS

                                  AUSTRALIA AND NEW ZEALAND
                                  BANKING GROUP LIMITED, as a Lender

                                  By: /s/ John W. Wade
                                      ------------------------------------------
                                  Name: John W. Wade
                                  Title: Director

                                       11
<PAGE>
                                  LENDERS

                                  KBC BANK N.V., as a Lender

                                  By: /s/ Eric Raskin
                                      ------------------------------------------
                                  Name: Eric Raskin
                                  Title: Vice President

                                  By: /s/ Robert Snauffer
                                      ------------------------------------------
                                  Name: Robert Snauffer
                                  Title: First Vice President

                                       12
<PAGE>
                                  LENDERS

                                  U.S. BANK NATIONAL ASSOCIATION,
                                  as a Lender

                                  By: /s/ James R. Farmer
                                      ------------------------------------------
                                  Name: James R. Farmer
                                  Title: Vice President

                                       13
<PAGE>
                                  LENDERS

                                  WESTPAC BANKING CORPORATION,
                                  as a Lender

                                  By: /s/ Robert Bosse
                                      ------------------------------------------
                                  Name: Robert Bosse
                                  Title: Vice President

                                       14
<PAGE>
                                  LENDERS

                                  CAJA MADRID, as a Lender

                                  By: /s/ Ana Martin Lareu
                                      ------------------------------------------
                                  Name: Ana Martin Lareu
                                  Title: Head of International Origination &
                                  Syndication

                                  By: /s/ Raquel Pascua Pascua
                                      ------------------------------------------
                                  Name: Raquel Pascua Pascua
                                  Title: Relationship Manager Corporate Banking

                                       15<PAGE>

                                                                    Exhibit 10.1

                          AGREEMENT AND PLAN OF MERGER

                                  by and among

                             GENIUS PRODUCTS, INC.,

                            GENIUS ACQUISITION CORP.,

                           AMERICAN VANTAGE COMPANIES

                                       AND

                       AMERICAN VANTAGE MEDIA CORPORATION

                           Dated as of March 21, 2005

<PAGE>

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>                                                                                    <C>
ARTICLE 1.               The Merger; Effective Time..............................       1
          1.1       The Merger...................................................       1
          1.2       Effective Time...............................................       1
          1.3       The Surviving Corporation....................................       2
          1.4       Treatment of Shares..........................................       2
          1.5       Closing......................................................       3
ARTICLE 2.               REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY....       3
          2.1       Assets and Liabilities at Closing............................       3
          2.2       Organization and Qualification; Subsidiaries.................       4
          2.3       Capitalization of the Company and Its Subsidiaries...........       4
          2.4       Authority Relative to This Agreement.........................       5
          2.5       SEC Reports; Financial Statements............................       6
          2.6       No Undisclosed Liabilities...................................       7
          2.7       Absence of Changes...........................................       7
          2.8       Governmental Approvals.......................................       9
          2.9       Consents and Defaults........................................      10
          2.10      Real Property................................................      10
          2.11      Litigation...................................................      11
          2.12      Compliance with Applicable Law; Permits......................      11
          2.13      Employee Plans...............................................      12
          2.14      Labor Matters................................................      13
          2.15      Environmental Matters........................................      14
          2.16      Tax Matters..................................................      15
          2.17      Insurance....................................................      18
          2.18      Material Company Contracts...................................      18
          2.19      Intellectual Property; Film Library..........................      19
          2.20      Opinion of Company Financial Advisor.........................      21
          2.21      Brokers......................................................      21
          2.22      Accredited Investor; Legend..................................      21
          2.23      Books and Records............................................      22
ARTICLE 3.               REPRESENTATIONS AND WARRANTIES OF PURCHASER.............      23
          3.1       Organization and Qualification...............................      23
          3.2       Capitalization of Purchaser..................................      23
          3.3       Authority Relative to This Agreement.........................      24
          3.4       SEC Reports; Financial Statements............................      25
          3.5       No Undisclosed Liabilities...................................      26
          3.6       Absence of Changes...........................................      26
          3.7       Governmental Approvals.......................................      28
          3.8       Consents and Defaults........................................      28
</TABLE>

                                        i
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>                                                                                    <C>
           3.9      Litigation...................................................      28
          3.10      Compliance with Applicable Law; Permits......................      28
          3.11      Tax Matters..................................................      29
          3.12      Intellectual Property........................................      30
          3.13      Brokers......................................................      31
          3.14      Material Company Contracts...................................      31
ARTICLE 4.               PRE-CLOSING COVENANTS...................................      31
          4.1       Conduct of Business by the Company Pending the Merger........      31
          4.2       Conduct of Business by Purchaser Pending the Merger..........      34
          4.3       Intercompany Accounts and Contracts; Upstream Guaranties.....      35
          4.4       No Solicitation..............................................      35
          4.5       Certain Notifications........................................      36
          4.6       Updating the Disclosure Schedules............................      36
          4.7       Access to Information........................................      36
          4.8       Best Efforts.................................................      37
          4.9       Consents.....................................................      37
ARTICLE 5.               POST-CLOSING COVENANTS..................................      37
          5.1       Resale and Voting of Purchaser Common Stock..................      37
          5.2       Company Intellectual Property................................      37
          5.3       Cooperation..................................................      37
          5.4       Limited Power of Attorney....................................      38
          5.5       Nondisclosure................................................      38
          5.6       Post-Closing Employee Benefits...............................      38
          5.7       Compliance with Legal Requirements and Other Obligations.....      39
          5.8       No Benefit to Seller Employees Intended......................      39
          5.9       Satisfaction of Certain Permitted Encumbrances...............      39
ARTICLE 6.               TAX COVENANTS AND INDEMNIFICATION.......................      39
          6.1       Preparation of Returns and Payment of Taxes..................      39
          6.2       Access to Records Pre-Closing................................      39
          6.3       Tax Sharing Agreements.......................................      40
          6.4       Access to Records Following Closing..........................      40
          6.5       Seller's Indemnification.....................................      40
          6.6       Purchaser's Indemnification..................................      41
ARTICLE 7.               CONDITIONS TO CLOSING...................................      41
          7.1       Conditions to Purchaser's Obligation to Close................      41
          7.2       Conditions to Seller's Obligation to Close...................      42
          7.3       Conditions to Obligations of Each Party to Close.............      43
ARTICLE 8.               TERMINATION.............................................      43
</TABLE>

                                       ii
<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                       PAGE
                                                                                       ----
<S>                                                                                    <C>
          8.1       Circumstances for Termination................................      43
          8.2       Effect of Termination........................................      44
          8.3       Fees for Termination.........................................      44
ARTICLE 9.               INDEMNIFICATION.........................................      44
          9.1       Survival of Representations and Warranties...................      44
          9.2       Indemnification by Seller....................................      44
          9.3       Indemnification by Purchaser.................................      45
          9.4       Procedures for Indemnification...............................      45
          9.5       Limitations on Indemnification...............................      45
          9.6       Remedies Cumulative..........................................      46
ARTICLE 10.              MISCELLANEOUS PROVISIONS.................................     46
          10.1      Expenses.....................................................      46
          10.2      Interpretation...............................................      47
          10.3      Further Assurances...........................................      47
          10.4      Entire Agreement.............................................      47
          10.5      Amendment, Waivers and Consents..............................      47
          10.6      Successors and Assigns.......................................      47
          10.7      Governing Law................................................      47
          10.8      Jurisdiction; Waiver of Jury Trial...........................      47
          10.9      Rules of Construction........................................      48
          10.10     Severability.................................................      48
          10.11     Exhibits.....................................................      48
          10.12     Notices......................................................      48
          10.13     Rights of Parties............................................      49
          10.14     Counterparts.................................................      49
</TABLE>

                                      iii
<PAGE>

                             EXHIBITS AND SCHEDULES

<TABLE>
<CAPTION>
Exhibits
-------------
<S>                  <C>
Exhibit A            Certain Definitions
Exhibit B            Form of Registration Rights Agreement
Exhibit C            Form of Resale and Voting Agreement
Exhibit D            Form of Warrants
Exhibit E            Form of Escrow Agreement
Exhibit F            Form of Assumption of Obligations and Pledge Agreement
Exhibit G            Form of Assignment, Assumption and Pledge Agreement
Exhibit 7.1(d)       Form of Opinion of Seller's Counsel
Exhibit 7.2(d)       Form of Opinion of Purchaser's Counsel

Schedules

Schedule 2           Company Disclosure Schedule
Schedule 3           Purchaser Disclosure Schedule
</TABLE>

                                       i
<PAGE>

                          AGREEMENT AND PLAN OF MERGER

      THIS AGREEMENT AND PLAN OF MERGER (the "Agreement") is entered into as of
March 21, 2005, by and among GENIUS PRODUCTS, INC., a Delaware corporation
("Purchaser"), GENIUS ACQUISITION CORP., a Nevada corporation and wholly-owned
subsidiary of Purchaser ("Merger Sub"), AMERICAN VANTAGE COMPANIES, a Nevada
corporation ("Seller"), and AMERICAN VANTAGE MEDIA CORPORATION, a Nevada
corporation and wholly-owned subsidiary of Seller (the "Company"). Certain
capitalized terms in this Agreement are defined in Exhibit A.

                                    RECITALS

      A. The Board of Directors of Purchaser, Merger Sub, Seller and the Company
each have determined that it is in the best interests of their respective
shareholders for Purchaser to acquire the Company by the merger of Merger Sub
with and into the Company upon the terms, and subject to the conditions, set
forth herein (the "Merger").

      B. For federal income tax purposes, it is intended that the Merger
constitute a reorganization under the provisions of Section 368 of the Internal
Revenue Code of 1986, as amended (the "Code"), and that this Agreement
constitute a plan of reorganization for purposes of Section 368 of the Code.

      C. At the Closing, each of Purchaser and Seller intend to enter into and
deliver (a) a Registration Rights Agreement in the form attached hereto as
Exhibit B (the "Registration Rights Agreement"); (b) a Resale and Voting
Agreement in the form attached hereto as Exhibit C (the "Resale and Voting
Agreement"); (c) an Escrow Agreement in the form attached hereto as Exhibit E
(the "Escrow Agreement"); (d) an Assumption of Obligations and Pledge Agreement
in the form attached hereto as Exhibit F (the "Assumption Agreement"); and (e)
an Assignment, Assumption and Pledge Agreement in the form attached hereto as
Exhibit G (the "Assignment Agreement").

                                    AGREEMENT

      Purchaser, Merger Sub, Seller and the Company, each intending to be
legally bound, agree as follows:

ARTICLE 1. THE MERGER; EFFECTIVE TIME

      1.1 THE MERGER. Subject to the terms and conditions of this Agreement, at
the Effective Time, Merger Sub shall be merged with and into the Company (the
"Merger"). At the Effective Time, the separate corporate existence of Merger Sub
shall cease and the Company shall continue as the surviving corporation
(sometimes referred to as the "Surviving Corporation") in the Merger as a
wholly-owned Subsidiary of Purchaser.

      1.2 EFFECTIVE TIME. Subject to the provisions of this Agreement, the
parties shall cause the Merger to be consummated by filing Articles of Merger
(the "Articles of Merger") with the Secretary of State of the State of Nevada in
such form as required by, and executed in accordance with, the relevant
provisions of the Nevada Revised Statutes ("NRS"), as soon as

<PAGE>

practicable on or after the Closing Date. The Merger shall become effective upon
the filing of such Articles of Merger with the Nevada Secretary of State, or at
such later time as agreed in writing by Purchaser and the Company and specified
in the Articles of Merger (the "Effective Time").

      1.3 THE SURVIVING CORPORATION

            (a) Articles of Incorporation. The Articles of Incorporation of the
Company as in effect at the Effective Time shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended in
accordance with applicable law.

            (b) Bylaws. The Bylaws of the Company as in effect at the Effective
Time shall be the Bylaws of the Surviving Corporation until thereafter amended
in accordance with applicable law.

            (c) Directors and Officers. The directors of the Company immediately
following the Effective Time shall consist of individuals appointed by
Purchaser, who shall be the initial directors of the Surviving Corporation and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualified in the manner provided in the Articles
of Incorporation and Bylaws of the Surviving Corporation, or as otherwise
provided by law. The officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation and shall hold
office from the Effective Time until removed or until their respective
successors are duly elected or appointed and qualified in the manner provided in
the Articles of Incorporation and Bylaws of the Surviving Corporation, or as
otherwise provided by law. (i) Immediately following the effectiveness of the
Merger, Stephen K. Bannon shall become co-chairman of the Board of Directors of
Purchaser; and (ii) immediately preceding the effectiveness of the Merger,
Stephen K. Bannon shall resign from all positions as an officer or director of
Seller.

            (d) Effects of the Merger. The Merger shall have the effects set
forth in Section 92A.250 of the NRS. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, all of the properties,
rights, privileges, powers and franchises of the Company and Merger Sub shall
vest in the Surviving Corporation, and all debts, liabilities and duties of the
Company and Merger Sub shall become the debts, liabilities and duties of the
Surviving Corporation.

      1.4 TREATMENT OF SHARES

            (a) At the Effective Time, by virtue of the Merger and without any
action on the part of the holders thereof, all outstanding shares of Company
Common Stock shall be converted in the aggregate into the right to receive (i)
7,000,000 shares of Purchaser Common Stock and (ii) warrants to purchase
1,400,000 shares of Purchaser Common Stock, half at an exercise price of $2.56
per share and half at an exercise price of $2.78 per share (collectively, the
"Warrants"), substantially in the form attached hereto as Exhibit D
(collectively, the "Merger Consideration"). As soon as reasonably practicable
following the Effective Time, (x) Seller will surrender certificates (the
"Company Stock Certificates") formerly representing all outstanding shares of
Company Common Stock to Purchaser for cancellation, and (y) Purchaser will issue

                                       2
<PAGE>

irrevocable instructions to its transfer agent (a copy of which will be provided
to Seller at the Effective Time) to promptly deliver to Seller stock
certificates evidencing the Merger Consideration in such denominations as Seller
shall reasonably request. Notwithstanding the immediately preceding two
sentences, of the shares of Purchaser Common Stock comprising the Merger
Consideration, (x) 600,000 shares (the "Escrowed Shares") shall be placed into,
held and thereafter released from escrow pursuant to and in accordance with the
Escrow Agreement, and (y) 700,000 shares (the "Pledged Shares") shall be held
and thereafter transferred to either Seller or Purchaser or sold, pursuant to
and in accordance with the Assumption Agreement.

            (b) The shares of Purchaser Common Stock issued in the Merger will
not be registered under the Securities Act. Such shares may not be transferred
or resold thereafter, except in compliance with the terms of this Agreement, the
Resale and Voting Agreement, and the Registration Rights Agreement, or following
registration under the Securities Act or in reliance on an exemption from
registration under the Securities Act.

            (c) The parties intend that no option, warrant or convertible
instrument of Seller will become exercisable or convertible for or into any
securities of Purchaser or the Surviving Corporation in connection with or
following the Merger.

      1.5 CLOSING. The closing of the Merger (the "Closing") will take place as
soon as practicable at a time and on a date to be specified by the parties (the
"Closing Date"), which shall be no later than the second business day after
satisfaction or waiver of the conditions set forth in Article 7 (other than
those conditions that by their nature are to be satisfied at the Closing, but
subject to the fulfillment or waiver of those conditions), at the offices of
Morrison & Foerster LLP, 555 West 5th Street, Suite 3500, Los Angeles,
California 90013, or at such other time, date or place as agreed to in writing
by the parties hereto.

ARTICLE 2. REPRESENTATIONS AND WARRANTIES OF SELLER AND COMPANY

      Except as specifically set forth in Schedule 2 (the "Company Disclosure
Schedule") attached to this Agreement (the parts of which are numbered to
correspond to the individual Section numbers of this Article 2), each of Seller
and the Company hereby represents and warrants to each of Purchaser and Merger
Sub as follows:

      2.1 ASSETS AND LIABILITIES AT CLOSING.

            (a) The direct or indirect subsidiaries of the Company are, and at
Closing will be, American Vantage/Hypnotic, Inc. ("Hypnotic"), Wellspring Media,
Inc. ("Wellspring") and Wellspring Productions, LLC (each a "Subsidiary", and
collectively, the "Subsidiaries"). Neither the Company nor any Subsidiary owns,
directly or indirectly, beneficially or of record, any shares of capital stock
or other securities of any entity or any investment in any entity, other than
the Subsidiaries.

            (b) At and immediately following the Closing, the Company and the
Subsidiaries, on a consolidated basis, will have (i) current balances of
principal and interest under the Permitted Encumbrances of not more than
$6,349,219 in the aggregate; (ii) those contingent liabilities set forth in
Schedule 2.1(b); (iii) no other liabilities or Encumbrances,

                                       3
<PAGE>

whether contingent or otherwise; and (iv) each item in the Company Film Library
and each Film License (as such terms are defined below).

            (c) At and immediately following the Closing, the only material
assets of Seller or its subsidiaries will consist of (i) an interest in the
Border Grill Restaurant; (ii) a pending lawsuit against the Table Mountain
Tribe; (iii) Ya Ya Media, Inc. ("YaYa"); (iv) the Merger Consideration; and (v)
cash in the bank accounts of the Company and Subsidiaries at the opening of
business on the date of this Agreement. The only furniture, fixtures and
equipment ("FFE") of Seller or its subsidiaries (other than the Company and the
Subsidiaries) that shall be retained by Seller following the Closing will
consist of such items located at Seller's Las Vegas, Nevada offices and
furniture and equipment owned by YaYa located at Seller's Santa Monica, CA
offices.

            (d) At and following the Closing, (i) Seller will release the
Company and its Subsidiaries from subleases and any other commitments or
obligations, if any, pertaining to the property located at 1819 and 1823
Colorado Avenue, Santa Monica, California (the "SM Lease"); and (ii) Seller will
be the sole lessee or sublessee under the outstanding lease for the property at
419 Park Ave. South, New York, NY (the "NY Lease"), that was occupied prior to
the Closing by Wellspring. Seller agrees to indemnify and hold harmless the
Purchaser and its subsidiaries from and against any and all losses, claims,
actions, damages, liabilities and expenses arising under either the SM Lease or
NY Lease and related to the period following the Closing.

            (e) Following the Closing, (i) Seller will allow Purchaser access to
and use of the property covered by the NY Lease for a transitional period of 90
days at Seller's actual cost for the property; and (ii) Seller will allow
Purchaser reasonable access to the property covered by the SM Lease to remove
FFE owned by the Company or the Subsidiaries located at such property during the
ten days following the Closing. Failure to vacate the property covered by the NY
Lease at the expiration of 90 days will result in Purchaser being obligated for
1.5 times Seller's actual cost under the NY Lease.

      2.2 ORGANIZATION AND QUALIFICATION; SUBSIDIARIES.

            (a) Each of the Company and each Subsidiary is a corporation or
legal entity duly organized, validly existing and in good standing under the
applicable Legal Requirements of the jurisdiction of its incorporation or
organization and has all requisite corporate, partnership or similar power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted.

            (b) Each of the Company and each Subsidiary is duly qualified or
licensed and in good standing to do business in each jurisdiction in which the
property owned, leased, or operated by it or the nature of the business
conducted by it makes such qualification or licensing necessary, except where
the failure to be so duly qualified or licensed and in good standing is not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and the Subsidiaries taken as a whole.

                                       4
<PAGE>

            (c) The Company has heretofore delivered to Purchaser accurate and
complete copies of the Company's articles of incorporation and bylaws, as
currently in effect. The Company has heretofore delivered to Purchaser accurate
and complete copies of the charter, articles of incorporation or organization,
bylaws, and operating agreement (or other similar organizational and governing
instruments), as currently in effect, of each of the Subsidiaries.

      2.3 CAPITALIZATION OF THE COMPANY AND ITS SUBSIDIARIES.

            (a) The authorized capital stock of the Company consists of 750,000
shares of common stock, par value $0.10 per share ("Company Common Stock"), of
which 100 shares are issued and outstanding as of the date hereof ("Company
Issued Shares"), all of which are owned beneficially and of record by Seller.
All of the Company Issued Shares are duly authorized, validly issued, fully paid
and non-assessable and are free of preemptive rights.

            (b) Except as set forth in this Section 2.3, as of the date hereof,
there are no issued or outstanding (i) shares of capital stock or other voting
securities of the Company; (ii) securities convertible into or exchangeable for
shares of capital stock or voting securities of the Company; (iii) options or
other rights to acquire, or obligations of the Company or any of the
Subsidiaries to issue, any capital stock, voting securities, or securities
convertible into or exchangeable for capital stock or voting securities of the
Company; (iv) equity equivalents, interests in the ownership or earnings of the
Company, or other similar rights (including stock appreciation rights); (v)
outstanding obligations of the Company or any of the Subsidiaries to repurchase,
redeem or otherwise acquire any securities of the Company. There are no
stockholder agreements, voting trusts or other agreements or understandings to
which the Company or any of the Subsidiaries is a party or to which it is bound
relating to the voting of any shares of capital stock of the Company or any
Subsidiary.

            (c) All of the outstanding capital stock of the Company's
Subsidiaries is owned by the Company, directly or indirectly, free and clear of
any Encumbrance or any other limitation or restriction (including, without
limitation, any restriction on the right to vote or sell the same) except for
the Permitted Encumbrances and as may otherwise be provided under applicable
Legal Requirements. There are no debt or equity securities of the Company or the
Subsidiaries convertible into or exchangeable for, no options or other rights to
acquire from the Company or the Subsidiaries, and no other contract,
understanding, arrangement, or obligation (whether or not contingent) providing
for the issuance or sale, directly or indirectly of, any capital stock or other
ownership interests in, or any other securities of, any Subsidiary of the
Company. There are no outstanding contractual obligations of the Company or the
Subsidiaries to repurchase, redeem, or otherwise acquire any outstanding shares
of capital stock or other ownership interests in any Subsidiary of the Company.

      2.4 AUTHORITY RELATIVE TO THIS AGREEMENT.

            (a) Each of Seller and the Company has all necessary corporate power
and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and no other corporate proceedings on the part
of either of Seller or the Company are necessary to authorize this Agreement or
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and

                                       5
<PAGE>

delivered by each of Seller and the Company and constitutes a valid, legal, and
binding agreement of each of Seller and the Company, enforceable against each of
them in accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and similar Legal Requirements
affecting creditors' rights and remedies generally, and subject, as to
enforceability, to general principles of equity, including principles of
commercial reasonableness, good faith and fair dealing (regardless of whether
enforcement is sought in a proceeding at law or in equity).

            (b) The Board of Directors of the Company (the "Company Board"), by
the requisite vote of those present (who constituted 100% of the directors then
in office), with no dissenting votes, has (i) duly and validly authorized the
execution and delivery of this Agreement and approved the consummation of the
transactions contemplated hereby, taken all corporate actions required to be
taken by the Company Board for the consummation of the transactions contemplated
hereby, including the Merger; and (ii) resolved (A) that this Agreement and the
transactions contemplated hereby, including the Merger, taken together, are
advisable and fair to, and in the best interests of, the Company and its sole
stockholder; and (B) to recommend that the sole stockholder of the Company
approve and adopt this Agreement and approve the Merger.

            (c) The Board of Directors of Seller (the "Seller Board"), by the
requisite vote of those present, has (i) duly and validly authorized the
execution and delivery of this Agreement and approved the consummation of the
transactions contemplated hereby, (ii) taken all corporate actions required to
be taken by the Seller Board for the consummation of the transactions
contemplated hereby, including the Merger, and (iii) resolved that this
Agreement and the transactions contemplated hereby, including the Merger, taken
together, are advisable and fair to, and in the best interests of, Seller and
its stockholders.

            (d) Seller, in its capacity as the sole stockholder of the Company,
has approved and adopted this Agreement and approved the Merger.

            (e) The approval of this Agreement or the Merger by the stockholders
of Seller is not required under any Legal Requirement applicable to Seller or
under its articles of incorporation or bylaws.

            (f) No shareholder of Seller is entitled to any dissenters or
appraisal rights in such capacity due to or arising out of this Agreement or the
transactions contemplated hereby.

      2.5 SEC REPORTS; FINANCIAL STATEMENTS.

            (a) The Company has previously delivered to Purchaser (i) the
preliminary, unaudited consolidated balance sheets ("Company Balance Sheet"),
and related statements of operations and cash flows (together with the Company
Balance Sheet, the "Company Financial Statements") of the Company and the
Subsidiaries, as of and for the fiscal year ending December 31, 2004 (the
"Company Balance Sheet Date"); and (ii) an accurate, correct and complete
breakdown and aging, as of February 28, 2005, of each of the Company's (A)
accounts payable (including to all of its suppliers) and (B) accounts
receivable, in each case in an amount greater than $10,000. No material portion
of such accounts receivable is other than (i) to the knowledge of Seller and the
Company, a valid and legally binding obligation of the account

                                       6
<PAGE>

debtor enforceable in accordance with its terms, free and clear of all
Encumbrances, and not subject to setoffs, adverse claims, counterclaims,
assessments, defaults, prepayments, defenses, and conditions precedent; (ii) a
true and correct statement of the account for items actually sold and delivered
to, or for services actually performed for and accepted by, such account debtor;
and (iii) to the knowledge of Seller and the Company, fully collectible, subject
to trade discounts provided in the ordinary course of business and any allowance
for doubtful accounts and sales returns contained in the Company Balance Sheet.

            (b) Since January 1, 2002, Seller has filed all forms, reports and
documents with the SEC required to be filed by it under the Securities Act and
the Exchange Act (collectively, the "Seller SEC Reports"), each of which
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each as in effect on the dates such Seller
SEC Reports were filed. None of the Seller SEC Reports contained, when filed,
any untrue statement of a material fact or omitted to state a material fact
required to be stated or incorporated by reference therein or necessary in order
to make the statements therein, in light of the circumstances under which they
were made, not misleading, except to the extent amended prior to the date hereof
by a subsequently filed Seller SEC Report. The consolidated financial statements
of Seller and any separate financial information relating to the Company
included in the Seller SEC Reports (the "Seller Filed Financial Statements")
complied as to form in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC in respect
thereof.

            (c) Each of the Company Financial Statements and the Seller Filed
Financial Statements (i) are true, accurate and complete in all respects; (ii)
are consistent with the books and records of Seller; (iii) present fairly and
accurately the financial condition of Seller and the Company, as appropriate, as
of the respective dates thereof and the results of operations, changes in
stockholder's equity and cash flows of each of them for the periods covered
thereby; and (iv) have been prepared in accordance with GAAP, applied on a
consistent basis throughout the periods covered; provided, however, that the
Company Balance Sheet may not contain all of the footnotes required by GAAP, and
may be subject to normal adjustments consistent with past practice which are not
material individually or in the aggregate. All reserves established by the
Company and set forth in the Company Financial Statements are adequate for the
purposes for which they were established.

            (d) Since the Company Balance Sheet Date, there has not been any
change, or any application or request for any change, by the Company or any of
the Subsidiaries in accounting principles, methods or policies for financial
accounting purposes, other than as a result of any changes under GAAP or other
relevant accounting principles.

            (e) Seller is in compliance with the provisions of the
Sarbanes-Oxley Act of 2002 ("SOX") applicable to it as of the date hereof.

            (f) At February 28, 2005, the Company's consolidated (A) accounts
payable (including to all of its suppliers) was no more than $5,275,000 and (B)
accounts receivable was no less than $4,531,000.

                                       7
<PAGE>

      2.6 NO UNDISCLOSED LIABILITIES. There are no material liabilities of the
Company or any of the Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, which are required
to be reflected in its financial statements (or in the notes thereto) in
accordance with GAAP, other than: (a) liabilities disclosed, provided for or
reserved against in the Company Balance Sheet or in the notes thereto; (b)
liabilities arising in the ordinary course of business after the Company Balance
Sheet Date or which arose in the ordinary course of business prior to the
Company Balance Sheet Date but were not required to be disclosed, provided for
or reserved against in the Company Balance Sheet; (c) liabilities disclosed in
the Seller SEC Reports prior to the date hereof; and (d) liabilities arising
under this Agreement.

      2.7 ABSENCE OF CHANGES. Except as contemplated by this Agreement or as
disclosed in the Seller SEC Reports filed prior to the date hereof, since the
Company Balance Sheet Date, the Company and the Subsidiaries have conducted
their business in the ordinary and usual course consistent with past practice
and there has not been:

            (a) any event, occurrence or development which had or is reasonably
      expected to have, individually or in the aggregate, a Material Adverse
      Effect on the Company and the Subsidiaries taken as a whole;

            (b) any declaration, setting aside or payment of any dividend or
      other distribution in respect of any shares of capital stock of the
      Company or (except to the Company or other Subsidiaries) any Subsidiary,
      any split, combination or reclassification of any shares of capital stock
      of the Company or any Subsidiary, or any repurchase, redemption or other
      acquisition by the Company or any of the Subsidiaries of any securities of
      the Company or any of the Subsidiaries;

            (c) any amendment or change to the charter, certificate or articles
      of incorporation, operating agreement or bylaws (or other similar
      organizational or governing instrument) of the Company or any of the
      Subsidiaries, or any amendment of any term of any outstanding security of
      the Company or any of the Subsidiaries that would materially increase the
      obligations of the Company or any such subsidiary under such security;

            (d) (i) any incurrence or assumption by the Company or any of the
      Subsidiaries of any indebtedness for borrowed money other than under
      existing credit facilities (or any renewals, replacements or extensions
      that do not increase the aggregate commitments thereunder) except (A) in
      the ordinary and usual course of business consistent with past practice or
      (B) as permitted or required by Sections 4.1 or 4.2, or (ii) any
      guarantee, endorsement, or other incurrence or assumption of liability
      (whether directly, contingently or otherwise) by the Company or any of the
      Subsidiaries for the obligations of any other person (other than any
      wholly owned subsidiary of the Company), other than in the ordinary and
      usual course of business consistent with past practice;

            (e) any creation or assumption by the Company or any of the
      Subsidiaries of any Encumbrance on any material asset of the Company or
      any of the Subsidiaries other than in the ordinary and usual course of
      business consistent with past practice;

                                       8
<PAGE>

            (f) any making of any loan, advance or capital contribution to or
      investment in any person by the Company or any of the Subsidiaries other
      than (i) as permitted or required by Sections 4.1 or 4.2; (ii) loans,
      advances or capital contributions to or investments in wholly owned
      subsidiaries of the Company; (iii) loans or advances to employees of the
      Company or any of the Subsidiaries in the ordinary and usual course of
      business consistent with past practice; or (iv) extensions of credit to
      customers in the ordinary and usual course of business consistent with
      past practice;

            (g) any contract or agreement entered into by the Company or any of
      the Subsidiaries on or prior to the date hereof relating to any material
      acquisition or disposition of any assets or business, other than contracts
      or agreements in the ordinary and usual course of business consistent with
      past practice and those contemplated by this Agreement;

            (h) any modification, amendment, assignment, termination or
      relinquishment by the Company or any of the Subsidiaries of any contract,
      license or other right (including any insurance policy naming it as a
      beneficiary or a loss payable payee) that is reasonably expected to have a
      Material Adverse Effect, after taking into account the benefit of the
      consideration, if any, received in exchange for agreeing to such
      modification, amendment, assignment, termination or relinquishment, on the
      Company and the Subsidiaries taken as a whole;

            (i) any material change in any method of accounting or accounting
      principles or practice by the Company or any of the Subsidiaries, except
      for any such change required by reason of a change in GAAP, which change
      has been consistently applied;

            (j) any (i) grant of any severance or termination pay to any
      director, officer or employee of the Company or any of the Subsidiaries;
      (ii) entering into of any employment, deferred compensation, severance,
      consulting, termination or other similar agreement (or any change or
      amendment to any such existing agreement) with any director, officer,
      employee, agent or other similar representative of the Company or any of
      the Subsidiaries (collectively, "Company Employment Agreements") whose
      annual cash compensation exceeds $100,000, other than changes or
      amendments that (A) do not and will not result in increases, in the
      aggregate, of more than five percent in the salary, wages or other
      compensation of any such person and (B) are otherwise consistent with
      clause (iv) below; (iii) increase in benefits payable under any existing
      severance or termination pay policies or Company Employment Agreements; or
      (iv) increase in compensation, bonus or other benefits payable to
      directors, officers or employees of the Company or any of the Subsidiaries
      other than, in the case of clauses (ii) and (iv) only, increases prior to
      the date hereof in compensation, bonus or other benefits payable to
      directors, officers or employees of the Company or any of the Subsidiaries
      in the ordinary and usual course of business consistent with past practice
      or merit increases in salaries of employees at regularly scheduled times
      in customary amounts consistent with past practices;

            (k) any adoption, entering into, amendment, alteration or
      termination of (partially or completely) any Company Benefit Plan or
      Company Employee Arrangement, except

                                       9
<PAGE>

      as contemplated by this Agreement or to the extent required by applicable
      Legal Requirement or GAAP;

            (l) any entering into of any contract with an officer, director,
      employee, agent or other similar representative of the Company or any of
      the Subsidiaries (other than a Company Employment Agreement that is not
      terminable, without penalty or other liability, upon not more than sixty
      (60) calendar days' notice); or

            (m) any (i) making or revoking of any material election relating to
      Taxes; (ii) settlement or compromise of any material claim, action, suit,
      litigation, proceeding, arbitration, investigation, audit or controversy
      relating to Taxes; or (iii) change to any material methods of reporting
      income or deductions for federal income Tax purposes.

      2.8 GOVERNMENTAL APPROVALS. Except for the filing and acceptance for
record of the Articles of Merger as required by the NRS, and such other filings,
permits, consents and approvals which, if not obtained or made, are not
reasonably expected to have a Material Adverse Effect on the Company and the
Subsidiaries taken as a whole, no filing with or notice to, and no permit,
authorization, consent or approval of, any Governmental Authority is necessary
for the execution and delivery by the Company of this Agreement or the
consummation by the Company of the transactions contemplated hereby.

      2.9 CONSENTS AND DEFAULTS. Neither the Company nor any of the Subsidiaries
is in violation of any term of its charter, certificate or articles of
incorporation, bylaws or operating agreement (or other similar organizational or
governing instruments). The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby will not
(i) result in any violation of or conflict with, constitute a default under
(with or without due notice or lapse of time or both), require any consent,
waiver or notice under any term of (the "Consents"), or result in the reduction
or loss of any benefit or the creation or acceleration of any right or
obligation (including any termination rights) under, (A) the charter,
certificate or articles of incorporation, bylaws or operating agreement (or
other similar organizational or governing instruments) of the Company or any of
the Subsidiaries, (B) any Material Contract or Film License, (C) any other
material agreement, material note, material bond, material mortgage, material
indenture, material Contract, material lease, material Company Permit or other
material obligation or material right to which the Company or any of the
Subsidiaries is a party or by which any of the assets or properties of the
Company or any of the Subsidiaries is bound, or (D) subject to Section 2.8, any
applicable domestic or foreign Legal Requirements, except in the case of clauses
(B), (C) and (D) where any of the foregoing is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
the Subsidiaries taken as a whole after the Merger; or (ii) result in the
creation of (or impose any obligation on the Company or any of the Subsidiaries
to create) any Encumbrance upon any of the material assets or properties of the
Company or any of the Subsidiaries.

      2.10 REAL PROPERTY.

            (a) The Company has provided Purchaser with the address, general use
of, and period of ownership or occupancy of all of the real property that the
Company and the

                                       10
<PAGE>

Subsidiaries use or occupy or have the right to use or occupy, now or in the
future, pursuant to any lease, sublease, or other occupancy agreement (the
"Company Leased Facilities"). No real property is owned, leased, subleased or
used by the Company or the Subsidiaries in the course of their respective
businesses other than the Company Leased Facilities.

            (b) With respect to each Company Leased Facility:

                  (i) the Company has made available to Purchaser a true,
correct, and complete copy of the lease, sublease or other occupancy agreement
for such Company Leased Facility (and all modifications, amendments, and
supplements thereto and all side letters to which Company or any of the
Subsidiaries is a party affecting the obligations of any party thereunder) (each
such agreement is referred to herein as a "Company Real Property Lease");

                  (ii) the Company or its Subsidiary using or occupying such
Company Leased Facility has a good and valid leasehold interest in such Company
Leased Facility free and clear of all Encumbrances, except (x) Taxes and general
and special assessments not in default and payable without penalty and interest,
and (y) easements, covenants and other restrictions that do not materially
impair the current use, occupancy or value of the Company's or such Subsidiary's
interest in such real property;

                  (iii) to the Seller's and Company's knowledge, each Company
Real Property Lease constitutes the valid and legally binding obligation of the
parties thereto, enforceable in accordance with its terms, and is in full force
and effect;

                  (iv) all rent and other sums and charges payable by the
Company or its Subsidiary using or occupying such Company Leased Facility as
tenant under the Company Real Property Lease covering such Company Leased
Facility are current, and no event or condition giving rise to a right to
terminate or uncured default on the part of the tenant or, to the Seller's and
Company's knowledge, the landlord, exists under such Company Real Property
Lease. No party to such Company Real Property Lease has given written notice to
the Company or such Subsidiary or made a claim in writing against the Company or
such Subsidiary in respect of any breach or default thereunder; and

                  (v) neither the Company nor its Subsidiary using or occupying
such Company Leased Facility has assigned, transferred, conveyed, mortgaged,
deeded in trust or encumbered its leasehold interest in such Company Leased
Facility.

      2.11 LITIGATION. There is no suit, claim, action, proceeding or, to the
Seller's and Company's knowledge, investigation, pending or, to the Seller's and
Company's knowledge, threatened against the Company or any Subsidiary. None of
the Company or the Subsidiaries is subject to any outstanding order, writ,
injunction or decree which is reasonably expected to have, individually or in
the aggregate, a Material Adverse Effect on the Company and the Subsidiaries
taken as a whole. To the Seller's and Company's knowledge, there is no action,
suit, proceeding or investigation pending or threatened against any current or
former officer, director, employee or agent of the Company or any of the
Subsidiaries (in his or her capacity as such) which is reasonably expected to
give rise to a claim for contribution or indemnification against the Company or
any of the Subsidiaries.

                                       11
<PAGE>

      2.12 COMPLIANCE WITH APPLICABLE LAW; PERMITS. The Company and the
Subsidiaries hold all permits, licenses, variances, exemptions, orders, and
approvals of all Governmental Entities necessary for the lawful conduct of their
respective businesses ("Company Permits"), except for failures to hold such
permits, licenses, variances, exemptions, orders and approvals which are not
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company and the Subsidiaries taken as a whole. The Company
and the Subsidiaries are in compliance with the terms of the Company Permits,
except where the failure to comply is not reasonably expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company and
the Subsidiaries taken as a whole. The businesses and operations of the Company
and the Subsidiaries comply in all respects with all Legal Requirements
applicable to the Company or the Subsidiaries, except where the failure to so
comply is not reasonably expected to have, individually or in the aggregate, a
Material Adverse Effect on the Company and the Subsidiaries taken as a whole.

      2.13 EMPLOYEE PLANS.

            (a) Schedule 2.13(a) of the Company Disclosure Schedule sets forth a
true, correct, and complete list of:

                  (i) all "employee benefit plans," as defined in Section 3(3)
of ERISA, under which Seller, the Company or any of the Subsidiaries has any
obligation or liability, contingent or otherwise, including, but not limited to,
all severance plans or arrangements and any supplemental or U.S. non-qualified
retirement plans or arrangements (the "Company Benefit Plans"); and

                  (ii) all employment, consulting, termination, severance or
individual compensation agreements; all stock award, stock option, stock
purchase or other equity-based (including phantom stock or stock appreciation
rights) plans or arrangements; all bonus or other incentive compensation plans
or agreements; and all salary continuation or deferred compensation plans or
agreements; in each case, relating to any current or former employee of the
Company or any of the Subsidiaries and as to which any of them or Seller may
have any obligation or liability (contingent or otherwise) (the "Company
Employee Arrangements").

            (b) Seller, the Company and the Subsidiaries, as applicable, have
each maintained and funded all Company Benefit Plans in accordance with their
terms and all applicable laws, and none of them, or any Member of the Controlled
Group, maintains or contributes to, or has ever maintained or contributed to,
any Defined Benefit Plan or Multiemployer Plan.

            (c) Nothing contained in any of the Company Benefit Plans will
obligate Purchaser or the Surviving Corporation to provide any benefits to
employees, former employees or beneficiaries of employees or former employees,
or to make any contributions to any plans from and after the Closing. Neither
the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will (i) result in any payment (including,
without limitation, severance, unemployment compensation, bonus or otherwise)
becoming due to any current or former director, officer or employee of the
Company or its any of the Subsidiaries under any Company Benefit Plan, Company
Employee Arrangement or otherwise;

                                       12
<PAGE>

(ii) increase any benefits otherwise payable under any Company Benefit Plan or
Company Employee Arrangement; (iii) result in the acceleration of the time of
payment or vesting of any such benefits; (iv) create a right to receive payments
upon a subsequent termination of employment; or (v) provide any employee with
the right to receive, or cause any option, warrant or convertible instrument of
Seller to be exercisable or convertible for or into, any security of Purchaser
or the Surviving Corporation in connection with or following the Merger.

            (d) There are no pending or, to the Seller's and Company's
knowledge, threatened, actions, claims, or proceedings against or relating to
any Company Benefit Plan or Company Employee Arrangement (other than routine
benefit claims by persons claiming benefits thereunder), and, to the knowledge
of the Seller and Company, there are no facts or circumstances which could form
a reasonable basis for any of the foregoing, except for such actions, claims or
proceedings which are not reasonably expected to have, individually or in the
aggregate, a Material Adverse Effect on the Company and the Subsidiaries taken
as a whole.

            (e) The Company and the Subsidiaries do not have any material
obligation or liability (contingent or otherwise) to provide post-retirement
life insurance or health benefits coverage for current or former officers,
directors, or employees of the Company or any of the Subsidiaries except (i) as
may be required under Part 6 of Title I of ERISA (or similar state or local law)
at the sole expense of the participant or the participant's beneficiary; (ii) a
medical expense reimbursement account plan pursuant to Section 125 of the Code;
or (iii) through the last day of the calendar month in which the participant
terminates employment with the Company or any Subsidiary of the Company.

            (f) None of the assets of any Company Benefit Plan is stock of the
Company, the Seller, or any of their respective affiliates, or property leased
to or jointly owned by the Company or any of its affiliates.

            (g) The Company has no employees outside of the United States.

            (h) No Company Benefit Plan or Company Employee Arrangement, or
other contract or arrangement, provides for the payment by the Company or the
Subsidiaries of any amount, either alone or in combination with any other
amounts, for which the deduction by the Company would be disallowed under
Section 162(m) or 280G of the Code or otherwise.

      2.14 LABOR MATTERS.

            (a) The Company and the Subsidiaries are not parties to any labor or
collective bargaining agreement, and no employees of the Company or any of the
Subsidiaries are represented by any labor organization. There are no
representation or certification proceedings, or petitions seeking a
representation proceeding, pending or, to the Seller's and Company's knowledge,
threatened in writing to be brought or filed with the National Labor Relations
Board or any other labor relations tribunal or authority. Within the last twelve
months, to the Seller's and Company's knowledge, there have been no organizing
activities involving the Company or any of the Subsidiaries in respect of any
group of employees of the Company or any of the Subsidiaries.

                                       13
<PAGE>

            (b) There are no unfair labor practice charges, grievances or
complaints pending or, to the Seller's and Company's knowledge, threatened in
writing, by or on behalf of any employee or group of employees of the Company or
any of the Subsidiaries which, if individually or collectively resolved against
the Company or any of the Subsidiaries, would reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries taken as a whole.

            (c) There are no complaints, charges or claims against the Company
or any of the Subsidiaries pending or, to the Seller's and Company's knowledge,
threatened to be brought or filed with any Governmental Authority or arbitrator
based on, arising out of, in connection with, or otherwise relating to the
employment or termination of employment of any individual by the Company or any
of the Subsidiaries which, if individually or collectively resolved against the
Company or any of the Subsidiaries, would reasonably be expected to have a
Material Adverse Effect on the Company and the Subsidiaries taken as a whole,
and, to the knowledge of the Seller and Company, there are no facts or
circumstances which could form a reasonable basis for any of the foregoing.

            (d) There has been no "mass layoff" or "plant closing" as defined by
the Worker Adjustment and Retraining Notification Act, as amended (the "WARN
Act"), in respect of the Company or any of the Subsidiaries within the six
months prior to the Effective Time.

            (e) To the knowledge of Seller and the Company, all employees of the
Company and the Subsidiaries possess all applicable passports, visas, permits
and other authorizations required by all applicable immigration or similar Legal
Requirements to be employed by and to perform services for and on behalf of the
Company and the Subsidiaries, except where the failure to possess such
passports, visas, permits or other authorizations would not, individually or in
the aggregate, reasonably be expected to materially affect the conduct of
business by the Company or the Subsidiaries. The Company and the Subsidiaries,
and their employees, have complied in all material respects with all applicable
immigration and similar Legal Requirements.

      2.15 ENVIRONMENTAL MATTERS.

            (a) For purposes of this Agreement:

                  (i) "Environmental Law" means all federal, state, local or
foreign Legal Requirements, or other legal requirement regulating or prohibiting
the Release of any Hazardous Material into the indoor or outdoor environment, or
pertaining to the protection of natural resources or wildlife, the environment
or public and employee health and safety or pollution or the exposure to a
Hazardous Material;

                  (ii) "Hazardous Material" means any substance, material or
waste which is regulated pursuant to any applicable Environmental Law as a
"hazardous waste," "hazardous material," "hazardous substance," "contaminant,"
"toxic waste," "toxic substance," "source material," "special nuclear material,"
"byproduct material," "high-level radioactive waste," "low-level radioactive
waste," "spent nuclear material," or "radio frequency" and includes petroleum,
petroleum products and petroleum byproducts and waste; and

                                       14
<PAGE>

                  (iii) "Release" means any release, spill, emission, leaking,
pumping, dumping, injections, deposit, disposal, discharge, dispersal, leaching
or migration into the indoor or outdoor environment, or into or out of any
property currently or formerly owned, operated or leased by the applicable party
or the Subsidiaries.

            (b) (i) The Company and each of the Subsidiaries have obtained and
are in compliance with all Company Permits issuable and issued pursuant to any
Environmental Law; (ii) as of the date hereof, there are no administrative,
civil or criminal actions, suits, demands, notices, investigations, writs,
injunctions, decrees, orders or judgments outstanding or, to the knowledge of
the Seller and Company, threatened against the Company or any of the
Subsidiaries based upon or arising out of any Environmental Law; (iii) neither
the Company nor any of the Subsidiaries has caused, has received notice of, or
has knowledge of any Release or threatened Release of a Hazardous Material on or
from the assets owned or operated by the Company or any of the Subsidiaries;
(iv) neither the Seller, Company nor any of the Subsidiaries has any current
liability in connection with any Release of a Hazardous Material; and (v) none
of the operations of the Company or any of the Subsidiaries involves the
treatment, storage, or disposal of a Hazardous Material on any property owned,
leased or operated by the Company or any of the Subsidiaries.

      2.16 TAX MATTERS.

            (a) Each of the Seller and its subsidiaries, including the Company,
the Subsidiaries and any individual, trust, corporation, partnership or any
other entity as to which the Company is liable for Taxes incurred by such
individual or entity either as a transferee, or pursuant to Treasury Regulations
Section 1.1502-6, or pursuant to any other provision of federal, territorial,
state, local or foreign law or regulations (the "Seller Group"), has timely
filed (or has had timely filed) all material Tax Returns required to be filed by
each of them (or on their behalf). All such Tax Returns are true, complete and
correct in all material respects. Seller Group has paid all material Taxes due
for the periods covered by such Tax Returns (whether or not shown on or
reportable on such Tax Returns) or with respect to any period prior to the date
of this Agreement. There are no liens on any of the assets of any member of the
Seller Group with respect to Taxes, other than liens for Taxes not yet due and
payable or for Taxes that a member of the Seller Group is contesting in good
faith through appropriate proceedings and for which appropriate reserves have
been established. The Company has previously delivered (or, in the case of
foreign Tax Returns and audit reports, will deliver) to Purchaser copies of (i)
all federal, state, foreign and other material income and franchise Tax Returns
filed by each member of Seller Group relating to any taxable periods that remain
subject to audit under applicable statutes of limitations; and (ii) any audit
report issued within the last three years (or otherwise in respect of any audit
or investigation in progress) relating to Taxes due from or in respect of the
Seller Group.

            (b) The amount of the Company's liability for unpaid Taxes, as of
the date of the financial statements contained in the most recent Seller SEC
Report and the Company Financial Statements, did not, in the aggregate, exceed
the reserve for Tax liability (excluding any reserve for deferred Taxes
established to reflect timing differences between book and Tax income) set forth
on the face of the balance sheets (rather than in any notes thereto) contained
in such financial statements. Since the date of the financial statements in the
most recent Company

                                       15
<PAGE>

Financial Statements, the Company has not incurred any liability for Taxes
outside the ordinary course of business or otherwise inconsistent with past
custom and practice, except for any liability for Taxes which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on the Company.

            (c) No material deficiencies for any Taxes have been proposed,
asserted, or assessed (either in writing or verbally, formally or informally) or
are expected to be proposed, asserted, or assessed against the Seller Group that
have not been fully paid or adequately provided for in the appropriate financial
statements of Seller Group, no requests for waivers of the time to assess any
Taxes are pending, and no power of attorney still in effect in respect of any
Taxes has been executed or filed with any taxing authority. No member of the
Seller Group has received notice (either in writing or verbally, formally or
informally) or expects to receive notice that it has not filed a Tax Return or
paid Taxes required to be filed or paid by it. The Tax Returns of the Seller
Group have never been audited by a government or taxing authority, nor is any
such audit in process, pending or threatened (either in writing or verbally,
formally or informally). No waiver or extension of any statute of limitations is
in effect with respect to Taxes or Tax Returns of the Seller Group. The Company
and each member of the Seller Group have disclosed on its federal income tax
returns all positions taken therein that could give rise to a substantial
understatement penalty within the meaning of Section 6662 of the Code. Neither
the Company nor any other member of the Seller Group has participated in a
"listed transaction" within the meaning of Treasury Regulations Section
1.6011-4T(b)(2) (determined without regard to whether such transaction is a
"reportable transaction" under such regulation).

            (d) No material Encumbrances for Taxes exist in respect of any
assets or properties of Seller Group, except for statutory Encumbrances for
Taxes not yet due.

            (e) No member of Seller Group is a party to or is bound by any Tax
sharing agreement, Tax indemnity obligation, or similar agreement, arrangement,
or practice in respect of Taxes (whether or not written) (including any advance
pricing agreement, closing agreement, or other agreement relating to Taxes with
any taxing authority).

            (f) No member of the Seller Group is a party to any safe harbor
lease within the meaning of Section 168(f)(8) of the Code, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982. No member of
the Seller Group is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the Code during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code and
Purchaser is not required to withhold tax on the purchase of the stock of the
Company by reason of Section 1445 of the Code. No member of the Seller Group is
a "consenting corporation" under Section 341(f) of the Code. No member of the
Seller Group has participated in an international boycott as defined in Section
999 of the Code. No member of the Seller Group has a permanent establishment in
any foreign country, as defined in any applicable Tax treaty or convention
between the United States of America and such foreign country. No member of the
Seller Group is a party to any joint venture, partnership or other agreement,
contract or arrangement (either in writing or verbally, formally or informally)
which could be treated as a partnership for federal income tax purposes. The
Company is in compliance with the terms and conditions of any applicable Tax
exemptions, Tax agreements or Tax orders of any government to which it may be

                                       16
<PAGE>

subject or which it may have claimed, and the transactions contemplated by this
Agreement will not have any adverse effect on such compliance.

            (g) The Company has filed all reports and has created and/or
retained all records required under Section 6038A of the Code with respect to
its ownership by and transactions with related parties. Each related foreign
person required to maintain records under Section 6038A with respect to
transactions between the Company and the related foreign person has maintained
such records. All documents that are required to be created and/or preserved by
the related foreign person with respect to transactions with the Company are
either maintained in the United States, or the Company is exempt from the record
maintenance requirements of Section 6038A with respect to such transactions
under Treasury Regulation Section 1.6038A-1. The Company is not a party to any
record maintenance agreement with the Internal Revenue Service with respect to
Section 6038A. Each related foreign person that has engaged in transactions with
the Company has authorized the Company to act as its limited agent solely for
purposes of Sections 7602, 7603, and 7604 of the Code with respect to any
request by the Internal Revenue Service to examine records or produce testimony
related to any transaction with the Company, and each such authorization remains
in full force and effect.

            (h) No member of Seller Group (i) has ever been a member of an
affiliated group within the meaning of Section 1504(a) of the Code (or any
similar or analogous group defined under a similar or analogous state, local or
foreign Legal Requirements) other than an affiliated group the common parent of
which is Seller, or (ii) has any liability under Treasury Regulation Section
1.1502-6 (or any predecessor or successor thereof or analogous or similar
provision under state, local or foreign Legal Requirements), as a transferee or
successor, by contract or otherwise for Taxes of any affiliated group of which
Seller is not the common parent.

            (i) No member of Seller Group has taken or agreed to take any action
that would prevent the Merger from constituting a reorganization qualifying
under the provisions of Section 368(a) of the Code.

            (j) There are no employment, severance, or termination agreements or
other compensation arrangements currently in effect which may affect Seller
Group which provide for the payment of any amount (whether in cash or property
or the vesting of property) as a result of any of the transactions contemplated
by this Agreement that individually or collectively (either alone or upon the
occurrence of any additional or subsequent event), could give rise to a payment
which is nondeductible pursuant to Sections 162(m) or 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code.

            (k) Each member of Seller Group has complied in all material
respects with all Legal Requirements applicable to the payment and withholding
of Taxes and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate taxing authority all
material amounts required to be so withheld and paid over for all periods under
all applicable Legal Requirements.

            (l) No federal, state, local, or foreign audits or other
administrative proceedings or court proceedings are presently pending in respect
of any Taxes or Tax Returns of any member of Seller Group and no such member has
received notice (either in writing or

                                       17
<PAGE>

verbally, formally or informally) of any pending audit or proceeding in respect
of any Taxes or Tax Returns.

            (m) No member of Seller Group has agreed to or is required to make
any adjustment under Section 481(a) of the Code or any similar provision of
state, local or foreign Legal Requirements by reason of a change in accounting
method or otherwise or has any knowledge that a taxing authority has proposed
any such adjustment or change in Tax accounting method, or has any application
pending with any taxing authority requesting permission for any changes in Tax
accounting methods that relate to the business or operations of any of them.

            (n) No member of Seller Group has constituted either a "distributing
corporation" or a "controlled corporation" (within the meaning of Section
355(a)(1)(A) of the Code) in a distribution of stock qualifying for tax-free
treatment under Section 355 of the Code (i) in the three years prior to the date
of this Agreement or (ii) in a distribution which could otherwise constitute
part of a "plan" or "series of related transactions" (within the meaning of
Section 355(e) of the Code) in conjunction with the Merger.

      2.17 INSURANCE. The Company has previously delivered to Purchaser an
accurate and complete list of all insurance policies, self-insurance
arrangements and fidelity bonds, currently in effect, that insure the businesses
and assets of the Company and the Subsidiaries (collectively, the "Company
Insurance Policies"). Each Company Insurance Policy is valid, binding, and in
full force and effect. Neither the Company nor any Subsidiary is in breach of
any Company Insurance Policy, and no event has occurred which, with notice or
the lapse of time, would constitute such a breach, or permit termination,
modification, or acceleration, of any Company Insurance Policy. Neither Seller
nor the Company has received any notice of cancellation or non-renewal of any
Company Insurance Policy. The consummation of the transactions contemplated
hereby will not cause a breach, termination, modification, or acceleration of
any Company Insurance Policy. There is no claim under any Insurance Policy that
has been improperly filed or as to which any insurer has questioned, disputed or
denied liability.

      2.18 MATERIAL COMPANY CONTRACTS.

            (a) Other than those Contracts listed in Schedule 2.19(a)-1 of the
Company Disclosure Schedule, Schedule 2.18(a) of the Company Disclosure Schedule
contains a list identifying the following Contracts (and all amendments,
modifications and supplements thereto and all side letters to which the Company
or any of the Subsidiaries is a party affecting the obligations of any party
thereunder) to which the Company or any of the Subsidiaries is a party or by
which any of its assets or properties is bound: (i) executory employment,
executory severance, material product design or development, executory personal
services, material consulting, executory non-competition or material
indemnification contracts (including, any material contract to which the Company
or any of the Subsidiaries is a party involving employees of the Company or any
of the Subsidiaries), but excluding normal indemnification provisions under
license or sale contracts; (ii) licensing, merchandising or distribution
agreements involving the payment of more than $100,000 per year; (iii) contracts
granting a right of first refusal or first negotiation involving in excess of
$100,000; (iv) partnership or joint venture agreements; (v) any agreements for
the acquisition, licensing, sale or lease of material assets or properties of
the Company entered into since January 1, 2002 involving a payment in

                                       18
<PAGE>
excess of $100,000; (vi) contracts or agreements with any Governmental Authority
involving the payment of more than $50,000 per year; (vii) loan or credit
agreements, mortgages, indentures or other agreements or instruments evidencing
indebtedness for borrowed money by the Company or any of the Subsidiaries or any
such agreement pursuant to which indebtedness for borrowed money may be
incurred, in each case involving in excess of $100,000; (viii) agreements that
purport to limit, curtail or restrict the ability of the Company or any of the
Subsidiaries to compete in any geographic area or line of business; (ix) supply
agreements, in each case involving in excess of $100,000 per year; (x)
agreements, written or oral, with any officers, directors, stockholders of the
Company, Seller or any Subsidiary, or any member of the immediate family of any
officer, director, or stockholder of any of them; and (xi) commitments and
agreements to enter into any of the foregoing (collectively, the "Material
Company Contracts"). The Company has heretofore made available to Purchaser
true, correct, and complete copies of all such Material Company Contracts.

            (b) To the Seller's and Company's knowledge, each of the Material
Company Contracts constitutes the valid and legally binding obligation of the
Company or the Subsidiaries, enforceable in accordance with its terms, and is in
full force and effect. There is no material default under any Material Company
Contract either by the Company (or the Subsidiaries) or, to the Seller's and
Company's knowledge, by any other party thereto, and no event has occurred that
with the giving of notice, the lapse of time, or both would constitute a
material default thereunder by the Company (or the Subsidiaries) or, to the
Seller's and Company's knowledge, any other party. As of the date hereof, to the
Seller's and Company's knowledge, no party has notified the Company in writing
that it intends to terminate or fail to extend any contract between such person
and the Company within one year of the date of this Agreement, except for any
such termination or failure as would not have a Material Adverse Effect on the
Company and the Subsidiaries taken as a whole.

            (c) To the Seller's and Company's knowledge, no party to any such
Material Company Contract has given notice to the Company of or made a claim
against the Company in respect of any material breach or default thereunder by
the Company or a Subsidiary.

            (d) No consent of any third party is required under any Material
Company Contract as a result of or in connection with, and the enforceability of
any Material Company Contract will not be affected in any manner by, the
execution, delivery, and performance of this Agreement or the consummation of
the transactions contemplated hereby.

      2.19  INTELLECTUAL PROPERTY; FILM LIBRARY.

            (a) Schedule 2.19(a)-1 sets forth, on a title-by-title basis, a
true, correct and complete list identifying (i) the films and programs which
constitute the programming library of the Company and the Subsidiaries as it
exists on the date hereof, specifying for each such film and program the number
of episodes produced (collectively and individually as to each film or program,
the "Company Film Library"), and (ii) each license and other Contract pursuant
to which the Company and the Subsidiaries have acquired Intellectual Property
Rights in each title (the "Film Licenses"). Schedule 2.19(a)-2 sets forth a
true, correct and complete list of all copyright registrations, registration
numbers and serial numbers by the issuing authority related to the Company Film
Library. Schedule 2.19(a)-3 sets forth a true, correct and complete list of

                                       19
<PAGE>

all trademarks, service marks, trade names, domain names and logos, and all
registrations, registration numbers and serial numbers by the issuing authority
thereof, included in the Company Film Library. Schedule 2.19(a)-4 sets forth a
true, correct and complete list (the "Physical Properties Schedule") of each
location at which the Physical Properties are held or stored and a general
description of the nature or type of Physical Properties held or stored thereat
and, at the Closing, Purchaser shall have exclusive ownership of such Physical
Properties.

            (b) To the knowledge of the Seller and Company, the Company and the
Subsidiaries own good and marketable title to (free and clear of all
Encumbrances), hold fully valid, enforceable and exclusive licenses of, or are
otherwise duly authorized to use substantially all rights in and under, (A) each
item in the Company Film Library and (B) all other Intellectual Property used or
otherwise exploited by each of them in connection with the operation of the
businesses of the Company and the Subsidiaries as presently conducted and as
presently proposed to be conducted, including, without limitation, the rights to
use, duplicate, distribute, merchandise, create derivative works based upon,
publicly perform, and publicly display each work in the Company Film Library,
other than as limited by the underlying acquisition agreements and production
agreements of the Company Film Library (collectively, the "Company Intellectual
Property"). The Company has taken reasonable steps to protect its rights in each
item of Company Intellectual Property. Each item of Company Intellectual
Property is in compliance with applicable legal requirements relating to the
registration or maintenance of such item (including payment of licensing,
filing, examination and maintenance fees), other than any requirement that, if
not satisfied, would not result in a revocation of or otherwise materially
affect the enforceability of the item in question.

            (c) To the Seller's and Company's knowledge, each of the Film
Licenses constitutes a valid and legally binding agreement, enforceable in
accordance with its terms, and is in full force and effect. There is no material
breach or default under any of the Film Licenses either by the Company (or the
Subsidiaries) or, to the Seller's and Company's knowledge, by any other party
thereto, and no event has occurred that with the giving of notice, the lapse of
time, or both would constitute a material default thereunder by the Company (or
the Subsidiaries) or, to the Seller's and Company's knowledge, any other party.
As of the date hereof, to the Seller's and Company's knowledge, (i) no party has
notified the Company in writing that it intends to terminate any Film License or
not extend any Film License that is due to expire by its terms within one year
of the date of this Agreement, and (ii) with respect to any Film License that is
due to expire by its terms within 60 days of the date of this Agreement, each
licensor of such Film License has notified the Company in writing that it will
extend such Film License. None of the licensors under any Film Licenses has
exercised any right to buy back any rights granted under any of the Film
Licenses nor have any such rights reverted to any licensor nor has any such
licensor purported to terminate or rescind any such rights. Except for the Film
Licenses, there are no Persons that have, or are entitled to receive, any rights
to participate in the development, production, distribution or financing of any
portion of the Company Film Library.

            (d) The execution, delivery and performance by the Company of this
Agreement, and the consummation of the transactions contemplated hereby, will
not (i) require the consent of any Governmental Authority or other third party
in respect of any item of Company Intellectual Property; (ii) result in the loss
or impairment of, or give rise to any right of any third party to terminate or
alter, any of the Company's or any of the Subsidiaries' rights to

                                       20
<PAGE>

own any item of Company Intellectual Property or any musical compositions or
sound recordings licensed from third parties and contained in the Company
Intellectual Property.

            (e) Neither the Company nor any of the Subsidiaries has interfered
with, infringed upon, misappropriated or otherwise come into conflict with any
Intellectual Property Rights of any other Person, and the ownership, use or
exploitation of the Company Film Library by any means in connection with the
operation of the businesses of the Company and the Subsidiaries as presently
conducted and as presently proposed to be conducted does not and will not
interfere with, infringe upon, or misappropriate the rights of any other Person,
including, without limitation, any rights relating to defamation, contract,
trademark, unfair competition, copyright, trade secret, privacy or publicity.
Neither the Company nor any of the Subsidiaries has received any charge,
complaint, claim or notice alleging any such interference, infringement,
misappropriation or violation, including, without limitation, oppositions filed
in respect to any trademark applications included in the Company Intellectual
Property.

            (f) No third party has, to the Company's knowledge, interfered with,
infringed upon, misappropriated or otherwise come into conflict with any item of
Company Intellectual Property, except where such actions are not reasonably
expected to have a Material Adverse Effect on the Company and the Subsidiaries
taken as a whole.

            (g) All advances, guarantees, guild payments, residuals and
participations, laboratory payments, open purchase orders, costs and fees
charged by agents and sub-agents, and other amounts or obligations owed, due,
invoiced or payable prior to or as of the Closing by the Company or any
Subsidiary or any of their predecessors-in-interest pursuant to or under any
item of Company Intellectual Property or otherwise in respect of the Company
Film Library have been, or at the Closing will have been, fully and accurately
accounted for, and if due, paid and discharged, except where challenged by the
Company in good faith by appropriate proceedings. The performance rights of all
non-dramatic music contained in the Company Film Library (whether in connection
with musical compositions or sound recordings) are: (i) controlled by a
performing rights organization such as the American Society for Composers
Authors and Publishers, Broadcast Music Inc., SESAC, Inc., PRS, and/or SOCAN;
(ii) available for license from the parties controlling such rights; (iii) in
the public domain; or (iv) controlled by the Company or the Subsidiaries
directly or through any licenses.

            (h) All of the artwork, packaging, publicity, promotional materials
and advertising prepared or used by the Company or the Subsidiaries relating to
the Company Film Library has been prepared in accordance with, and is in
compliance in all material respects with, all of the requirements of the
applicable Film Licenses and applicable law.

      2.20  OPINION OF COMPANY FINANCIAL ADVISOR. Jefferies & Company, Inc. (the
"Company Financial Advisor") has delivered to the Board of Directors of Seller
its opinion, dated the date of this Agreement, to the effect that, as of such
date, the Merger Consideration is fair to Seller from a financial point of view,
and as of the date of the Closing, such opinion has not been withdrawn or
modified. Seller has provided to Purchaser a true and correct copy of (i) such
opinion of the Company Financial Advisor and (ii) all outstanding engagement
letters and other Contracts with the Company Financial Advisor. It is noted that
Seller has retained the Company Financial Advisor and the Company Financial
Advisor is solely providing services,

                                       21
<PAGE>

and its opinion, to Seller for Seller's sole benefit and use. Accordingly,
Purchaser and Merger Sub (and all other third parties) may not rely, in any
respect, on any advise or opinion issued by the Company Financial Advisor in
connection with the consummation of the transactions contemplated by this
Agreement.

      2.21  BROKERS. Except for the Company Financial Advisor, no broker,
finder, investment banker or other person is entitled to receive from Seller or
any of its subsidiaries or Affiliates any brokerage, finder's or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement.

      2.22  ACCREDITED INVESTOR; LEGEND. Seller is an "accredited investor"
within the meaning of Rule 501 of Regulation D promulgated under the Securities
Act, as presently in effect. Seller understands that each certificate
representing Merger Consideration will bear substantially the following legends:

            "These securities have not been registered under the Securities Act
            of 1933, as amended. They may not be sold, offered for sale, pledged
            or hypothecated in the absence of (a) a registration statement in
            effect with respect to the securities under such Act, (b) an opinion
            of counsel satisfactory to the Company that such registration is not
            required, or (c) unless sold pursuant to Rule 144 or Rule 144A of
            such Act."

            "The right to sell or vote the shares represented by this
            certificate is subject to certain restrictions set forth in a Resale
            and Voting Agreement to which the corporation is a party, a copy of
            which is on file at the corporation's principal place of business."

      2.23  BOOKS AND RECORDS.

            (a) The books, records and accounts of the Company and its
Subsidiaries, in all material respects, (i) have been maintained in accordance
with good business practices on a basis consistent with prior years; (ii) are
stated in reasonable detail and accurately and fairly reflect the transactions
and dispositions of the assets of the Company and its Subsidiaries; and (iii)
accurately and fairly reflect the basis for the financial statements pertaining
to the Company and the Subsidiaries contained in the Seller SEC Reports and the
Company Financial Statements.

            (b) The Company has devised and maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management's general or specific
authorization; and (ii) transactions are recorded as necessary (A) to permit
preparation of financial statements in conformity with GAAP; and (B) to maintain
accountability for assets.

            (c) Seller maintains a system of disclosure controls and procedures
that comply with Rules 13a-14 and 13a-15 of the Exchange Act (as in effect on
the date of this Agreement) and that are designed to ensure that information
required to be disclosed by Seller in its reports or other documents filed with
or furnished to the SEC is recorded, processed, summarized and reported within
the time periods required by the SEC's rules and forms, including, without
limitation, controls and procedures designed to ensure that such information is

                                       22
<PAGE>

accumulated and communicated to the Company's senior management, including its
principal executive and principal financial officers, or persons performing
similar functions, as appropriate to allow timely decisions by Seller regarding
required disclosure.

ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER

      Except as specifically set forth in Schedule 3 (the "Purchaser Disclosure
Schedule") attached to this Agreement (the parts of which are numbered to
correspond to the individual Section numbers of this Article 3), Purchaser
hereby represents and warrants to Seller as follows (where appropriate, the term
"Purchaser" should be read to include Purchaser's predecessor entity, Genius
Products, Inc., a Nevada corporation, which merged into Purchaser on March 3,
2005 in a transaction to change the domicile of Purchaser):

      3.1   ORGANIZATION AND QUALIFICATION.

            (a) The only direct or indirect subsidiaries of Purchaser is Sanuk
Corporation, a Nevada corporation, which has no active operations and is
immaterial to Purchaser. Purchaser does not own, directly or indirectly,
beneficially or of record, any shares of capital stock or other securities of
any other entity or any other investment in any other entity.

            (b) Each of Purchaser and Merger Sub is a corporation duly
organized, validly existing and in good standing under the applicable Legal
Requirements of the jurisdiction of its incorporation and has all requisite
corporate power and authority to own, lease and operate its properties and to
carry on its business as now being conducted.

            (c) Each of Purchaser and Merger Sub is duly qualified or licensed
and in good standing to do business in each jurisdiction in which the property
owned, leased, or operated by it or the nature of the business conducted by it
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing is not reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on Purchaser.

            (d) Each of Purchaser and Merger Sub has heretofore delivered to
Seller accurate and complete copies of their respective articles or certificate
of incorporation and bylaws, as currently in effect.

      3.2   CAPITALIZATION OF PURCHASER.

            (a) The authorized capital stock of Purchaser consists of: (i)
100,000,000 shares of common stock, par value $0.0001 per share ("Purchaser
Common Stock"), of which 31,747,499 shares are issued and outstanding as of the
date hereof ("Purchaser Issued Shares"); and (ii) 10,000,000 shares of preferred
stock, par value $0.0001 per share, none of which are issued or outstanding. All
of the Purchaser Issued Shares are duly authorized, validly issued, fully paid
and non-assessable and are free of preemptive rights.

            (b) The authorized capital stock of Merger Sub consists of: (i) 100
shares of Common Stock, par value $0.10 per share, of which 100 shares are
issued and outstanding as of the date hereof (the "Merger Sub Shares"); and no
shares of preferred stock. All of the Merger

                                       23
<PAGE>

Sub Shares are duly authorized, validly issued, fully paid and non-assessable
and are free of preemptive rights.

            (c) Purchaser has reserved 7,500,000 shares of Common Stock for
issuance to officers, directors, employees and consultants to its equity
incentive plans, of which options to purchase 5,143,080 shares have been issued
as of the date hereof. Purchaser has outstanding warrants to acquire an
aggregate of 12,379,052 shares of Common Stock of Purchaser as of the date
hereof.

            (d) Except as set forth in this Section 3.2, as of the date hereof,
there are no issued or outstanding (i) shares of capital stock or other voting
securities of Purchaser or Merger Sub; (ii) securities convertible into or
exchangeable for shares of capital stock or voting securities of Purchaser or
Merger Sub; (iii) options or other rights to acquire, or obligations of
Purchaser to issue, any capital stock, voting securities, or securities
convertible into or exchangeable for capital stock or voting securities of
Purchaser or Merger Sub; (iv) equity equivalents, interests in the ownership or
earnings of Purchaser or Merger Sub, or other similar rights (including stock
appreciation rights); (v) outstanding obligations of Purchaser or Merger Sub to
repurchase, redeem or otherwise acquire any securities of either of them. There
are no stockholder agreements, voting trusts or other agreements or
understandings to which Purchaser or Merger Sub is a party or to which either of
them is bound relating to the voting of any shares of capital stock of Purchaser
or Merger Sub.

      3.3   AUTHORITY RELATIVE TO THIS AGREEMENT.

            (a) Each of Purchaser and Merger Sub has all necessary corporate
power and authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby and no other corporate proceedings on the part
of either of Purchaser or Merger Sub is necessary to authorize this Agreement or
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly and validly executed and delivered by Purchaser and Merger Sub and
constitutes a valid, legal, and binding agreement of each of Purchaser and
Merger Sub, enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar Legal Requirements affecting creditors'
rights and remedies generally, and subject, as to enforceability, to general
principles of equity, including principles of commercial reasonableness, good
faith and fair dealing (regardless of whether enforcement is sought in a
proceeding at law or in equity).

            (b) The Board of Directors of Purchaser (the "Purchaser Board"), by
the requisite vote of those present, with no dissenting votes, has (i) duly and
validly authorized the execution and delivery of this Agreement and approved the
consummation of the transactions contemplated hereby, taken all corporate
actions required to be taken by Purchaser Board for the consummation of the
transactions contemplated hereby, including approval of the Merger in its
capacity as stockholder of Merger Sub; and (ii) resolved that this Agreement and
the transactions contemplated hereby, including the Merger, taken together, are
advisable and fair to, and in the best interests of, Purchaser and its
stockholders.

                                       24
<PAGE>

            (c) The Board of Directors of Merger Sub (the "Merger Sub Board"),
by the requisite vote of those present (who constituted 100% of the directors
then in office), with no dissenting votes, has (i) duly and validly authorized
the execution and delivery of this Agreement and approved the consummation of
the transactions contemplated hereby, (ii) taken all corporate actions required
to be taken by the Merger Sub Board for the consummation of the transactions
contemplated hereby, including approval of the Merger, and (iii) resolved (A)
that this Agreement and the transactions contemplated hereby, including the
Merger, taken together, are advisable and fair to, and in the best interests of,
Merger Sub and its stockholder, the Purchaser, and (B) to recommend that the
sole stockholder of Merger Sub adopt and approve this Agreement and the Merger.

            (d) The approval of this Agreement or the Merger by the shareholders
of Purchaser is not required under any Legal Requirement applicable to Purchaser
or under its articles of incorporation or bylaws.

      3.4   SEC REPORTS; FINANCIAL STATEMENTS.

            (a) Purchaser has previously delivered to Seller the preliminary,
unaudited consolidated balance sheets ("Purchaser Balance Sheet"), and related
statements of operations, changes in stockholders' equity, and cash flows
(together with Purchaser Balance Sheet, the "Purchaser Financial Statements"),
of Purchaser and its subsidiaries, as of and for the fiscal year ending December
31, 2004 (the "Purchaser Balance Sheet Date").

            (b) Since January 1, 2002, Purchaser has filed all forms, reports
and documents with the SEC required to be filed by it under the Securities Act
and the Exchange Act (collectively, the "Purchaser SEC Reports"), each of which
complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act, each as in effect on the dates such
Purchaser SEC Reports were filed. None of the Purchaser SEC Reports contained,
when filed, any untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading, except to the extent amended prior
to the date hereof by a subsequently filed Purchaser SEC Report. The
consolidated financial statements of Purchaser included in the Purchaser SEC
Reports (the "Purchaser Filed Financial Statements") complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC in respect thereof.

            (c) Each of Purchaser Financial Statements and the Purchaser Filed
Financial Statements (i) are true, accurate and complete in all respects; (ii)
are consistent with the books and records of Purchaser; (iii) present fairly and
accurately the financial condition of Purchaser as of the respective dates
thereof and the results of operations, changes in stockholder's equity and cash
flows of Purchaser for the periods covered thereby; and (iv) have been prepared
in accordance with GAAP, applied on a consistent basis throughout the periods
covered; provided, however, that the Purchaser Financial Statements may not
contain all of the footnotes required by GAAP, and they may be subject to normal
adjustments consistent with past practice which are not material individually or
in the aggregate. All reserves established by Purchaser and set forth in
Purchaser Financial Statements are adequate for the purposes for which they were
established.

                                       25
<PAGE>

            (d) Since the Purchaser Balance Sheet Date, there has not been any
change, or any application or request for any change, by Purchaser in accounting
principles, methods or policies for financial accounting purposes, other than as
a result of any changes under GAAP or other relevant accounting principles.

            (e) Purchaser is in compliance with the provisions of SOX applicable
to it as of the date hereof.

      3.5   NO UNDISCLOSED LIABILITIES. There are no material liabilities of
Purchaser of any kind whatsoever, whether accrued, contingent, absolute,
determined, determinable or otherwise, which are required to be reflected in its
financial statements (or in the notes thereto) in accordance with GAAP, other
than: (a) liabilities disclosed, provided for or reserved against in the
Purchaser Balance Sheet or in the notes thereto; (b) liabilities arising in the
ordinary course of business after the Purchaser Balance Sheet Date or which
arose in the ordinary course of business prior to the Purchaser Balance Sheet
Date but were not required to be disclosed, provided for or reserved against in
the Purchaser Balance Sheet; (c) liabilities disclosed in the Purchaser SEC
Reports prior to the date hereof; and (d) liabilities arising under this
Agreement.

      3.6   ABSENCE OF CHANGES. Except as contemplated by this Agreement or as
disclosed in the Purchaser SEC Reports filed prior to the date hereof, since the
Purchaser Balance Sheet Date, the Purchaser has conducted its business in the
ordinary and usual course consistent with past practice and there has not been:

            (a) any event, occurrence or development which had or is reasonably
expected to have, individually or in the aggregate, a Material Adverse Effect on
the Purchaser taken as a whole;

            (b) any declaration, setting aside or payment of any dividend or
other distribution in respect of any shares of capital stock of the Purchaser or
any subsidiary of the Purchaser (each a "Purchaser Subsidiary"), any split,
combination or reclassification of any shares of capital stock of the Purchaser
or any Purchaser Subsidiary, or any repurchase, redemption or other acquisition
by the Purchaser or any Purchaser Subsidiary of any securities of the Purchaser
or any Purchaser Subsidiary;

            (c) any amendment or change to the charter, certificate or articles
of incorporation, operating agreement or bylaws (or other similar organizational
or governing instrument) of the Purchaser or any Purchaser Subsidiary, or any
amendment of any term of any outstanding security of the Purchaser or any
Purchaser Subsidiary that would materially increase the obligations of the
Purchaser or any Purchaser Subsidiary under such security;

            (d) (i) any incurrence or assumption by the Purchaser or any
Purchaser Subsidiary of any indebtedness for borrowed money other than under
existing credit facilities (or any renewals, replacements or extensions that do
not increase the aggregate commitments thereunder), except (A) in the ordinary
and usual course of business consistent with past practice or (B) as permitted
or required by this Agreement, or (ii) any guarantee, endorsement, or other
incurrence or assumption of liability (whether directly, contingently or
otherwise) by the Purchaser or any Purchaser Subsidiary for the obligations of
any other person (other than any

                                       26
<PAGE>

wholly owned subsidiary of the Purchaser), other than in the ordinary and usual
course of business consistent with past practice;

            (e) any creation or assumption by the Purchaser or any Purchaser
Subsidiary of any Encumbrance on any material asset of the Purchaser or any
Purchaser Subsidiary other than in the ordinary and usual course of business
consistent with past practice;

            (f) any making of any loan, advance or capital contribution to or
investment in any person by the Purchaser or any Purchaser Subsidiary, other
than (i) as permitted or required by this Agreement, (ii) loans, advances or
capital contributions to or investments in wholly owned subsidiaries of the
Purchaser, (iii) loans or advances to employees of the Purchaser or any
Purchaser Subsidiary in the ordinary and usual course of business consistent
with past practice, or (iv) extensions of credit to customers in the ordinary
and usual course of business consistent with past practice;

            (g) any contract or agreement entered into by the Purchaser or any
Purchaser Subsidiary on or prior to the date hereof relating to any material
acquisition or disposition of any assets or business, other than contracts or
agreements in the ordinary and usual course of business consistent with past
practice and those contemplated by this Agreement;

            (h) any modification, amendment, assignment, termination or
relinquishment by the Purchaser or any Purchaser Subsidiary of any contract,
license or other right (including any insurance policy naming it as a
beneficiary or a loss payable payee) that is reasonably expected to have a
Material Adverse Effect, after taking into account the benefit of the
consideration, if any, received in exchange for agreeing to such modification,
amendment, assignment, termination or relinquishment, on the Purchaser and the
Purchaser Subsidiaries taken as a whole;

            (i) any material change in any method of accounting or accounting
principles or practice by the Purchaser or any Purchaser Subsidiary, except for
any such change required by reason of a change in GAAP, which change has been
consistently applied;

            (j) any (i) grant of any severance or termination pay to any
director, officer or employee of the Purchaser or any Purchaser Subsidiary, (ii)
entering into of any employment, deferred compensation, severance, consulting,
termination or other similar agreement (or any change or amendment to any such
existing agreement) with any director, officer, employee, agent or other similar
representative of the Purchaser or any Purchaser Subsidiary (collectively,
"Purchaser Employment Agreements") whose annual cash compensation exceeds
$100,000, other than changes or amendments that (A) do not and will not result
in increases, in the aggregate, of more than five percent in the salary, wages
or other compensation of any such person and (B) are otherwise consistent with
clause (iv) below, (iii) increase in benefits payable under any existing
severance or termination pay policies or Purchaser Employment Agreements, or
(iv) increase in compensation, bonus or other benefits payable to directors,
officers or employees of the Purchaser or any Purchaser Subsidiary other than,
in the case of clauses (ii) and (iv) only, increases prior to the date hereof in
compensation, bonus or other benefits payable to directors, officers or
employees of the Purchaser or any Purchaser Subsidiary in the ordinary and

                                       27
<PAGE>

usual course of business consistent with past practice or merit increases in
salaries of employees at regularly scheduled times in customary amounts
consistent with past practices; or

            (k) any (i) making or revoking of any material election relating to
Taxes; (ii) settlement or compromise of any material claim, action, suit,
litigation, proceeding, arbitration, investigation, audit or controversy
relating to Taxes; or (iii) change to any material methods of reporting income
or deductions for federal income Tax purposes.

      3.7   GOVERNMENTAL APPROVALS. Except for the filing and acceptance for
record of the Articles of Merger as required by the NRS, and such other filings,
permits, consents and approvals which, if not obtained or made, are not
reasonably expected to have a Material Adverse Effect on Purchaser, no filing
with or notice to, and no permit, authorization, consent or approval of, any
Governmental Authority is necessary for the execution and delivery by Purchaser
of this Agreement or the consummation by Purchaser of the transactions
contemplated hereby.

      3.8   CONSENTS AND DEFAULTS. Purchaser is not in violation of any term of
its articles or certificate of incorporation or bylaws. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby will not (i) result in any violation of or conflict with,
constitute a default under (with or without due notice or lapse of time or
both), require any consent, waiver or notice under any term of, or result in the
reduction or loss of any benefit or the creation or acceleration of any right or
obligation (including any termination rights) under, (A) the articles of
incorporation or bylaws of Purchaser, (B) any material agreement, material note,
material bond, material mortgage, material indenture, material contract,
material lease, material permit or other material obligation or material right
to which Purchaser is a party or by which any of its assets or properties is
bound, or (C) subject to Section 3.7, any applicable domestic or foreign Legal
Requirements, except in the case of clause (B) and (C) where any of the
foregoing is not reasonably expected to have, individually or in the aggregate,
a Material Adverse Effect on Purchaser; or (ii) result in the creation of (or
impose any obligation on Purchaser to create) any Encumbrance upon any of the
material assets or properties of Purchaser pursuant to any such term.

      3.9   LITIGATION. There is no suit, claim, action, proceeding or, to
Purchaser's knowledge, investigation, pending or, to Purchaser's knowledge,
threatened against Purchaser. Purchaser is not subject to any outstanding order,
writ, injunction or decree which is reasonably expected to have, individually or
in the aggregate, a Material Adverse Effect on Purchaser. To Purchaser's
knowledge, there is no action, suit, proceeding or investigation pending or
threatened against any current or former officer, director, employee or agent of
Purchaser (in his or her capacity as such) which is reasonably expected to give
rise to a claim for contribution or indemnification against Purchaser.

      3.10  COMPLIANCE WITH APPLICABLE LAW; PERMITS. Purchaser holds all
permits, licenses, variances, exemptions, orders, and approvals of all
Governmental Entities necessary for the lawful conduct of its business
("Purchaser Permits"), except for failures to hold such permits, licenses,
variances, exemptions, orders and approvals which are not reasonably expected to
have, individually or in the aggregate, a Material Adverse Effect on Purchaser.
Purchaser is in compliance with the terms of Purchaser Permits, except where the
failure to comply is not

                                       28
<PAGE>

reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Purchaser. The businesses and operations of Purchaser complies
in all respects with all Legal Requirements applicable to Purchaser, except
where the failure to so comply is not reasonably expected to have, individually
or in the aggregate, a Material Adverse Effect on Purchaser.

      3.11  TAX MATTERS.

            (a) Each of the Purchaser, its subsidiaries and any individual,
trust, corporation, partnership or any other entity as to which the Purchaser is
liable for Taxes incurred by such individual or entity either as a transferee,
or pursuant to Treasury Regulations Section 1.1502-6, or pursuant to any other
provision of federal, territorial, state, local or foreign law or regulations
(the "Purchaser Group") has timely filed (or has had timely filed) all material
Tax Returns required to be filed by each of them (or on their behalf). All such
Tax Returns are true, complete and correct in all material respects. Purchaser
Group has paid all material Taxes due for the periods covered by such Tax
Returns (whether or not shown on or reportable on such Tax Returns) or with
respect to any period prior to the date of this Agreement. There are no liens on
any of the assets of any member of the Purchaser Group with respect to Taxes,
other than liens for Taxes not yet due and payable or for Taxes that a member of
the Purchaser Group is contesting in good faith through appropriate proceedings
and for which appropriate reserves have been established.

            (b) The most recent Purchaser SEC Report and the Purchaser Financial
Statements reflect adequate reserves for all Taxes payable by Purchaser Group
for all Taxable periods and portions thereof through the dates thereof.

            (c) No material deficiencies for any Taxes have been proposed,
asserted, or assessed (either in writing or verbally, formally or informally) or
are expected to be proposed, asserted, or assessed against the Purchaser Group
that have not been fully paid or adequately provided for in the appropriate
financial statements of Purchaser Group, no requests for waivers of the time to
assess any Taxes are pending, and no power of attorney still in effect in
respect of any Taxes has been executed or filed with any taxing authority. No
member of the Purchaser Group has received notice (either in writing or
verbally, formally or informally) or expects to receive notice that it has not
filed a Tax Return or paid Taxes required to be filed or paid by it. The Tax
Returns of the Purchaser Group have never been audited by a government or taxing
authority, nor is any such audit in process, pending or threatened (either in
writing or verbally, formally or informally). No waiver or extension of any
statute of limitations is in effect with respect to Taxes or Tax Returns of the
Purchaser Group. Each member of the Purchaser Group has disclosed on its federal
income tax returns all positions taken therein that could give rise to a
substantial understatement penalty within the meaning of Section 6662 of the
Code. No member of the Purchaser Group has participated in a "listed
transaction" within the meaning of Treasury Regulations Section 1.6011-4T(b)(2)
(determined without regard to whether such transaction is a "reportable
transaction" under such regulation).

            (d) No member of the Purchaser Group is a party to any safe harbor
lease within the meaning of Section 168(f)(8) of the Code, as in effect prior to
amendment by the Tax Equity and Fiscal Responsibility Act of 1982. No member of
the Purchaser Group is or has been a United States real property holding
corporation within the meaning of Section 897(c)(2) of the

                                       29
<PAGE>

Code during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code and Purchaser is not required to withhold tax on the purchase of the stock
of the Company by reason of Section 1445 of the Code. No member of the Purchaser
Group is a "consenting corporation" under Section 341(f) of the Code. No member
of the Purchaser Group has participated in an international boycott as defined
in Section 999 of the Code. No member of the Purchaser Group has a permanent
establishment in any foreign country, as defined in any applicable Tax treaty or
convention between the United States of America and such foreign country. No
member of the Purchaser Group is a party to any joint venture, partnership or
other agreement, contract or arrangement (either in writing or verbally,
formally or informally) which could be treated as a partnership for federal
income tax purposes.

            (e) No member of Purchaser Group has taken or agreed to take any
action that would prevent the Merger from constituting a reorganization
qualifying under the provisions of Section 368(a) of the Code.

            (f) There are no employment, severance, or termination agreements or
other compensation arrangements currently in effect which may affect Purchaser
Group which provide for the payment of any amount (whether in cash or property
or the vesting of property) as a result of any of the transactions contemplated
by this Agreement that individually or collectively (either alone or upon the
occurrence of any additional or subsequent event), could give rise to a payment
which is nondeductible pursuant to Sections 162(m) or 280G of the Code or an
excise tax to the recipient of such payment pursuant to Section 4999 of the
Code.

            (g) Each member of Purchaser Group has complied in all material
respects with all Legal Requirements applicable to the payment and withholding
of Taxes and have duly and timely withheld from employee salaries, wages and
other compensation and have paid over to the appropriate taxing authority all
material amounts required to be so withheld and paid over for all periods under
all applicable Legal Requirements.

            (h) No federal, state, local, or foreign audits or other
administrative proceedings or court proceedings are presently pending in respect
of any Taxes or Tax Returns of any member of Purchaser Group and no such member
has received notice (either in writing or verbally, formally or informally) of
any pending audit or proceeding in respect of any Taxes or Tax Returns.

            (i) It is the present intention of Purchaser to continue at least
one significant historic business line of Company, or to use a significant
portion of the Company's historic business assets in a business, in each case
within the meaning of Treasury Regulation Section 1.368-1 (d) promulgated under
the Code.

      3.12  INTELLECTUAL PROPERTY.

            (a) Purchaser owns good and marketable title to (free and clear of
all Encumbrances), holds fully valid, enforceable and exclusive licenses of, or
is otherwise duly authorized to use substantially all rights in and under, all
Intellectual Property used or otherwise exploited by it in connection with the
operation of the businesses of Purchaser as presently conducted and as presently
proposed to be conducted (the "Purchaser Intellectual Property"),

                                       30
<PAGE>

other than as limited by the underlying acquisition agreements and production
agreements of Purchaser Film Library or where the failure to hold such rights
would not reasonably be expected to have a Material Adverse Effect on Purchaser.

            (b) Purchaser has not interfered with, infringed upon,
misappropriated or otherwise come into conflict with any Intellectual Property
Rights of any other Person where the action would reasonably be expected to have
a Material Adverse Effect on Purchaser.

      3.13  BROKERS. Except for Cappello Capital Corp., no broker, finder,
investment banker or other person is entitled to receive from Purchaser or any
of its subsidiaries or Affiliates any brokerage, finder's or other fee or
commission or expense reimbursement in connection with the transactions
contemplated by this Agreement.

      3.14  MATERIAL COMPANY CONTRACTS.

            (a) Schedule 3.14(a) of the Purchaser Disclosure Schedule contains a
list identifying certain Contracts (the "Purchaser Contracts"). The Purchaser
has heretofore made available to the Seller true, correct, and complete copies
of all such Purchaser Contracts. To the Purchaser's knowledge, each of the
Purchaser Contracts constitutes the valid and legally binding obligation of the
Purchaser or the Purchaser Subsidiaries, enforceable in accordance with its
terms, and is in full force and effect. There is no material default under any
Purchaser Contract either by the Purchaser (or the Purchaser Subsidiaries) or,
to the Purchaser's knowledge, by any other party thereto, and no event has
occurred that with the giving of notice, the lapse of time, or both would
constitute a material default thereunder by the Purchaser (or the Purchaser
Subsidiaries) or, to the Purchaser's knowledge, any other party. As of the date
hereof, to the Purchaser's knowledge, no party has notified the Purchaser in
writing that it intends to terminate or fail to extend any Purchaser Contract
within one year of the date of this Agreement. To Purchaser's knowledge, no
party to any Purchaser Contract has given notice to the Purchaser or any
Purchaser Subsidiary of or made a claim against the Purchaser or any Purchaser
Subsidiary in respect of any material breach or default thereunder by the
Purchaser or a Purchaser Subsidiary.

            (b) No consent of any third party is required under any Purchaser
Contract as a result of or in connection with, and the enforceability of any
Purchaser Contract will not be affected in any manner by, the execution,
delivery, and performance of this Agreement or the consummation of the
transactions contemplated hereby.

ARTICLE 4. PRE-CLOSING COVENANTS

      4.1   CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Each of
Seller and the Company covenant and agree that, between the date of this
Agreement and the Effective Time, (i) unless Purchaser shall otherwise agree in
writing, (ii) except as specifically permitted or required by this Agreement and
(iii) except for such changes in or transfers of assets or liabilities as may be
necessary so that the representations and warranties contained in Section 2.1
are accurate as of the Closing, the businesses of the Company and the
Subsidiaries shall be conducted only in, and the Company and the Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice. Each of Seller and the

                                       31
<PAGE>

Company shall use their respective best efforts to preserve substantially intact
the business organization of the Company and the Subsidiaries, to keep available
the services of the current officers, employees and consultants of the Company
and the Subsidiaries, and to preserve the current relationships of the Company
and the Subsidiaries with customers, suppliers and other persons with which the
Company or any of the Subsidiaries has significant business relations. Seller
shall cause the Company and the Subsidiaries to comply with the Company's
obligations under this Section 4.1. By way of amplification and not limitation,
except as expressly contemplated by this Agreement, neither the Company nor any
of the Subsidiaries shall, between the date of this Agreement and the Effective
Time, directly or indirectly, do, or propose to do, any of the following without
the prior written consent of Purchaser:

            (a) amend or otherwise change its articles of incorporation or
bylaws or equivalent organizational documents;

            (b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of any class of capital stock of the Company or any of the Subsidiaries, or any
options, warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest) of the Company or any of the
Subsidiaries; or (ii) any material assets of the Company or any of the
Subsidiaries, except in the ordinary course of business and in a manner
consistent with past practice;

            (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its capital stock;

            (d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its capital stock;

            (e) (i) acquire (including, without limitation, by merger, share
exchange, consolidation, or acquisition of stock or assets or any other business
combination) any other Entity or any division thereof or any material amount of
assets; (ii) incur any indebtedness for borrowed money or issue any debt
securities or assume, guarantee or endorse, or otherwise become responsible for,
the obligations of any person, or make any loans or advances, except in the
ordinary course of business and consistent with past practice, but in no event
for more than $10,000 in each instance or $100,000 in the aggregate; (iii)
authorize, or make any commitment with respect to any single capital expenditure
which is, individually, in excess of $10,000, or in the aggregate in excess of
$100,000; or (iv) make or direct to be made any capital investments or equity
investments in any entity, other than investments in any of its wholly-owned
Subsidiaries, in excess of $10,000 for a single transaction and $100,000 in the
aggregate;

            (f) except for changes expressly required or contemplated in this
Agreement, increase the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and consistent with past practice in salaries
or wages of employees of the Company or any of the Subsidiaries who are not
directors or officers of the Company; or grant any severance or termination pay
to, or enter into any employment or severance agreement with, any director,
officer or other employee of the Company or of any of the Subsidiaries; or
establish, adopt, enter into or amend any

                                       32
<PAGE>

employee benefit, bonus, profit-sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee;

            (g) hire any new employee other than in the ordinary course of
business or terminate any officer or key employee;

            (h) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable);

            (i) make or change any election in respect of Taxes, adopt or change
any accounting method in respect of Taxes, file any amendment to a Tax Return,
enter into any closing agreement, settle any claim or assessment in respect of
Taxes, or consent to any extension or waiver of the limitation period applicable
to any claim or assessment in respect of Taxes;

            (j) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business and
consistent with past practice, of liabilities reflected or reserved against in
the Company Balance Sheet or subsequently incurred in the ordinary course of
business and consistent with past practice;

            (k) amend, modify or consent to the termination of any Material
Company Contract or Film License, or amend, waive, modify or consent to the
termination of the rights of the Company or any of the Subsidiaries thereunder,
other than in the ordinary course of business and consistent with past practice;

            (l) commence or settle any Legal Proceeding;

            (m) knowingly take, or allow to be taken, or fail to take any action
which act or omission would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code;

            (n) fail to maintain its property and assets in customary repair,
order and condition, reasonable wear and use excepted;

            (o) fail to maintain its books account and records in the usual,
regular and ordinary manner, in accordance with GAAP applied on a consistent
basis;

            (p) fail to comply in all material respects with applicable Legal
Requirements;

            (q) engage in any action or enter into any transaction or permit any
action to be taken or transaction to be entered into that could reasonably be
expected to delay the consummation of, or otherwise adversely affect any of the
transactions contemplated hereunder;

                                       33
<PAGE>

            (r) take any action that would, or would reasonably be expected to,
result in any of the representations and warranties of the Company set forth in
this Agreement to be untrue or any condition to the Merger set forth in Article
7 to not be satisfied; or

            (s) announce an intention, enter into any formal or informal
agreement or arrangement, or otherwise make a commitment to do any of the
foregoing.

      4.2   CONDUCT OF BUSINESS BY PURCHASER PENDING THE MERGER. Purchaser
covenants and agrees that, between the date of this Agreement and the Effective
Time, unless Seller shall otherwise agree in writing and except as specifically
permitted or required by this Agreement, the business of Purchaser shall be
conducted only in, and Purchaser shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice.
Purchaser shall not, between the date of this Agreement and the Effective Time,
directly or indirectly, do, or propose to do, any of the following without the
prior written consent of Seller:

            (a) amend or otherwise change its or Merger Sub's articles or
certificate of incorporation or bylaws or equivalent organizational documents;

            (b) issue, sell, pledge, dispose of, grant, encumber, or authorize
the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares
of any class of capital stock of Purchaser or Merger Sub or any options (except
pursuant to Board-approved employee benefit plans in existence on the date
hereof), warrants, convertible securities or other rights of any kind to acquire
any shares of such capital stock, or any other ownership interest (including,
without limitation, any phantom interest) of Purchaser or Merger Sub; or (ii)
any material assets of Purchaser, except in the ordinary course of business and
in a manner consistent with past practice;

            (c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect to any
of its or Merger Sub's capital stock;

            (d) reclassify, combine, split, subdivide or redeem, or purchase or
otherwise acquire, directly or indirectly, any of its or Merger Sub's capital
stock;

            (e) except for changes expressly required or contemplated in this
Agreement, increase the compensation payable or to become payable or the
benefits provided to its directors, officers or employees, except for increases
in the ordinary course of business and consistent with past practice in salaries
or wages of employees of the Purchaser or any Purchaser Subsidiary who are not
directors or officers of the Purchaser, or grant any severance or termination
pay to, or enter into any employment or severance agreement with, any director,
officer or other employee of the Purchaser or of any Purchaser Subsidiary, or
establish, adopt, enter into or amend any employee benefit, bonus,
profit-sharing, thrift, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment, termination , severance or other
plan, agreement, trust, fund, policy or arrangement for the benefit of any
director, officer or employee;

            (f) take any action, other than reasonable and usual actions in the
ordinary course of business and consistent with past practice, with respect to
accounting policies or procedures (including, without limitation, procedures
with respect to the payment of accounts payable and collection of accounts
receivable);

                                       34

<PAGE>

            (g) knowingly take, or allow to be taken, or fail to take any action
which act or omission would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code;

            (h) fail to maintain its books account and records in the usual,
regular and ordinary manner, in accordance with GAAP applied on a consistent
basis;

            (i) fail to comply in all material respects with applicable Legal
Requirements where the failure to so comply would be reasonably likely to have a
Material Adverse Effect on Purchaser;

            (j) engage in any action or enter into any transaction or permit any
action to be taken or transaction to be entered into that could reasonably be
expected to delay the consummation of, or otherwise adversely affect any of the
transactions contemplated hereunder;

            (k) take any action that would, or would reasonably be expected to,
result in any of the representations and warranties of the Purchaser and Merger
Sub set forth in this Agreement to be untrue or any condition to the Merger set
forth in Article 7 to not be satisfied; or

            (l) announce an intention, enter into any formal or informal
agreement or arrangement, or otherwise make a commitment to do any of the
foregoing.

      4.3   INTERCOMPANY ACCOUNTS AND CONTRACTS; UPSTREAM GUARANTIES. On or
prior to the Closing Date and except as otherwise provided in this Agreement,
Seller shall (i) pay or cause to be paid to the Company and the Subsidiaries all
amounts owing by Seller or its Affiliates to each of them, if any; and (ii)
terminate or cause to be terminated all Contracts between Seller or its
Affiliates, on the one hand, and the Company or any of the Subsidiaries, on the
other hand, and (iii) cancel or cause to be cancelled all guaranties and
security interests given by the Company or any Subsidiary on behalf of Seller or
any of its Affiliates, in each case except as otherwise requested by Purchaser.
Seller has furnished to Purchaser prior to the date hereof the details of all
such arrangements and copies of Contracts relating thereto, if any.

      4.4   NO SOLICITATION. Until the earlier of (a) the Closing and (b) the
termination of this Agreement pursuant to its terms, Seller shall not, and
Seller shall cause its Representatives not to, directly or indirectly, (i)
initiate, solicit or encourage (including by way of furnishing information
regarding the Company or any of its assets) any inquiries, or make any
statements to third parties which may reasonably be expected to lead to any
proposal concerning the sale of the Company or any of its assets (whether by way
of merger, purchase of capital shares, purchase of assets or otherwise) (a
"Competing Transaction"); or (ii) except as may otherwise be required under
applicable law, hold any discussions or enter into any agreements with, or
provide any information or respond to, any third party concerning a proposed
Competing Transaction or cooperate in any way with, agree to, assist or
participate in, solicit, consider, entertain, facilitate or encourage any effort
or attempt by any third party to do or seek any of the foregoing. If at any time
prior to the earlier of (x) the Closing and (y) the termination of this
Agreement pursuant to its terms, Seller is approached in any manner by a third
party concerning a Competing Transaction (a "Competing Party"), Seller shall
promptly inform Purchaser regarding such

                                       35

<PAGE>

contact and furnish Purchaser with a copy of any inquiry or proposal, or, if not
in writing, a description thereof, including the name of such Competing Party,
and Seller shall keep Purchaser informed of the status and details of any future
notices, requests, correspondence or communications related thereto.

      4.5   CERTAIN NOTIFICATIONS. From the date of this Agreement until the
Closing, each of Seller and the Company on the one hand, and Purchaser on the
other hand, shall promptly notify the other party in writing regarding any:

            (a) action taken by any of them not in the ordinary course of
business and any circumstance or event that could reasonably be expected to have
a Material Adverse Effect on either of them, the Company or Merger Sub;

            (b) fact, circumstance, event, or action by any of them or any of
their respective Affiliates, including the Company and Merger Sub, (i) which, if
known on the date of this Agreement, would have been required to be disclosed in
or pursuant to this Agreement; or (ii) the existence, occurrence, or taking of
which would result in any of their respective representations and warranties
contained in this Agreement not being true and correct when made or at Closing;

            (c) breach of any of their, the Company's or Merger Sub's respective
covenants or obligations hereunder; or

            (d) circumstance or event which will result in, or could reasonably
be expected to result in, the failure of any of them to timely satisfy any
closing conditions specified in Article 7 of this Agreement.

      4.6   UPDATING THE DISCLOSURE SCHEDULES. If any event, condition, fact or
circumstance that is required to be disclosed pursuant to Section 4.5 would
require a change to the Seller Disclosure Schedule or Purchaser Disclosure
Schedule if such Disclosure Schedule were dated as of the date of the
occurrence, existence or discovery of such event, condition, fact or
circumstance, then Seller or Purchaser, as appropriate, shall promptly deliver
to the other party an update to its Disclosure Schedule specifying such change
and shall use its best efforts to remedy same, as applicable; provided, however,
that no such update shall be deemed to supplement or amend the Disclosure
Schedule for the purpose of (i) determining the accuracy of any of the
representations and warranties made by any party in this Agreement or (ii)
determining whether any of the conditions set forth in Article 7 have been
satisfied.

      4.7   ACCESS TO INFORMATION. From the date of this Agreement until the
Closing, each of Seller and the Company on the one hand, and Purchaser on the
other hand, shall (i) permit the other party and its Representatives to have
free and complete access at all reasonable times, and in a manner so as not to
interfere with their normal business operations, to all premises, properties,
personnel, Persons having business relationships with any of them or their
respective subsidiaries (including suppliers, licensees, customers and
distributors), books, records (including Tax records), contracts, and documents
of or pertaining to any of them; (ii) furnish the other party with all
financial, operating and other data and information related to their respective
businesses (including copies thereof), as the other party may reasonably
request; and

                                       36

<PAGE>

(iii) otherwise cooperate and assist, to the extent reasonably requested, with
their investigation of the other party. No information or knowledge obtained in
any investigation pursuant to this Section 4.6 shall affect or be deemed to
modify any representation or warranty contained herein or the conditions to the
obligations of the parties to consummate the Merger.

      4.8   BEST EFFORTS. From the date of this Agreement until the Closing,
each of Seller and Purchaser shall use their respective best efforts to cause to
be fulfilled and satisfied all of the other party's conditions to Closing set
forth in Article 7.

      4.9   CONSENTS. As promptly as possible after the date of this Agreement,
Purchaser, Seller, the Company and the Subsidiaries shall use their respective
best efforts to obtain all Consents (as defined in Section 2.9) and make and
deliver all filings and notices required under any Material Company Contract or
Film Licenses as a result of this Agreement and the transactions contemplated
hereby. Purchaser shall not be required to agree to any material changes in, or
the imposition of any material condition to the transfer to the Surviving
Corporation of, any Material Company Contract, Film License or Governmental
Approval as a condition to obtaining any Consent.

ARTICLE 5. POST-CLOSING COVENANTS

      5.1   RESALE AND VOTING OF PURCHASER COMMON STOCK. Seller agrees that,
from and after the Closing Date, it and its Affiliates will only sell, transfer,
loan, hypothecate or vote the shares of Purchaser Common Stock constituting the
Merger Consideration in accordance with the terms of the Resale and Voting
Agreement attached hereto as Exhibit C.

      5.2   COMPANY INTELLECTUAL PROPERTY.

            (a) Seller agrees that, from and after the Closing Date, it shall
not, and it shall cause its Representatives not to, use any of the Company
Intellectual Property. If Seller or any assignee of Seller owns or has any right
or interest in any Company Intellectual Property that cannot be, or for any
reason is not, owned exclusively by the Surviving Corporation or its
subsidiaries at the Closing, Seller shall grant or cause to be granted to the
Surviving Corporation, at the Closing, a worldwide, royalty-free, fully paid up,
perpetual, irrevocable, transferable, sublicensable, and exclusive license to
Exercise All Rights in and to such Company Intellectual Property.

            (b) If Purchaser or the Surviving Corporation is unable to enforce
rights in Company Intellectual Property against a third party as a result of any
Legal Requirement that prohibits enforcement of such rights by a transferee of
such rights, Seller agrees to assign to Purchaser such rights as may be required
by Purchaser or the Surviving Corporation to enforce its Intellectual Property
Rights in its own name. If such assignment still does not permit Purchaser to
enforce such rights in Company Intellectual Property against the third party,
Seller agrees to initiate proceedings against such third party in Seller's name;
provided, however, that Purchaser shall be entitled to participate in such
proceedings and Purchaser shall be responsible for the all costs and expenses of
such proceedings.

      5.3   COOPERATION. After the Closing, Seller shall (a) cooperate with
Purchaser in its efforts to continue and maintain for the benefit of Purchaser
those business relationships of Seller

                                       37

<PAGE>

existing prior to the Closing and relating to the business of the Company or
Subsidiaries; (b) refer to Purchaser all inquiries relating to such business;
and (c) promptly deliver to Purchaser (i) any mail, packages and other
communications addressed to Seller relating to the Surviving Corporation or its
subsidiaries and (ii) any cash or other property that Seller receives and that
properly belongs to the Surviving Corporation or its subsidiaries, including any
insurance proceeds, payments with respect to receivables, and interest payable
thereon. Neither Seller nor any of its officers, employees, agents or
stockholders shall take any action that would tend to diminish the value of the
Surviving Corporation or its subsidiaries after the Closing or that would
interfere with the business of Purchaser to be engaged in after the Closing,
including disparaging the name or business of Purchaser or the Surviving
Corporation or its subsidiaries.

      5.4   LIMITED POWER OF ATTORNEY. Effective upon the Closing, Seller hereby
irrevocably appoints Purchaser and its successors, agents and assigns as its
true and lawful attorney, in its name, place and stead, with power of
substitution, to take any action and to execute any instrument which Purchaser
may deem necessary or advisable to fulfill Seller's obligations or rights under,
or to accomplish the purposes of, this Agreement, including, (i) to demand and
receive any and all assets or rights that rightfully belong to the Surviving
Corporation or its subsidiaries and to make endorsements and give receipts and
releases for and in respect of the same; (ii) to institute, prosecute, defend,
compromise and/or settle any and all Legal Proceedings with respect to the
Surviving Corporation or its subsidiaries; (iii) to make any filings required to
transfer any Company Intellectual Property; (iv) to receive and open all mail,
packages and other communications addressed to Seller and relating to the
Surviving Corporation or its subsidiaries; and (v) in the name of Seller or
otherwise, collect all receivables of the Surviving Corporation or its
subsidiaries for its own account. The foregoing power of attorney is a special
power of attorney coupled with an interest and is irrevocable.

      5.5   NONDISCLOSURE. After the Closing Date, except as may be required for
tax purposes, filings or reports with the SEC or The Nasdaq Stock Market, Inc.,
or other regulatory purposes, neither Seller nor any of its successors and
assigns shall (a) retain any document, databases or other media embodying any
confidential or proprietary information of the Surviving Corporation or its
subsidiaries, or use, publish or disclose to any third person any such
confidential or proprietary know-how; provided, however, that Seller shall be
entitled to retain copies of any of the foregoing to the extent necessary in
connection with prosecuting or defending any Legal Proceeding in which Seller is
a party or (b) use, publish or disclose any information concerning Purchaser,
the Surviving Corporation or its subsidiaries. In the event of any termination
of this Agreement, (i) Seller shall treat as confidential and proprietary and
shall not disclose or use, directly or indirectly, in any manner whatsoever, or
permit others under its control to disclose or to use, any information
concerning Purchaser or its business or products obtained pursuant to or in
connection with this Agreement, unless such information is or becomes a matter
of public knowledge through no fault of Seller or can be shown to have been in
the possession of Seller prior to disclosure by Purchaser; and (ii) Seller shall
promptly return to Purchaser upon written request all written information and
documents received from any other party, its affiliates, accountants or counsel,
in connection with this Agreement, including all copies thereof. Purchaser
acknowledges that there is not an adequate remedy at law for the breach of this
Section 5.5 and that, in addition to any other remedies available, injunctive
relief may be granted for any such breach. The provisions of this Section 5.5
shall survive any termination of this Agreement.

                                       38

<PAGE>

      5.6   POST-CLOSING EMPLOYEE BENEFITS. After the Closing, and continuing
for a period of at least 12 months, Seller shall, if requested by Purchaser and
permitted under applicable law or otherwise, arrange for each employee of the
Surviving Corporation or its subsidiaries to continue to receive benefits under
Seller's benefit plans upon reimbursement by Purchaser of Seller's actual costs
of continuing to provide such benefits.

      5.7   COMPLIANCE WITH LEGAL REQUIREMENTS AND OTHER OBLIGATIONS. Prior to
the Closing, at its sole cost and expense, Seller shall take all actions
necessary to comply with all appropriate Legal Requirements in connection with
Seller's employment of its employees, including any Legal Requirements under the
WARN Act. Seller shall be solely responsible, before and after the Closing, for
the payment of any amounts required to be paid under any Legal Requirement,
including the WARN Act and any similar state laws, as a result of the transfer
of any employee to the Surviving Corporation or its Subsidiaries in connection
with this Agreement.

      5.8   NO BENEFIT TO SELLER EMPLOYEES INTENDED. This Article 5 is not
intended to, and does not, create any rights or obligations to or for the
benefit of anyone other than Purchaser and Seller.

      5.9   SATISFACTION OF CERTAIN PERMITTED ENCUMBRANCES. Immediately
following consummation of the Merger, Purchaser shall cause (a) that portion of
the Permitted Encumbrances owing to Atlantic Bank of New York ("Atlantic Bank")
to be satisfied in full and (b) cause the stock certificates evidencing the
Company's ownership of Wellspring to be delivered to the pledgees in accordance
with the terms of the Wellspring Stock Pledge Agreement.

ARTICLE 6. TAX COVENANTS AND INDEMNIFICATION

      6.1   PREPARATION OF RETURNS AND PAYMENT OF TAXES. Seller and the Company
shall prepare and timely file all Tax Returns and amendments thereto required to
be filed by them and the Seller Group on or before the Closing Date. Purchaser
shall have a reasonable opportunity to review prior to filing all Tax Returns
and amendments thereto. Seller, the Company and each member of the Seller Group
shall pay and discharge all Taxes, assessments and governmental charges upon or
against it or any of its properties or assets due for periods ending on or prior
to the Closing Date, and all liabilities at any time existing, before the same
shall become delinquent and before penalties accrue thereon, except to the
extent and as long as: (i) the same are being contested in good faith and by
appropriate proceedings pursued diligently and in such a manner as not to cause
any material adverse effect upon the condition (financial or otherwise) or
operations of the Company or any member of the Seller Group; and (ii) the
Company shall have set aside on its books reserves (segregated to the extent
required by sound accounting practice) in the amount of the demanded principal
imposition (together with interest and penalties relating thereto, if any).

      6.2   ACCESS TO RECORDS PRE-CLOSING. Between the date of this Agreement
and the Closing Date, Seller and the Company shall give Purchaser and its
authorized representatives full access to all properties, books, records and Tax
Returns of or relating to the Company, whether in possession of the Company,
Seller or third-party professional advisors or representatives

                                       39

<PAGE>

(except accountant's work papers) in order that Purchaser may have full
opportunity to make such investigations as it shall desire to make of the
affairs of the Company. Seller and the Company shall ensure that all third-party
advisors and representatives of Seller and the Company, including without
limitation accountants and attorneys, fully cooperate and be available to
Purchaser in connection with such investigation.

      6.3   TAX SHARING AGREEMENTS. Seller and the Company shall, as of the
Closing Date, terminate all tax allocation agreements or tax sharing agreements
with respect to the Company and shall ensure that such agreements are of no
further force or effect as to the Company on and after the Closing Date and
there shall be no further liability of the Company under any such agreement.

      6.4   ACCESS TO RECORDS FOLLOWING CLOSING. Purchaser and Seller agree that
so long as any books, records and files retained by Seller relating to the
business of the Company, or the books, records and files delivered to the
control of Purchaser pursuant to this Agreement to the extent they relate to the
operations of the Company prior to the Closing Date, remain in existence and
available, each party (at its expense) shall have the right upon prior notice to
inspect and to make copies of the same at any time during business hours for any
proper purpose. Purchaser and Seller shall use reasonable efforts not to destroy
or allow the destruction of any such books, records and files without first
offering in writing to deliver them to the other.

      6.5   SELLER'S INDEMNIFICATION.

            (a) From and after the Closing Date, Seller shall protect, defend,
indemnify and hold harmless Purchaser and the Company from any and all Taxes
which are imposed on the Company in respect of its income, business, property or
operations or for which the Company may otherwise be liable (i) for any taxable
period ending prior to the Closing Date, (ii) resulting by reason of the several
liability of the Company pursuant to Treasury Regulations Section 1.1502-6 or
any analogous state, local or foreign law or regulation or by reason of the
Company having been a member of any consolidated, combined or unitary group on
or prior to the Closing Date, (iii) resulting from the Company ceasing to be a
member of the affiliated group (within the meaning of Section 1504(a) of the
Code) that includes Seller, (iv) in respect of any period ending after the
Closing Date, attributable to events, transactions, sales, deposits, services or
rentals occurring, received or performed in a period ending prior to the Closing
Date, (v) in respect of any period ending after the Closing Date, attributable
to any change in accounting method employed by the Company during any of its
four previous taxable years, (vi) in respect of any period ending after the
Closing Date, attributable to any items of income or gain of a partnership
reporting the Company as a partner, to the extent such items are properly
attributable to periods of the partnership ending on or before the Closing Date,
(vii) attributable to any discharge of indebtedness that may result from any
capital contributions by Seller (or an affiliate of Seller) to the Company of
any intercompany indebtedness owed by the Company to Seller (or an affiliate of
Seller), (viii) resulting from the making of the Code Section 338 election (or
analogous provision of state, local or territorial law), and (ix) resulting from
the breach of Seller's covenants set forth in Article 6; provided, however, that
Seller's liability under the foregoing provisions of this paragraph shall be
reduced as to any item to the extent that such item was specifically and fully
reserved for on the consolidated balance sheet of Seller as of the most recent
SEC filings.

                                       40

<PAGE>

            (b) Purchaser will, as to any Taxes in respect of which Seller has
agreed to indemnify Purchaser or the Company, promptly inform Seller of, and
permit the participation of Seller in, any investigation, audit or other
proceeding by or with the Internal Revenue Service or any other taxing authority
empowered to administer or enforce such a tax and will not consent to the
settlement or final determination in such proceeding without the prior written
consent of Seller (which consent will not be unreasonably withheld).

            (c) All payments pursuant to this Section 6.5 will be, and will be
treated as, adjustments to the Merger Consideration.

      6.6   PURCHASER'S INDEMNIFICATION.

            (a) From and after the Closing Date, Purchaser shall protect,
defend, indemnify and hold harmless Seller from any and all Taxes which are
imposed on the Company in respect of its income, business, property or
operations or for which the Company may otherwise be liable (i) for any taxable
period ending after the Closing Date, (ii) resulting by reason of the several
liability of the Company pursuant to Treasury Regulations Section 1.1502-6 or
any analogous state, local or foreign law or regulation or by reason of the
Company having been a member of any consolidated, combined or unitary group
after to the Closing Date, (iii) in respect of any period ending after the
Closing Date, attributable to any items of income or gain of a partnership
reporting the Company as a partner, to the extent such items are properly
attributable to periods of the partnership ending after the Closing Date, and
(iv) resulting from the breach of Purchaser's covenants set forth in Article 6.

            (b) Seller will, as to any Taxes in respect of which Purchaser has
agreed to indemnify Seller, promptly inform Purchaser of, and permit the
participation of Purchaser in, any investigation, audit or other proceeding by
or with the Internal Revenue Service or any other taxing authority empowered to
administer or enforce such a tax and will not consent to the settlement or final
determination in such proceeding without the prior written consent of Purchaser
(which consent will not be unreasonably withheld).

            (c) All payments pursuant to this Section 6.6 will be, and will be
treated as, adjustments to the Merger Consideration.

ARTICLE 7. CONDITIONS TO CLOSING

      7.1   CONDITIONS TO PURCHASER'S OBLIGATION TO CLOSE. The obligations of
Purchaser to consummate the Merger shall be subject to the satisfaction, on or
prior to the Closing, of each of the following conditions, any of which may be
waived by Purchaser in writing:

            (a) Representations, Warranties and Covenants. (i) All of the
representations and warranties of Seller and the Company in this Agreement shall
have been true and correct as of the date of this Agreement and shall be true
and correct as of the Closing Date (or, to the extent such representations and
warranties speak only as of an earlier date, they shall be true and correct as
of such earlier date); (ii) Seller and the Company shall have performed all
covenants and obligations in this Agreement required to be performed by each of
them as of the Closing Date; and (iii) Purchaser shall have received a
certificate, dated the Closing Date, signed on behalf of Seller by its Chief
Executive Officer and Chief Financial Officer to that effect.

                                       41

<PAGE>

            (b) Key Consents. Seller shall have delivered to Purchaser all
executed Consents specified in Schedule 7.1(b) of the Seller Disclosure
Schedule.

            (c) No Legal Proceedings. Since the date of this Agreement, no Legal
Proceeding shall have been commenced or threatened against Purchaser or any
Representative of Purchaser that have not been dismissed or withdrawn (a)
involving any challenge to, or seeking damages or other relief in connection
with, the Merger; or (b) that may have the effect of preventing, delaying,
making illegal, imposing limitations or conditions on or otherwise interfering
with the Merger.

            (d) Opinion of Counsel. Purchaser shall have received an Opinion of
Seller's counsel, in form and substance reasonably acceptable to Purchaser,
covering the matters contained in Exhibit 7.1(d).

            (e) Other Agreements. Seller shall have executed and delivered to
Purchaser (i) the Registration Rights Agreement in the form attached hereto as
Exhibit B; (ii) the Resale and Voting Agreement in the form attached hereto as
Exhibit C; (iii) the Escrow Agreement in the form attached hereto as Exhibit E;
(iv) the Assumption Agreement in the form attached hereto as Exhibit F; and (v)
the Assignment Agreement in the form attached hereto as Exhibit G.

            (f) No Material Adverse Effect. Since the date of this Agreement,
there shall have occurred any events or changes (other than those contemplated
under this Agreement) which have had, individually or in the aggregate, a
Material Adverse Effect on the Company and the Subsidiaries taken as a whole.

      7.2   CONDITIONS TO SELLER'S OBLIGATION TO CLOSE. The obligations of
Seller to consummate the Merger shall be subject to the satisfaction, on or
prior to the Closing, of each of the following conditions, any of which may be
waived by Seller in writing:

            (a) Representations, Warranties and Covenants. (i) All of the
representations and warranties of Purchaser in this Agreement shall have been
true and correct as of the date of this Agreement and shall be true and correct
as of the Closing Date (or, to the extent such representations and warranties
speak as of an earlier date, they shall be true and correct as of such earlier
date); (ii) Purchaser shall have performed all covenants and obligations in this
Agreement required to be performed by it as of the Closing Date; and (iii)
Seller shall have received a certificate, dated the Closing Date, signed on
behalf of Purchaser by its Chief Executive Officer and Chief Financial Officer
to that effect.

            (b) Appointment of Board Member. Purchaser shall have taken the
necessary actions so that, effective immediately following the consummation of
the Merger, Purchaser's Board of Directors shall have appointed one individual
named by Seller, who shall be Stephen K. Bannon unless he is unable to serve, to
Purchaser's Board of Directors to serve until the next annual meeting of
shareholders of Purchaser. Further, Mr. Bannon shall be elected as co-chairman
of the Board of Directors of Purchaser, effective immediately following the
consummation of the Merger.

            (c) No Legal Proceedings. Since the date of this Agreement, no Legal
Proceeding shall have been commenced or threatened against Seller or any
Representative of

                                       42

<PAGE>

Seller that have not been dismissed or withdrawn (a) involving any challenge to,
or seeking damages or other relief in connection with, the Merger; or (b) that
may have the effect of preventing, delaying, making illegal, imposing
limitations or conditions on or otherwise interfering with the Merger.

            (d) Opinion of Counsel. Seller shall have received an Opinion of
Purchaser's counsel, in form and substance reasonably acceptable to Seller,
covering the matters contained in Exhibit 7.2(d).

            (e) Other Agreements. Purchaser shall have executed and delivered to
Seller (i) the Registration Rights Agreement in the form attached hereto as
Exhibit B; (ii) the Resale and Voting Agreement in the form attached hereto as
Exhibit C; (iii) the Warrant in the form attached hereto as Exhibit D; (iii) the
Escrow Agreement in the form attached hereto as Exhibit E; and (iv) the
Assumption Agreement in the form attached hereto as Exhibit F; and (v) the
Assignment Agreement in the form attached hereto as Exhibit G (or caused
Hypnotic to do so).

            (f) No Material Adverse Effect. Since the date of this Agreement,
there shall have occurred any events or changes (other than those contemplated
under this Agreement) which have had, individually or in the aggregate, a
Material Adverse Effect on the Purchaser.

            (g) Financial Position. The Purchaser, on a consolidated basis,
shall have, as of the Closing Date, net working capital of no less than
$2,300,000. For purposes of this Section 7.2(g), net working capital shall be
defined as current assets minus current liabilities.

      7.3   CONDITIONS TO OBLIGATIONS OF EACH PARTY TO CLOSE. The respective
obligations of each party to this Agreement to consummate the Merger shall be
subject to the satisfaction, on or prior to the Closing, of each of the
following condition(s), any of which may be waived by Purchaser or Seller, as
applicable, in writing:

            (a) No Legal Impediments to Closing. There shall not be in effect
any Order issued by any Governmental Authority preventing the consummation of
the Merger, seeking any damages as a result of the Merger, or otherwise
affecting the right or ability of Purchaser to own, operate or control the
Company and the Subsidiaries, nor shall any Legal Proceeding be pending that
seeks any of the foregoing. There shall not be any Legal Requirement prohibiting
Seller from selling or Purchaser from owning, operating or controlling the
Company and the Subsidiaries or that makes this Agreement or the consummation of
the Merger illegal.

ARTICLE 8. TERMINATION

      8.1   CIRCUMSTANCES FOR TERMINATION. At any time prior to the Closing,
this Agreement may be terminated by the mutual written consent of Purchaser and
Seller, or by Purchaser (on behalf of itself and Merger Sub) or Seller (on
behalf of itself and the Company) by delivery of written notice to the other
explaining the reason for such termination (without prejudice to other remedies
which may be available to the parties under this Agreement, at law or in
equity):

                                       43

<PAGE>

            (a) by either Purchaser or Seller if (i) the non-terminating party
is in material breach of any material provision of this Agreement and such
breach shall not have been cured within ten (10) days of receipt by such party
of written notice from the terminating party of such breach]; and (ii) the
terminating party is not, on the date of termination, in material breach of any
material provision of this Agreement;

            (b) by either Purchaser or Seller if (i) the Closing has not
occurred on or prior to March 21, 2005, (the "Outside Closing Date") for any
reason; and (ii) the terminating party is not, on the date of termination, in
material breach of any material provision of this Agreement; and

            (c) by either Purchaser or Seller if (i) satisfaction of a closing
condition of the terminating party in Article 7 is impossible; and (ii) the
terminating party is not, on the date of termination, in material breach of any
material provision of this Agreement.

      8.2   EFFECT OF TERMINATION. Subject to Section 8.3, if this Agreement is
terminated in accordance with Section 8.1, all obligations of the parties
hereunder shall terminate, except for the obligations set forth in this Article
8 and Section 5.5; provided, however, that nothing herein shall relieve any
party from liability for the breach of any of its representations, warranties,
covenants or agreements set forth in this Agreement.

      8.3   FEES FOR TERMINATION. If Purchaser or Seller terminates this
Agreement pursuant to Section 8.1(c) by reason of the failure of the other party
to satisfy any of the terminating party's closing conditions contained in
Article 8 and all of the terminating party's closing conditions have been
satisfied, the non-terminating party shall promptly pay the terminating party
for all of its out-of-pocket costs and expenses associated with the Merger.

ARTICLE 9. INDEMNIFICATION

      9.1   SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations and
warranties of the parties to this Agreement or any other Transaction Agreement
shall survive the Closing until the earlier of sixty (60) days after delivery by
Purchaser's auditor of an audit report covering Purchaser's fiscal year which
includes the Closing Date or April 30, 2006 (the "Survival Date"); provided,
however, that (a) all representations and warranties of the parties contained in
Section 2.15 (Environmental Matters), Section 2.16 (Tax Matters), and Section
3.11 (Tax Matters) shall survive until 90 days after all applicable statutes of
limitations, including waivers and extensions, have expired with respect to each
matter addressed therein; (b) all representations and warranties of the parties
contained in Sections 2.1, 2.2, 2.3, 3.1 and 3.2, as in effect at the Closing,
shall survive indefinitely; and (c) any claim for indemnification based upon a
breach of any such representation or warranty and asserted prior to the Survival
Date by written notice shall survive until final resolution of such claim. The
representations and warranties contained in this Agreement (and any right to
indemnification for breach thereof) shall not be affected by any investigation,
verification or examination by any party hereto or by any Representative of any
such party or by any such party's Knowledge of any facts with respect to the
accuracy or inaccuracy of any such representation or warranty.

                                       44

<PAGE>

      9.2   INDEMNIFICATION BY SELLER. Subject to the limitations set forth in
this Article 9 and except for matters subject to indemnification in Section 6.5,
Seller shall indemnify, defend and hold harmless Purchaser and its
Representatives from and against any and all Damages, whether or not involving a
third-party claim, including attorneys' fees (collectively, "Purchaser
Damages"), arising out of, relating to or resulting from (a) any breach of a
representation or warranty of Seller or the Company contained in this Agreement
or in any other Transaction Agreement; (b) any breach of a covenant of Seller or
the Company contained in this Agreement or in any other Transaction Agreement;
(c) any business or assets of Seller not transferred to Purchaser under this
Agreement; or (d) any violation or noncompliance with applicable bulk sales or
fraudulent transfer Legal Requirements in connection with the Merger. The
parties specifically agree that, in the event of a breach of a representation or
warranty contained in Section 2.5(f) hereof, Purchaser Damages will be measured
as (x) the amount by which accounts payable at February 28, 2005 exceed the
amount indicated in Section 2.5(f)(A) plus (y) the amount by which accounts
receivable at February 28, 2005 are less than the amount indicated in Section
2.5(f)(B), as determined in each case by an audit of the Company's books and
records conducted by Purchaser within 90 days after the Effective Date.

      9.3   INDEMNIFICATION BY PURCHASER. Subject to the limitations set forth
in this Article 9, Purchaser shall indemnify, defend and hold harmless Seller
and its Representatives (collectively, the "Seller Indemnified Persons") from
and against any and all Damages, whether or not involving a third-party claim,
including attorneys' fees (collectively, "Seller Damages"), arising out of,
relating to or resulting from (a) any breach of a representation or warranty of
Purchaser contained in this Agreement or in any other Transaction Agreement; (b)
any breach of a covenant of Purchaser contained in this Agreement or in any
other Transaction Agreement; or (c) the business or operations of the Company or
the Subsidiaries after the Closing Date, unless such Damages relate to a
condition or circumstance in existence on or prior to the Closing Date which
Seller failed to disclose to Purchaser prior to the Closing.

      9.4   PROCEDURES FOR INDEMNIFICATION.

            (a) Promptly after receipt by a party entitled to indemnification
hereunder (the "Indemnitee") of written notice of the assertion or the
commencement of any Legal Proceeding by a third-party with respect to any matter
referred to in Sections 9.2 or 9.3, the Indemnitee shall give written notice
thereof to the party obligated to indemnify Indemnitee (the "Indemnitor"), and
thereafter shall keep the Indemnitor reasonably informed with respect thereto;
provided, however, that failure of the Indemnitee to give the Indemnitor notice
as provided herein shall not relieve the Indemnitor of its obligations hereunder
except to the extent that the Indemnitor is prejudiced thereby. A claim for
indemnification for any matter not involving a third-party Legal Proceeding may
be asserted by notice to the party from whom indemnification is sought and shall
be paid promptly after such notice.

            (b) If any claim for indemnification is made by Purchaser pursuant
to Section 9.2 prior to the expiration of the escrow under the Escrow Agreement,
Purchaser shall apply to the Escrow Agent for reimbursement of such claim in
accordance with the provisions hereof and the provisions of the Escrow
Agreement. The right to receive the Escrowed Shares shall not be Purchaser's
exclusive remedy for Purchaser Damages that it is entitled to indemnification
for hereunder.

                                       45

<PAGE>

      9.5 LIMITATIONS ON INDEMNIFICATION.

            (a) Notwithstanding anything herein to the contrary, Seller shall
not be obligated to indemnify Purchaser under this Article 9 to the extent that
the aggregate of all Purchaser Damages exceeds the value of the Merger
Consideration at Closing (the "Seller's Indemnification Cap"); provided,
however, that the Seller's Indemnification Cap shall not apply to any Seller
indemnification obligation (x) arising out of, relating to or resulting from
fraud or intentional misrepresentation or breach of warranty by Seller; (y)
arising out of, relating to or resulting under Section 9.2(b), (c) or (d), or
from a breach of any of Seller's representations or warranties contained in
Sections 2.15 or 2.16; or (z) if the Merger does not close.

            (b) Notwithstanding anything herein to the contrary, Purchaser shall
not be obligated to indemnify Seller under this Article 9 to the extent that the
aggregate of all Seller Damages exceeds one-half of the value of the Merger
Consideration at Closing (the "Purchaser's Indemnification Cap"); provided,
however, that the Purchaser's Indemnification Cap shall not apply to any
Purchaser indemnification obligation (x) arising out of, relating to or
resulting from fraud or intentional misrepresentation or breach of warranty by
Purchaser; (y) arising out of, relating to or resulting under Section 9.3(b) or
(c) or from a breach of any of Purchaser's representations or warranties in
Section 3.11; or (z) if the Merger does not close.

            (c) Purchaser will not be entitled to seek indemnification under
Section 9.2 for Purchaser Damages unless and until the aggregate amount of all
Purchaser Damages exceeds $35,000 (the "Threshold Amount"). In the event that
the aggregate of all Purchaser Damages for which Seller is obligated to provide
indemnification under Section 9.2 exceeds the Threshold Amount, the Purchaser
will be entitled to seek indemnification in respect of all Purchaser Damages for
which Seller is obligated to provide indemnification under Section 9.2 (subject
to the other provisions hereof); provided, however, that the Threshold Amount
shall not apply (i) with respect to breaches of the representations and
warranties contained in Sections 2.1, 2.2, 2.3, 2.5(f), 2.15, or 2.16; and (ii)
in cases of fraud or intentional misrepresentation.

            (d) Seller will not be entitled to seek indemnification under
Section 9.3 for Seller Damages unless and until the aggregate amount of all
Seller Damages exceeds the Threshold Amount. In the event that the aggregate of
all Seller Damages for which Purchaser is obligated to provide indemnification
under Section 9.3 exceeds the Threshold Amount, the Seller will be entitled to
seek indemnification in respect of all Seller Damages for which Purchaser is
obligated to provide indemnification under Section 9.3 (subject to the other
provisions hereof); provided, however, that the Threshold Amount shall not apply
(i) with respect to breaches of the representations and warranties contained in
Sections 3.1, 3.2, or 3.11; and (ii) in cases of fraud or intentional
misrepresentation.

      9.6   REMEDIES CUMULATIVE. The remedies provided in this Agreement shall
be cumulative and shall not preclude any party from asserting any other right,
or seeking any other remedies, against the other party. No party shall be
foreclosed from and each party shall be permitted to pursue (i) any and all
equitable relief or other equitable remedies (including, without limitation
specific performance) that may be available to such party, and (ii) any
applicable statutory, equitable, common law or other remedy that may be
available to such party for breach of any covenants or agreements contained
herein.

                                       46

<PAGE>

ARTICLE 10. MISCELLANEOUS PROVISIONS

      10.1  EXPENSES. Subject to Article 9, whether or not the Merger is
consummated, each party shall pay it own costs and expenses in connection with
this Agreement and the Merger, including without limitation the fees and
expenses of its advisers, accountants and legal counsel.

      10.2  INTERPRETATION. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed, as the context
indicates, to be followed by the words "but (is/are) not limited to".

      10.3  FURTHER ASSURANCES. Each party agrees (a) to furnish upon request to
each other party such further information, (b) to execute and deliver to each
other party such other documents, and (c) to do such other acts and things, all
as another party may reasonably request for the purpose of carrying out the
intent of this Agreement and the Merger.

      10.4  ENTIRE AGREEMENT. This Agreement and the other Transaction
Agreements constitute the entire agreement between and among the parties hereto
with regard to the subject matter hereof, and supersedes all prior agreements
and understandings with regard to such subject matter. There are now no
agreements, representations or warranties between or among the parties other
than those set forth in this Agreement and the other Transaction Agreements.

      10.5  AMENDMENT, WAIVERS AND CONSENTS. This Agreement shall not be changed
or modified, in whole or in part, except by supplemental agreement signed by all
the parties. Any party may waive compliance by any other party with any of the
covenants or conditions of this Agreement, but no waiver shall be binding unless
executed in writing by the party making the waiver. No waiver of any provision
of this Agreement shall be deemed, or shall constitute, a waiver of any other
provision, whether or not similar, nor shall any waiver constitute a continuing
waiver. Any consent under this Agreement shall be in writing and shall be
effective only to the extent specifically set forth in such writing.

      10.6  SUCCESSORS AND ASSIGNS. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns, provided, however, that no party hereto may assign any right or
obligation hereunder without the prior written consent of all other parties
hereto.

      10.7  GOVERNING LAW. The rights and obligations of the parties shall be
governed by, and this Agreement shall be interpreted, construed and enforced in
accordance with, the laws of the State of Nevada, excluding its conflict of laws
rules to the extent such rules would apply the law of another jurisdiction.

      10.8  JURISDICTION; WAIVER OF JURY TRIAL.

            (a) Any judicial proceeding brought against any of the parties to
this Agreement or any dispute arising out of this Agreement or related hereto
may be brought in the courts of the State of California, or in the United States
District Court for the Southern District of Nevada, and, by execution and
delivery of this Agreement, each of the parties to this Agreement accepts the
exclusive jurisdiction of such courts, and irrevocably agrees to be bound by any
judgment rendered thereby in connection with this Agreement. The foregoing
consents to

                                       47

<PAGE>

jurisdiction shall not constitute general consents to service of process in any
jurisdiction for any purpose except as provided above and shall not be deemed to
confer rights on any Person other than the parties to this Agreement. Each of
the parties to this Agreement agree that service of any process, summons, notice
or document by U.S. mail (sent by certified mail with return receipt requested)
to such party's address for notice hereunder shall be effective service of
process for any action, suit or proceeding in California or Nevada with respect
to any matters for which it has submitted to jurisdiction pursuant to this
Section 10.8.

            (b) Each of the parties hereto hereby irrevocably waives its right
to a jury trial in connection with any action, proceeding or claim arising out
of or relating to this Agreement or any transaction contemplated hereby.

      10.9  RULES OF CONSTRUCTION. The parties acknowledge that each party has
read and negotiated the language used in this Agreement. The parties agree that,
because all parties participated in negotiating and drafting this Agreement, no
rule of construction shall apply to this Agreement which construes ambiguous
language in favor of or against any party by reason of that party's role in
drafting this Agreement.

      10.10 SEVERABILITY. If any provision of this Agreement, as applied to
either party or to any circumstance, is declared by a court of competent
jurisdiction to be illegal, unenforceable or void, this Agreement shall continue
in full force and effect without said provision.

      10.11 EXHIBITS. All Exhibits and Schedules attached hereto shall be deemed
to be a part of this Agreement and are fully incorporated in this Agreement by
this reference.

      10.12 NOTICES. Any notice required or permitted to be given hereunder
shall be sufficient if in writing and (a) delivered in person against written
receipt therefor, or by nationally recognized express delivery or courier
service requiring acknowledgment of receipt, (b) sent by facsimile, or (c)
deposited in the mail registered or certified first class, postage prepaid and
return receipt requested (provided that any notice given pursuant to clause (b)
is also confirmed by the means described in clause (a) or (c)) to such address
or facsimile of the party set forth below or to such other place or places as
such party from time to time may designate in writing in compliance with the
terms hereof. Each notice shall be deemed given when so delivered personally, or
sent by facsimile transmission, or, if sent by express delivery or courier
service one (1) Business Day after being sent, or if mailed, five (5) Business
Days after the date of deposit in the mail. A notice of change of address or
facsimile number shall be effective only when done in accordance with this
Section 10.12.

      To the Purchaser         Genius Products, Inc.
       or Merger Sub:          740 Lomas Santa Fe, Suite 210
                               Solana Beach, CA 92075
                               Facsimile: 858-793-8842
                               Attention: Trevor Drinkwater

                                       48
<PAGE>

      With copies to:                         Morrison & Foerster LLP
                                              555 West Fifth Street, Suite 3500
                                              Los Angeles, CA 90013
                                              Facsimile: 213-892-5454
                                              Attention: Allen Z. Sussman, Esq.

      To the Seller                           American Vantage Companies
      or the Company:                         4735 South Durango Drive,Suite 105
                                              Las Vegas, Nevada  89147
                                              Facsimile: 702-227-8525
                                              Attention: Ronald J. Tassinari

      With copies to:                         Snow Becker Krauss P.C.
                                              605 Third Avenue, 25th Floor
                                              New York, New York  10158-0125
                                              Facsimile: 212-949-7052
                                              Attention: Jack Becker, Esq.

      10.13 RIGHTS OF PARTIES. Nothing in this Agreement, whether express or
implied, is intended to confer any rights or remedies under or by reason of this
Agreement on any persons other than the parties to it and their respective
successors and permitted assigns, nor is anything in this Agreement intended to
relieve or discharge the obligation or liability of any third person to any
party to this Agreement, nor shall any provision give any third person any right
of subrogation or action over or against any party to this Agreement.

      10.14 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.

                     [Signatures Follow On a Separate Page]

                                       49

<PAGE>

      IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by their respective officers thereunto duly authorized
all as of the date first written above.

"Purchaser"                                   "Merger Sub"

GENIUS PRODUCTS, INC.                         GENIUS ACQUISITION CORP.

By: /s/  Trevor Drinkwater                    By: /s/  Trevor Drinkwater
    ---------------------------------------       ------------------------------
Name: _____________________________________   Name: ____________________________
Title: ____________________________________   Title: ___________________________

"Seller"                                      "The Company"

AMERICAN VANTAGE COMPANIES                    AMERICAN VANTAGE MEDIA
                                              CORPORATION

By: /s/  Ronald J. Tassinari                  By: /s/  Stephen K. Bannon
    ---------------------------------------       ------------------------------
Name: Ronald  J. Tassinari                    Name: Stephen K. Bannon
Title: President                              Title: CEO

                                SIGNATURE PAGE TO
                          AGREEMENT AND PLAN OF MERGER

<PAGE>

                                    EXHIBIT A

                               CERTAIN DEFINITIONS

"Affiliate" shall mean any member of the immediate family (including spouse,
brother, sister, descendant, ancestor or in-law) of any officer, director or
stockholder of Seller or any corporation, partnership, trust or other entity in
which Seller or any such family member has a five percent (5%) or greater
interest or is a director, officer, partner or trustee. The term Affiliate shall
also include any entity which controls, or is controlled by, or is under common
control with any of the individuals or entities described in the preceding
sentence.

"Agreement" shall mean the Asset Purchase Agreement to which this Exhibit A is
attached (including the Seller Disclosure Schedule and all other schedules and
exhibits attached hereto), as it may be amended from time to time.

"Closing" shall have the meaning specified in Section 1.5.

"Closing Date" shall have the meaning specified in Section 1.5.

"Code" shall mean the Internal Revenue Code of 1986, as amended.

"Company Disclosure Schedule" shall have the meaning specified in Article 3.

"Company Intellectual Property" shall mean specified in Section 2.19(b).

"Competing Party" shall have the meaning specified in Section 4.3.

"Competing Transaction" shall have the meaning specified in Section 4.3.

"Contract" shall mean any agreement, contract, consensual obligation, promise,
understanding, arrangement, commitment or undertaking of any nature (whether
written or oral and whether express or implied), whether or not legally binding.

"Damages" shall mean and include any loss, damage, injury, decline in value,
lost opportunity, Liability, claim, demand, settlement, judgment, award, fine,
penalty, Tax, fee (including any legal fee, accounting fee, expert fee or
advisory fee), charge, cost (including any cost of investigation) or expense of
any nature.

"Defined Benefit Plan" shall mean either a plan described in Section 3(35) of
ERISA or a plan subject to the minimum funding standards set forth in Section
302 of ERISA and Section 412 of the Code.

"Employee Benefit Plan" shall have the meaning specified in Section 3(3) of
ERISA.

"Encumbrance" shall mean any lien, pledge, hypothecation, charge, mortgage,
security interest, encumbrance, equity, trust, equitable interest, claim,
preference, right of possession, lease, tenancy, license, encroachment,
covenant, infringement, interference, Order, proxy, option, right

                                     PAGE 1

<PAGE>

of first refusal, preemptive right, community property interest, legend, defect,
impediment, exception, reservation, limitation, impairment, imperfection of
title, condition or restriction of any nature (including any restriction on the
voting of any security, any restriction on the transfer of any security or other
asset, any restriction on the receipt of any income derived from any asset, any
restriction on the use of any asset and any restriction on the possession,
exercise or transfer of any other attribute of ownership of any asset).

"Entity" shall mean any corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust or company (including any limited liability company or
joint stock company).

"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.

"Exercise All Rights" shall mean to exercise or practice any and all rights now
or hereafter provided by law (by treaty, statute, common law or otherwise)
anywhere in the world to inventors, authors, creators and/or owners of
intellectual or intangible property; including the right to make, use, disclose,
sell, offer to sell, distribute, import, rent, lease, lend, reproduce, prepare
derivative works of and otherwise modify, perform and display (whether publicly
or otherwise), broadcast, transmit, use and/or otherwise exploit such
intellectual or intangible property and/or any product, component or service
embodying, related to or subject to such intellectual or intangible property;
and the right to assign, transfer, license and/or sublicense (with the right to
sublicense further) any of the foregoing, and the right to have and/or authorize
others do any of the foregoing.

"GAAP" means U.S. generally accepted accounting principles in effect on the date
on which they are to be applied pursuant to this Agreement, applied consistently
throughout the relevant periods.

"Governmental Approval" shall mean any: (a) permit, license, certificate,
concession, approval, consent, ratification, permission, clearance,
confirmation, exemption, waiver, franchise, certification, designation, rating,
registration, variance, qualification, accreditation or authorization issued,
granted, given or otherwise made available by or under the authority of any
Governmental Authority or pursuant to any Legal Requirement; or (b) right under
any Contract with any Governmental Authority.

"Governmental Authority" shall mean any: (a) nation, principality, state,
commonwealth, province, territory, county, municipality, district or other
jurisdiction of any nature; (b) federal, state, local, municipal, foreign or
other government; (c) governmental or quasi governmental authority of any nature
(including any governmental division, subdivision, department, agency, bureau,
branch, office, commission, council, board, instrumentality, officer, official,
representative, organization, unit, body or Entity and any court or other
tribunal); (d) multinational organization or body; or (e) individual, Entity or
body exercising, or entitled to exercise, any executive, legislative, judicial,
administrative, regulatory, police, military or taxing authority or power of any
nature.

                                     PAGE 2

<PAGE>

"Intellectual Property" shall mean domestic and foreign (i) copyrightable works
and copyrights and all applications and registrations therefor, and renewals
thereof; (ii) trademarks, service marks, trade dress, trade names, logos,
corporate names, domain names, and all applications and registrations therefor
and renewals thereof, and all goodwill associated therewith; (iii) inventions
(whether patentable or unpatentable), all improvements thereto, and patents,
patent applications, and patent disclosures, together with all reissuances,
continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof; (iv) proprietary software (including data and related documentation)
and proprietary databases; (v) trade secrets and confidential business
information (including ideas, research and development, know-how, formulas,
compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing
and cost information, and business and marketing plans and proposals); (vi)
copies and tangible embodiments of the foregoing (in whatever form or medium);
(vii) licenses and other rights to any of the foregoing; and (viii) related
ownership, use and other intellectual property and intangible asset rights in
and to any of the foregoing (including the right to sue for past, present and
future infringements or misappropriations thereof).

"Intellectual Property Rights" shall mean any or all rights in and to
Intellectual Property.

"Knowledge" An individual shall be deemed to have "Knowledge" of a particular
fact or other matter if: (i) such individual is actually aware of such fact or
other matter or (ii) (except when Knowledge is stated to be "actual Knowledge")
a prudent individual could be expected to discover or otherwise become aware of
such fact or other matter in the course of conducting a reasonably comprehensive
investigation concerning the truth or existence of such fact or other matter.
Each party to this Agreement shall be deemed to have "Knowledge" of a particular
fact or other matter if any of their respective directors, officers or employees
(i) with the authority to establish policy for the company or (ii) who are
otherwise responsible for the function that is the subject of the fact or matter
has actual knowledge of such fact or matter after due and diligent inquiry.

"Legal Proceeding" shall mean any action, suit, litigation, arbitration,
proceeding (including any civil, criminal, administrative, investigative or
appellate proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation that is, has been or may in the future be
commenced, brought, conducted or heard at law or in equity or before any
Governmental Authority or any arbitrator or arbitration panel.

 "Legal Requirement" shall mean any federal, state, local, municipal, foreign or
other law, statute, legislation, constitution, principle of common law,
resolution, ordinance, code, Order, edict, decree, proclamation, treaty,
convention, rule, regulation, permit, ruling, directive, pronouncement,
requirement (licensing or otherwise), specification, determination, decision,
opinion or interpretation that is, has been or may in the future be issued,
enacted, adopted, passed, approved, promulgated, made, implemented or otherwise
put into effect by or under the authority of any Governmental Authority.

"Material Adverse Effect" means, with respect to any Entity, any event, change
or effect that, when taken individually or together with all other adverse
events, changes and effects, is or is

                                     PAGE 3

<PAGE>

reasonably likely (a) to be materially adverse to the condition (financial or
otherwise), properties, assets, liabilities, business, operations, results of
operations or prospects of that Entity or (b) to prevent or materially delay
consummation of the Merger or otherwise to prevent the Entity from performing
its obligations under this Agreement.

"Material Company Contract" shall have the meaning specified in Section 2.18(a).

"Member of the Controlled Group" shall mean each trade or business, whether or
not incorporated, that would be treated as a single employer with Seller under
Section 4001 of ERISA or Section 414(b), (c), (m) or (o) of the Code.

"Multiemployer Plan" shall mean a plan described in Section 3(37) of ERISA.

"Order" shall mean any: (a) temporary, preliminary or permanent order, judgment,
injunction, edict, decree, ruling, pronouncement, determination, decision,
opinion, verdict, sentence, stipulation, subpoena, writ or award that is or has
been issued, made, entered, rendered or otherwise put into effect by or under
the authority of any court, administrative agency or other Governmental
Authority or any arbitrator or arbitration panel; or (b) Contract with any
Governmental Authority that is or has been entered into in connection with any
Legal Proceeding.

"Person" shall mean any individual, Entity or Governmental Authority.

"Permitted Encumbrances" shall mean those Encumbrances granted by the Company or
a Subsidiary in connection with the original issuance of the: (1) Revolving Line
of Credit Secured Promissory Note of Wellspring Media, Inc. payable to Atlantic
Bank of New York, in the original principal amount of $2,400,000, which has a
principal balance on the date hereof of $2,349,219; (2) Company's Secured
Negotiable Promissory Note payable to Al Cattabiani in the original principal
amount of $1,076,704; (3) Company's Secured Negotiable Promissory Note payable
to Carl Seldin Koerner in the original principal amount of $65,472; (4)
Company's Secured Negotiable Promissory Note payable to Clara Spalter Miller in
the original principal amount of $965,712; (5) Company's Secured Negotiable
Promissory Note payable to Lee Miller in the original principal amount of
$965,712; (6) Company's Secured Negotiable Promissory Note payable to Al
Cattabiani in the original principal amount of $200,000; (7) Company's Secured
Negotiable Promissory Note payable to Jefferies & Company, Inc. in the original
principal amount of $480,000; (8) Company's Secured Negotiable Promissory Note
payable to Bryan Hancock in the original principal amount of $49,280; (9)
Company's Secured Negotiable Promissory Note payable to Barbara Behen in the
original principal amount of $24,640; (10) Company's Secured Negotiable
Promissory Note payable to Tanya Brunner in the original principal amount of
$24,640; (11) Company's Secured Negotiable Promissory Note payable to
Marie-Therese Guirgis in the original principal amount of $24,640; (12)
Company's Secured Negotiable Promissory Note payable to Wendy Lidell in the
original principal amount of $24,640; (13) Company's Secured Negotiable
Promissory Note payable to Charles O'Malley in the original principal amount of
$24,640; (14) Company's Secured Negotiable Promissory Note payable to Maryann
Manelski in the original principal amount of $24,640; (15) Company's Secured
Negotiable Promissory Note payable to Sheri Levine-Poznznski in the original
principal

                                     PAGE 4

<PAGE>

amount of $24,640; and (16) Company's Secured Negotiable Promissory Note payable
to Lawrence Sapadin in the original principal amount of $24,640.

"Physical Properties" shall mean all physical properties of every kind or nature
of or relating to any film or program in the Company Film Library and all
versions thereof and all teasers, trailers, music videos, featurettes,
television spots, "making of" films or programs, including, without limitation,
exposed film, developed film, positives, negatives, prints, answer prints,
special effects, preparing materials (including interpositives, negatives,
duplicate negatives, internegatives, color reversals, intermediates, lavenders,
fine grain master prints and matrices, title overlays, textless backgrounds and
all other forms of pre-print elements which may be necessary or useful to
produce prints or other copies or additional pre-print elements, whether now
known or hereafter devised), soundtracks, recordings, audio and video tapes and
discs of all types and gauges, cutouts, trims and any and all other physical
properties of every kind and nature relating to the Company Film Library in
whatever state of completion, and all duplicates, drafts, versions and copies of
each thereof.

"Purchaser" shall mean Genius Products, Inc., a Delaware corporation.

"Representatives" shall mean officers, directors, employees, attorneys,
accountants, advisors, agents, distributors, licensees, shareholders,
subsidiaries and lenders of a party. In addition, all Affiliates of Seller shall
be deemed to be "Representatives" of Seller.

"Securities Act" shall mean the Securities Act of 1933, as amended.

"Seller" shall mean American Vantage Companies, a Nevada corporation

"Seller Disclosure Schedule" shall have the meaning specified in Article 2.

"SOX" shall means the Sarbanes-Oxley Act of 2002.

"Subsidiary" or "Subsidiaries" shall have the meaning specified in Section 2.1.

"Survival Date" shall have the meaning specified in Section 9.1.

"Tax" or "Taxes" means all taxes, however denominated, including any interest,
penalties or other additions to tax that may become payable in respect thereof,
imposed by any federal, territorial, state, local or foreign government or any
agency or political subdivision of any such government, which taxes shall
include, without limiting the generality of the foregoing, all income or profits
taxes (including, but not limited to, federal income taxes and state income
taxes), payroll and employee withholding taxes, unemployment insurance, social
security taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise
taxes, gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and other
governmental charges, and other obligations of the same or of a similar nature
to any of the foregoing, which the Seller Group and/or Purchaser Group is
required to pay, withhold or collect.

                                     PAGE 5

<PAGE>

"Tax Return" means any report, return, document, declaration, or any other
information or filing required to be supplied to any taxing authority or
jurisdiction (domestic or foreign) in respect of Taxes, including, information
returns, any document in respect of or accompanying payments or estimated Taxes,
or in respect of or accompanying requests for the extension of time in which to
file any such report, return document, declaration, or other information,
including amendments thereof and attachments thereto.

"Trademarks" shall mean any and all trademarks, service marks, logos, trade
names, corporate names, Internet domain names and addresses and general-use
e-mail addresses, and all goodwill associated therewith throughout the world.

"Transaction Agreements" shall mean this Agreement, the Registration Rights
Agreement, the Resale and Voting Agreement, the Escrow Agreement, the Assumption
Agreement, the Assignment Agreement, and all other agreements, certificates,
instruments, documents and writings delivered by Purchaser, Merger Sub, Seller
or the Company in connection with the Merger.

"Transfer Taxes" shall mean all federal, state, local or foreign sales, use,
transfer, real property transfer, mortgage recording, stamp duty, value-added or
similar Taxes that may be imposed in connection with the transfer of Purchased
Assets or assumption of Assumed Liabilities, together with any interest,
additions to Tax or penalties with respect thereto and any interest in respect
of such additions to Tax or penalties.

"WARN Act" shall have the meaning specified in Section 4.20(e).

"Wellspring Stock Pledge Agreement" shall mean that certain Stock Pledge
Agreement, dated February 3, 2004, between the Company and Lee Miller as Pledge
Agent on behalf of Al Cattabiani, Carl Seldin Koerner, Clara Spaltzer Miller,
Jefferies & Company, Inc. and Lee Miller.

                                     PAGE 6

<PAGE>

                                    EXHIBIT B

                      FORM OF REGISTRATION RIGHTS AGREEMENT

<PAGE>

                                    EXHIBIT C

                       FORM OF RESALE AND VOTING AGREEMENT

<PAGE>

                                    EXHIBIT D

                                FORM OF WARRANTS

<PAGE>

                                    EXHIBIT E

                            FORM OF ESCROW AGREEMENT

<PAGE>

                                    EXHIBIT F

                                     FORM OF
                 ASSUMPTION OF OBLIGATIONS AND PLEDGE AGREEMENT

<PAGE>

                                    EXHIBIT G

                                     FORM OF
                              ASSIGNMENT AGREEMENT

<PAGE>

                                 EXHIBIT 7.1(d)
              MATTERS TO BE COVERED IN OPINION OF SELLER'S COUNSEL

1. Each of Seller and the Company has the requisite corporate power and
authority to (a) enter into the Merger Agreement and each of the other
Transaction Documents to which it is a party and (b) consummate the transactions
contemplated by the Transaction Documents to which it is a party, including, but
not limited to, the Merger;

2. Each of the Company, Wellspring and Hypnotic (a) has been duly incorporated
and is validly existing and in good standing under the laws of their respective
jurisdictions of incorporation and (b) has the requisite corporate power and
authority to own its property and assets and to conduct its business as it is
currently being conducted;

3. The Company has authorized capital stock of 750,000 shares of common stock,
par value $0.10 per share (the "Company Common Stock"), and, to our knowledge,
Seller is the beneficial and record holder of all issued and outstanding shares
of the Company Common Stock;

4. Except as disclosed in the Company Disclosure Schedule, the execution,
delivery and performance of the Transaction Documents by each of Seller and the
Company, and the consummation by each of them of the transactions contemplated
thereby, and compliance by each of them with the provisions thereof (a) do not
violate or conflict with any term or provision of the charter or bylaws of
either Seller or the Company, and (b) do not violate or contravene any order,
writ, judgment, injunction, decree, determination or award which has been
entered against Seller or the Company and of which we have knowledge;

5. Each of the Transaction Documents to which Seller or the Company is a party
has been duly and validly authorized, executed and delivered by each of them, as
applicable, and constitutes a valid and binding agreement of each of them, as
applicable, enforceable against them in accordance with its terms, except (a)
that we render no opinion on whether the execution or delivery of the
Transaction Documents and the performance and consummation of the transactions
contemplated by the Transaction Documents, including, but not limited to, the
Merger, requires the approval of the Seller's stockholders and (b) as
enforcement may be limited by applicable bankruptcy, insolvency, liquidation,
receivership, administration, reorganization, reconstruction, arrangement,
moratorium or other similar laws and defenses affecting creditors' rights, and
subject to general equity principles and to limitations on availability of
equitable relief, including specific performance;

6. Except as set forth in the Company Disclosure Schedule, to our knowledge
there are no civil, criminal or administrative actions, suits, proceedings or
investigations pending or threatened against the Company or any of the
Subsidiaries before any court, arbitrator, or administrative, governmental or
regulatory authority, domestic or foreign.

<PAGE>

                                 EXHIBIT 7.2(d)
             MATTERS TO BE COVERED IN OPINION OF PURCHASER'S COUNSEL

1. Each of Purchaser and, subject to certain assumptions regarding Nevada law,
Merger Sub has the requisite corporate power and authority to (i) enter into the
Agreement and Plan of Merger and each of the other documents to be executed and
delivered by each of them at Closing (the "Transaction Documents") and (ii)
consummate the transactions contemplated thereby.

2. Each of Purchaser and, subject to certain assumptions regarding Nevada law,
Merger Sub (i) has been duly incorporated and is validly existing and in good
standing under the laws of their respective states of incorporation, and (ii)
has the requisite power and authority to own its property and assets and to
conduct its business as it is currently being conducted. Purchaser has
authorized capital stock of 100,000,000 shares of common stock, par value
$0.0001 per share, and 10,000,000 shares of preferred stock, par value $0.0001
per share. Purchaser is the beneficial and record holder of all issued and
outstanding shares of Merger Sub.

3. Except as disclosed in the Purchaser Disclosure Schedule, the execution,
delivery and performance of the Transaction Documents by each of Purchaser and
Merger Sub, and the consummation by each of them of the transactions
contemplated thereby, and compliance by each of them with the provisions thereof
(i) do not violate or conflict with any term or provision of the charter or
bylaws of either Purchaser or Merger Sub, and (ii) do not violate or contravene
any order, writ, judgment, injunction, decree, determination or award which has
been entered against Purchaser or Merger Sub and of which we are aware.

4. Subject to certain assumptions regarding Transaction Documents governed by
Nevada law, each of the Transaction Documents to which Purchaser or Merger Sub
is a party has been duly and validly authorized, executed and delivered by each
of them, as applicable, and constitutes a valid and binding agreement of each of
them, as applicable, enforceable against them in accordance with its terms,
except as enforcement may be limited by applicable bankruptcy, insolvency,
liquidation, receivership, administration, reorganization, reconstruction,
arrangement, moratorium or other similar laws and defenses affecting creditors'
rights, and subject to general equity principles and to limitations on
availability of equitable relief, including specific performance.

5. The shares constituting the Merger Consideration have been duly authorized
and, upon delivery to Seller against payment therefor in accordance with the
terms of the Tranasction Documents, will be validly issued, fully paid and
nonassessable.

<PAGE>

                                    SCHEDULES

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00081-of-00352.parquet"}]]