Document:

TIMBERLAND

PURCHASE AND SALE AGREEMENT

FOR THE MORTON, LEWIS COUNTY, WASHINGTON TIMBERLANDS

by and between

PLUM CREEK TIMBERLANDS, L.P.,

As Seller

and

POPE RESOURCES, A Delaware Limited Partnership,

	 

	

	 
	As Purchaser
	 
	Dated the ___ day of December, 2003

	

	
TIMBERLAND 

PURCHASE AND SALE AGREEMENT

FOR THE MORTON, LEWIS COUNTY, WASHINGTON TIMBERLANDS 

        THIS AGREEMENT is made and entered into this ___ day
of December, 2003, by and among PLUM CREEK TIMBERLANDS, L.P., a Delaware limited partnership, as
successor by merger to Plum Creek Timber Company, L.P., a Delaware limited partnership (“Seller”)
whose address is 999 Third Avenue, Suite 4300, Seattle, Washington 98104, and POPE RESOURCES, A Delaware
Limited Partnership whose address is 19245 Tenth Avenue Northeast, Poulsbo, Washington 98370-0239
(“Purchaser”).

        Purchaser desires to purchase from Seller and Seller
desires to sell to Purchaser approximately 3,297 acres of timberland and associated property and
assets located in the State of Washington, known as the Morton, Lewis County, Washington Timberlands.
In consideration of the mutual covenants set forth in this Agreement, the receipt and sufficiency
of which are acknowledged, and subject to all terms of this Agreement, the parties agree as follows:

        1.             Purchase and Sale of Assets. Subject to the contingencies and other terms and conditions contained herein, Seller agrees to sell
and Purchaser agrees to purchase the Assets (as defined in Paragraph 1.6), as follows:

                                1.1          Timberlands. All of Seller’s right, title and interest in and to certain real property owned by Seller in
Lewis County, Washington, as further described on Exhibit “A” attached hereto and incorporated
herein by this reference (“Real Property”), together with all other rights and interests
related or appurtenant thereto, including but not limited to all of Seller’s right, title, and
interest (i) in and to the merchantable and unmerchantable timber, growing, lying, standing or felled,
timber interests and timber rights located on or appurtenant to the Real Property; (ii) in and to
any mineral, sand, oil, gas, hydrocarbon substances and gravel and other hard rock rights on and
under the Real Property not previously severed by Seller’s predecessors in interest; and (iii)
in and to any development rights, air rights, water, water rights, ditch and ditch rights appurtenant
to the Real Property (collectively, all property described in this Paragraph 1.1 is herein called
the “Timberlands”). 

                                1.2          Access Rights and Easements. All rights and interests of Seller in and to any access rights, rights-of-way and easements appurtenant
to or benefiting the Timberlands and listed in Schedule 1.2 (“Access Rights and Easements”).

                                1.3          Maps and Records. All records and information in Seller’s possession or control used in connection with or pertaining
to the Timberlands, including, without limitation, Seller’s records and information relating
to timber inventories, timber management and operations reports, records relating to title matters,
current agreements, roads, current easements and access rights, and environmental conditions,
maps, Road Maintenance and Abandonment Plan, wildlife survey results, biological studies, open Forest
Practice Applications (including any FPAs where any reforestation or other continuing forestland
obligations remain uncompleted), aerial photos, plans, drawings, specifications, renderings, engineering
studies, surveys,  and electronic timber inventory data solely concerning the Timberlands (collectively,
the “Maps and Records”). The term “Maps and Records” shall include all information,
documents, records, maps, reports, due diligence materials, including, without limitation, surveys,
forest management records, and wildlife and fisheries reports, received by Seller from the State
Department of Natural Resources (“DNR”) in connection with Seller’s acquisition of
the Timberlands from the DNR in 2001.

	

	
                                1.4          Assets. The Timberlands, Access Rights and Easements and Maps and Records are sometimes collectively referred
to as the “Assets.” 

                                1.7          Possession. Purchaser shall be entitled to possession of the Assets upon Closing. 

                2.            
Purchase Price and Terms.

                                2.1          Purchase Price. The purchase price for the Assets is Eight Million Five Hundred Five Thousand Dollars (US$8,505,000)
(“Purchase Price”). 

                               2.2          Earnest Money.  Upon full execution hereof, Purchaser shall place into the escrow with the Escrow Agent (defined
below) the amount of Two Hundred Fifty Thousand Dollars (US$250,000), in cash or by wire transfer
or otherwise immediately available federal funds paid or delivered as earnest money (the “Earnest
Money”) in part payment of the Purchase Price for the Assets. The Earnest Money shall be invested
by Escrow Agent in an interest-bearing account mutually acceptable to the parties, with all interest
earned thereon being for the account of Purchaser. The Earnest Money shall be refunded to Purchaser
if this Agreement terminates for any reason other than Purchaser’s failure to close without
legal excuse. The Earnest Money shall constitute Seller’s sole and exclusive remedy in the event
Purchaser fails to close this transaction without legal excuse.

                                2.3          Payment of Purchase Price. At Closing, Purchaser shall pay Seller in cash or by wire transfer or otherwise immediately available
federal funds the entire Purchase Price, of which the Earnest Money receipted herein is a part. The
value of the Access Rights and Easements and Maps and Records is included in the value allocated
to the Timberlands, which is 100% of the Purchase Price. 

                3.
            Closing. Subject to the provisions of Paragraph 14.1(h), Closing (“Closing”) shall occur at the
offices of Transnation Title Insurance Company, 1200 Sixth Avenue, Seattle, Washington 98101 (“Escrow
Agent”) on or before January 9, 2004, unless such date is extended by written agreement of the
parties.

                4.
            Representations and Warranties of Seller. Seller represents and warrants to Purchaser that except as disclosed in a Schedule or Schedules hereinafter
described:

                                4.1          Organization. Seller is a limited partnership duly organized and validly existing under the laws of the State of
Delaware. 

	

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                                4.2          Good Standing. Seller is qualified to do business in the State of Washington.

                                4.3          Power and Authority for Transaction. Seller has the power and authority to execute, deliver and perform this Agreement and the transactions
contemplated herein in accordance with the terms hereof.

                                4.4          Authorization. The execution and delivery by Seller of this Agreement and the due consummation of the transactions
contemplated herein have been duly and validly authorized by all necessary partnership actions on
the part of Seller and this Agreement constitutes a valid and legally binding agreement of Seller.

                                4.5          No Violation or Conflicts. Neither the execution and delivery of this Agreement by Seller nor the consummation by Seller of
the transactions contemplated herein (i) constitute a violation of Seller’s certificate
of limited partnership or limited partnership agreement, or (ii) result in the breach of or the imposition
of any lien on any Assets pursuant to, or constitute a material default under, any indenture or bank
loan or credit agreement or other agreement or instrument to which Seller is a party or by which
it or its property may be bound or affected. Except for consents or approvals which will have been
obtained or actions which will have been taken on or prior to the Closing Date, and except for consents,
approvals, authorizations or actions described in Paragraph 16.2, no consent, approval, authorization or action by any governmental authority, or any person or entity
having legal rights against or jurisdiction over Seller, is required in connection with the execution
and delivery by Seller of this Agreement or the consummation by Seller of the transactions contemplated
herein.

                                4.6          No Defaults. To Seller’s knowledge, the Access Rights and Easements are valid and in full force and effect,
and no event has occurred or is claimed to have occurred which may render unenforceable or permit
the termination of any of the Access Rights and Easements. To Seller’s knowledge, neither Seller
nor, to Seller’s knowledge, any other party thereto has breached or violated or is claiming
Seller has breached or violated any provision of, or is in default or is claiming Seller is in default
in any respect under, the terms or conditions of any Access Right or Easement. Except as disclosed on Schedule 1.2, the Access Rights and Easements are assignable to Purchaser without consent. 

                                4.7          Condemnation Proceedings. Subject to Paragraph 14.1(e), no condemnation proceeding is pending or, to the knowledge of Seller,
threatened which affects or could reasonably be expected to affect the Timberlands.

                                4.8          Environmental Matters. To Seller’s knowledge, Seller warrants that:

                                (a)          the
Timberlands are not nor have they at any time been used for or suffered the generation, transportation,
management, handling, treatment, storage, manufacture, emission disposal, release or deposit of any
hazardous substances or fill or other material containing hazardous substances in material violation
of applicable laws; 

	

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                                (b)          there
are no underground storage tanks on the Timberlands; 

                                (c)          Seller
has not received written notification from any third party, including, but not limited to, any governmental
agency, alleging that Seller, with respect to the management and operations of the Timberlands, and/or
the Timberlands are not materially in compliance with, may require remediation under, or be subject
to liability under applicable environmental laws; and

                                (d)          there
are no hazardous substances in, on or under the Timberlands or any part thereof that are in violation
of applicable environmental laws except for such violations as would not (individually or in the
aggregate) be material.

                Except
as to matters covered by Seller’s warranty set forth in this Paragraph 4.8, Purchaser releases
Seller from all costs, losses, liabilities, obligations and claims, of any nature whatsoever, known
and unknown, that Purchaser may have against Seller or that may arise after the date of Closing based
in whole or in part upon (i) Seller’s failure to comply with any environmental laws applicable
to the Timberlands; or (ii) the presence, release or disposal of any hazardous substance, solid waste,
or any other environmental contamination on, within, or from the Timberlands before, as of, or after
the Closing Date. The above-referenced release does not cover or apply to any statutory or common
law claim for contribution or indemnity that may arise to the extent Purchaser suffers any liabilities
or obligations from future claims of any governmental agency arising out of (i) or (ii) above, or
any claims, costs, losses, liabilities, or obligations arising out of the activities of Seller or
its agents, contractors or employees on, in, under or about the Timberlands after the Closing Date.
As used herein, the term “environmental laws” shall mean all applicable federal, state
or local laws, rules, regulations, governmental permits or other binding determinations of any governmental
authority relating to or addressing the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act, as amended (“CERCLA”), and the
Resource Conservation and Recovery Act, as amended (“RCRA”), the Toxic Substances Control
Act, as amended (“TSCA”), the Clean Water Act, as amended (“CWA”), the Clean
Air Act, as amended (“CAA”), and the Oil Pollution Control Act of 1990, as amended (“OPA”).
As used herein, the terms “hazardous substance” and “release” (as it relates
to the release of hazardous substances as opposed to the release of claims) have the meanings specified
in CERCLA and the terms “solid waste” and “disposal” (or “disposed”)
have the meanings specified in RCRA. If either CERCLA or RCRA is amended to broaden the meaning of
any term defined thereby, the broader meaning shall apply to this Paragraph 4.8 after the effective
date of the amendment. Moreover, to the extent that Washington law establishes a meaning for “hazardous
substance,” “release,” “solid waste,” or “disposal” that is broader
than that specified in either CERCLA or RCRA, the broader meaning shall apply.

	

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                                4.9          Suits, Actions or Proceedings. There is (i) no court or administrative decision, permit, moratorium, judgment or order against Seller or
specifically involving the Timberlands which materially and adversely affects the value of the Timberlands
or the operations of the Timberlands as they are currently being operated; and (ii) no legal, administrative
or other suit, action, proceeding or arbitration, or governmental investigation pending or, to the
knowledge of Seller, threatened against Seller or specifically involving the Timberlands which would
reasonably be expected to materially and adversely affect the value of the Timberlands or the operations
of the Timberlands as they are currently being operated. There is no suit, action, claim, arbitration
or other proceeding pending, or to the knowledge of Seller, threatened before any court or governmental
agency, which may result in the restraint or prohibition of the consummation of the transactions
contemplated by this Agreement.

                                4.10        Broker Fees. Seller has engaged Forestland Marketing /Troy Dana/Mike Flanagan (collectively, “Broker”)
as its broker, agent or finder with respect to this transaction, and Seller shall pay Broker at Closing
all brokerage fees, agents’ commissions and/or finders’ fees owed to Broker in connection
with the transaction contemplated herein. Purchaser shall have no liability or obligation to pay
Broker any commissions or fees. Purchaser and Seller each represent and warrant to the other that
no other broker, agent or finder, licensed or otherwise has been engaged by it, respectively, in
connection with the transaction contemplated by this Agreement. In the event of any such claim for
broker’s, agent’s or finder’s fee or commission for any broker, agent or finder other
than the Broker in connection with the negotiation, execution or consummation of this transaction,
the party upon whose alleged statement, representation or agreement such claim or liability arises
shall indemnify, hold harmless and defend the other party from and against such claim and liability,
including without limitation, reasonable attorney’s fees and court costs. Purchaser and Seller
acknowledge that the representations and warranties contained in this Paragraph shall survive the Closing.

                                4.11        Compliance. Seller has not received written notification from any governmental agency alleging that the Timberlands
or the use or condition thereof are not presently in compliance with applicable laws and Seller
has no knowledge of any such violations relating to the Timberlands or the use or condition thereof.
To Seller’s knowledge, Seller maintains the Assets in material compliance with all applicable
laws, ordinances, codes, permits, approved Forest Practices Applications, and regulations. Seller
has not engaged in any timber harvest operations on the Timberlands since September 29, 2003.

                                4.12        Marketable Title. Seller has good and marketable title to the Assets and at Closing such Assets will be free and clear
of all liens, security interests, charges and encumbrances except, in the case of the Timberlands,
Permitted Exceptions defined in Paragraph 7(c).

                                4.13        Unrecorded Encumbrances; Ongoing Rights. There is currently and shall prior to Closing be no timber cutting or harvesting activity on or removal
of any timber from the Timberlands. Except for the Forest Practice Application disclosed in Schedule 4.13, the Timberlands are not subject to any contracts, leases, cutting rights, logging, stumpage or other
agreements, timber contracts or deeds, licenses, restrictive covenants, Forest Practice Applications,
permits, tenancies, easements or reservations except those encumbrances of public record. Seller
warrants that it shall not sell, mortgage or otherwise transfer the Assets or any portion thereof
or interest therein, or modify, waive any rights under or terminate any Access Rights and Easements,
breach or violate any terms or conditions in any Access Rights and Easements, or enter into
any agreements, create any liens, claims, restrictions or encumbrances, or grant any rights or interests
in or pertaining to the Assets or release or terminate any existing rights benefiting the Assets
without the prior written consent of Purchaser, which shall not be unreasonably withheld. Seller
has provided Purchaser with a copy of the FPA listed on Schedule 4.13.

	

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                                4.14        No Adverse Claims. Except as to matters of public record, to Seller’s knowledge, the Timberlands are not subject
to any rights of persons in possession or persons making use thereof which would reasonably be expected
to have a material adverse effect on the value of the Timberlands, nor has Seller received any notice
that that the Timberlands are subject to any claim of adverse possession or prescriptive easement.

                                4.15        ESA. To Seller’s knowledge, there are no (i) endangered or threatened species (as defined or listed
under federal law) nor any nesting site(s) or habitat of or waterways containing any such species
located on or proximate to the Timberlands, or (ii) areas of the Timberlands within any “owl
circles,” which would materially and adversely affect the harvesting of the timber on the Timberlands.

                                4.16        Tribal Rights. Seller has not received written notice from any aboriginal or Native American tribe (or representative
thereof) of any rights or claims of such tribe that relate to the Timberlands.

                                4.17        Timber Harvest Obligations. Except for approximately 65 acres located within the Timberlands in the area shown on the map attached
hereto as Exhibit “B” for which an obligation remains to plant, (i) all timber harvest excise taxes, costs and liabilities
associated with any prior harvesting and removal of timber or other natural resources from the Timberlands
have been fully paid, and (ii) all other liabilities and obligations arising out of the use, ownership
or possession of the Timberlands (including, without limitation, the removal of timber or other natural
resources) prior to Closing will be fully paid and performed by Seller on or before Closing.

                5.
            Representations and Warranties of Purchaser. Purchaser represents and warrants to Seller that:

                                5.1        Organization. Purchaser is a limited partnership duly organized and validly existing under the laws of the State
of Delaware, and has the partnership power to enter into this Agreement and to carry out the transactions
contemplated herein in accordance with the terms hereof.

	

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                                5.2.        Authorization; No Violation or Conflicts. The execution and delivery of this Agreement by Purchaser and the due consummation of the transactions
contemplated herein have been duly and validly authorized by all necessary partnership action on
the part of Purchaser, and this Agreement constitutes a valid and legally binding agreement of Purchaser.
Neither the execution and delivery of this Agreement by Purchaser nor the consummation by Purchaser
of the transactions contemplated herein constitute a violation of Purchaser’s agreement of limited
partnership or other organizational documentation or agreements or result in the breach of, or the
imposition of any lien on any assets of Purchaser pursuant to, or constitute a default under, any
indenture or bank loan or credit agreement, or other agreement or instrument to which Purchaser is
a party or by which it or any of its properties may be bound or affected. Except for consents, approvals,
or authorizations which will have been obtained or actions which will have been taken on or prior
to the Closing Date, no consent, approval, authorization or action by any governmental authority
or any person or entity having legal rights against or jurisdiction over Purchaser is required in
connection with the execution and delivery by Purchaser of this Agreement or for consummation by
Purchaser of the transactions contemplated herein.

                                5.3        Broker Fees. Purchaser has not employed any broker, agent or finder, or incurred any liability for any brokerage
fees, agents’ commissions or finders’ fees, in connection with the transactions contemplated
herein. 

                                5.4        Suits, Actions or Proceedings. Purchaser has no knowledge of any suit, action, arbitration or other proceeding pending before any
court or governmental agency, which may result in the restraint or prohibition of the consummation
of the transactions contemplated by this Agreement.

                6.
            Survival; Cushion Against Claims; Knowledge; Materiality.

                                6.1        Survival. The respective representations and warranties of Seller and Purchaser contained herein or in any
Schedule, certificate or other instrument delivered by or on behalf of such party pursuant to this
Agreement, including the environmental matters set forth in Paragraph 4.8, shall survive the Closing for a period of twelve (12) months and thereafter shall expire and terminate,
and each party shall be forever released from liability to the other based upon such representations
and warranties except as to matters for which notice has been given by a party of the inaccuracy
or breach of any representation or warranty on or prior to such termination date. The representations
and warranties of Seller contained in Paragraph 4.12 and in any deeds or assignment instruments transferring the Assets shall not be subject to the terms
of this Paragraph 6.1.

                                6.2        Seller’s Knowledge Defined. “Knowledge” as used in this Agreement with respect to the Seller shall mean actual current
knowledge (as opposed to constructive or imputed knowledge) of the fact or matter in question by
any officer of the Seller or by David Crooker; Michael Yeager, Director Land Management, Lee Spencer,
Resources Manager, and Gregg Lewis, Forester. 

	

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                                6.3        Materiality Defined. “Material” or “materiality” or “materially” or “materially and
adversely affect” as used in this Agreement with respect to Seller shall mean a claim, encumbrance
or occurrence (including without limitation a breach of warranty or violation by Seller) that could
lessen the value of the Assets by, or cause damages of, at least $25,000.00.

                7.
           Condition of Title and Title Insurance.

                              (a)  As of the date of closing, title to the Timberlands is to be free of all encumbrances
or defects except those listed in the preliminary commitments for title insurance deemed to be Permitted
Exceptions as described below. Monetary encumbrances and any encumbrances arising after the date
of this Agreement not caused by or approved in writing by Purchaser shall not be deemed to be Permitted
Exceptions and shall be discharged by Seller and be paid from Seller’s funds at Closing. The
following shall not be deemed encumbrances or defects and shall be deemed to be Permitted Exceptions: rights
reserved in federal patents or state deeds, building or use restrictions consistent with current
zoning, and rights previously reserved for minerals, metals and ores of every kind and nature
(excluding sand, rock and gravel), and previously reserved rights for oil, gas and other hydrocarbons.

                             (b)  At closing,
Seller shall, at Seller’s expense, cause the Transnation Title Insurance Company to furnish
to Purchaser a standard form ALTA Owner’s or Purchaser’s Policy of Title Insurance (policy
form 1970-B or other available form approved by Purchaser) in the amount of the Purchase Price for
the Timberlands insuring the title to the Timberlands in Purchaser, subject only to the Permitted
Exceptions and any liens or encumbrances suffered or incurred by Purchaser (“Title Policy”).
Purchaser shall be entitled to obtain at closing, at Purchaser’s cost, such special endorsements
to the Title Policy as Purchaser may reasonably request.

                             (c)  Seller
has provided a copy of the preliminary commitments for title insurance for the Timberlands, together
with copies of the exception documents referenced therein. Purchaser shall have until close of business
on the date that is ten (10) business days after the date of mutual execution and delivery of this
Agreement to notify Seller of any objections Purchaser has to any matters shown or referred to in
the title commitments. Any title encumbrances or exceptions that are set forth in the title commitments
to which Purchaser does not object during the period specified, except the encumbrances that Seller
is required to remove under Paragraph 7(a) above, shall be deemed to be permitted exceptions to the status of Seller’s title (the “Permitted
Exceptions”). With regard to items to which Purchaser does object within the period specified,
Seller shall attempt to cure and remove such items prior to Closing. If Seller is unable or fails
to cure or remove such items by the date that is five (5) days after the date Purchaser gives notice
of such objection, Seller shall notify Purchaser thereof by the expiration of such 5-day period,
and Purchaser may either waive its objection and proceed with closing, or terminate this Agreement
by written notice to Seller no later than the date that is five (5) days after the date Purchaser
receives such notice from Seller (or if Seller is unable or fails to timely cure or remove such items
or give such notice to Purchaser, no later than ten (10) days after Purchaser gives its notice of
objection). If Purchaser fails to give such notice to Seller within the time specified, the objection(s)
shall be deemed waived by the Purchaser. If any supplements to any of the title commitments are issued
after the date of this Agreement, Purchaser shall have until the later of (i) the expiration of the
initial ten (10) business day title review period, or (ii) five (5) business days after receipt of
such supplement, to notify Seller of Purchaser’s objection to any such matters shown therein,
and if such notice is not given within such period, Purchaser shall be deemed to have accepted such
matters, except the encumbrances that Seller is required to remove under Paragraph 7(a) above, as Permitted Exceptions. If Seller is unable or fails to cure or remove such items by the required
date for Closing, Seller shall notify Purchaser thereof at least two (2) business days prior to such
required date for Closing, and Purchaser may either waive its objection thereto and proceed with
closing, or terminate this Agreement by written notice to Seller no later than the required date
for Closing.

	

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                8.
            Condition of Property; Subsequent Acts.

                                8.1        Limitation on Representations. Purchaser agrees that neither Seller nor its agents, officers, employees or assigns shall be held
to any covenant or representation respecting the condition of the Timberlands or any improvements
thereon, nor shall Purchaser or Seller or the assigns of either be held to any covenant or agreement
for alterations, improvements or repairs unless the covenant, representation or agreement relied
on is contained herein or expressly or impliedly in the deeds or instruments transferring any of
the Assets or is in writing and attached to and made a part of this Agreement.

                                8.2        Limitation of Warranties. Except for the representations and warranties made in this Agreement or contained, expressly or impliedly,
in the deeds or instruments transferring any of the Assets, Purchaser specifically acknowledges and
agrees that (i) Seller does not make any representations or warranties of any kind whatsoever, either
express or implied, with respect to the Timberlands; and (ii) the Timberlands are sold to Purchaser
in an “AS IS” and “WITH ALL FAULTS” condition as of the Closing Date, including
without limitation the stability of soils, suitability for any construction or development, encroachment
or boundary questions, drainage, availability of utilities, zoning, quantity, quality, acreage, access
and similar matters. Purchaser assumes the risk that adverse physical conditions may not have been
revealed by its investigation. The limitations and “AS IS” provisions of this Paragraph 8.2 specifically do not apply to the express exceptions to the release granted to Seller in Paragraph 4.8 hereof.

                9.
            Liabilities Not Assumed. Except for obligations under the Access Rights and Easements arising from and after Closing, and
as otherwise expressly set forth in this Agreement, Purchaser shall not assume or be responsible
for any liabilities of Seller.

                10.         
Access Rights and Easements.

                               At Closing, Seller shall assign, to the extent assignable, and, subject to the terms of Paragraph 16.2 below, Purchaser shall assume the Access Rights and Easements listed on Schedule 1.2 pursuant to an executed blanket assignment in the form of Schedule 10 hereto. Seller has provided copies of the Access Rights and Easements to Purchaser. 

	

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                11.
         Access to Information. Upon full execution hereof, Seller will permit Purchaser to have reasonable access to the Timberlands
and to the Maps and Records, whether located in Seller’s Seattle office or elsewhere, provided,
however, that any such access must be coordinated through Michael Yeager in Seller’s Seattle
office. Seller shall provide Purchaser with access to all other materials reasonably requested by
Purchaser. Purchaser and its employees, agents and consultants shall have the right, at Purchaser’s
sole cost and expense, to enter onto the Timberlands prior to Closing to conduct such inspections
of the Assets, document reviews, and tests as Purchaser deems reasonable; provided, however, that
such access must be coordinated through Michael Yeager in Seller’s Seattle office. 

                12.
         Confidentiality; Public Announcements; Return of Information. Subject to the provisions of Paragraph 12.3 below:

                                12.1        Neither Seller nor Purchaser shall disclose the content or substance of this Agreement to any
individual, firm, partnership, corporation, entity, governmental authority, or other party except
advisors, agents, lenders and representatives assisting each respective party in connection with
this transaction, and except government agencies and other third parties to whom notice must be given
or from whom consent must be obtained in order to complete the transactions described herein, until
such disclosure is agreed upon in writing and then only to accomplish the consents and approvals
required hereunder.

                                12.2        No press releases or other public statements concerning this Agreement or the transactions contemplated
hereby shall be made by either party without the prior written approval of the other, provided such
approval shall not be unreasonably withheld or delayed; provided further that the parties shall cooperate
in good faith with respect to issuing a joint press release at or prior to Closing. Seller acknowledges
that this transaction constitutes a “material transaction” for Purchaser with respect to
disclosure requirements and Purchaser’s press release will include disclosure of the Purchase
Price. Seller agrees that upon the full execution of this Agreement, Purchaser may issue a press
release regarding this transaction so long as the Purchase Price is not disclosed, and upon Closing
Purchaser may issue a press release regarding this transaction including disclosure of the Purchase
Price; provided, however, that Seller must approve the form and content of any such press release
prior to its issuance, such approval not to be unreasonably withheld

                                12.3        Each party hereto, its representatives, agents and employees shall hold in strict confidence
and shall not use or disclose to any person or organization any information or data concerning this
Agreement or the transaction contemplated hereby except to the extent that (i) said information has
been published or constitutes a matter of public knowledge or record; (ii) such disclosure is reasonably
necessary for communications with and reporting to the Board of Directors or other governing body
of either party or reasonably appears to be required by a governmental agency having jurisdiction
over the parties; (iii) such information is necessary in connection with any suit brought to enforce
the obligations of any party hereunder; or (iv) if based upon the legal opinion of counsel for the
disclosing party, that such counsel reasonably believes that disclosure is necessary or desirable
to avoid conflict with or violation of any applicable law, rule, or regulation.

	

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                                12.4        In the event of termination of this Agreement for whatever reason, Purchaser will return all
originals and copies of documents, work papers and other material obtained hereunder, whether obtained
before or after the execution hereof (subject to retention of true copies for litigation purposes
as applicable), and Purchaser agrees that it will not disclose or divulge any such information to
any other person without Seller’s written consent, and will use its best efforts to keep any
information so obtained confidential; provided, however, that (i) Purchaser may disclose this information
to its employees, attorneys, accountants and prospective lenders who need to know such information
in connection with this transaction and who have been informed of Purchaser’s obligation to
maintain the information as confidential; and (ii) Purchaser shall not be obligated to treat as confidential
any information which was known to it at the time of disclosure or which becomes publicly known or
available thereafter or is rightfully received by Purchaser from a third party.

                13.
         Exchange.  Seller may wish to complete this transaction as part of a Section 1031 tax-deferred exchange. Purchaser
agrees to cooperate with Seller in documenting and completing such exchange by agreeing that Seller
may transfer Seller’s rights and obligations under this Agreement to Seller’s Qualified
Intermediary, in Seller’s sole discretion, provided that such assignment, if made, shall not
release Seller from its obligations under this Agreement. Purchaser agrees to accept Seller’s
Qualified Intermediary as the assigned Seller of the Property described in this Agreement. Purchaser
shall incur no additional expense or liability by such cooperation. Purchaser may wish to complete
this transaction (or portion thereof) as part of a Section 1031 tax-deferred exchange. Seller agrees
to cooperate with Purchaser in documenting and completing such exchange by agreeing that Purchaser
may transfer all or any portion of Purchaser’s rights and obligations under this Agreement to
Purchaser’s Qualified Intermediary or Exchange Accommodation Titleholder (as defined in Rev.
Proc. 2000-37), in Purchaser’s sole discretion, provided that such assignment, if made, shall
not release Purchaser from its obligations under this Agreement. Seller agrees to accept Purchaser’s
Qualified Intermediary or Exchange Accommodation Titleholder as the assigned Purchaser of the Property
described in this Agreement. Seller shall incur no additional expense or liability by such cooperation.

                14.         
Closing.

                                14.1        Conditions to Purchaser’s Obligations. The obligations of Purchaser to perform this Agreement are subject to the satisfaction, in all material
respects on or before the Closing Date or the date indicated for any such contingency listed below
(whichever is earlier), of each of the following conditions and any other conditions to Purchaser’s
obligations hereunder specified elsewhere in this Agreement, unless waived in writing by Purchaser
in its sole discretion:

                                                 (a)        Material Inaccuracies. Seller’s representations and warranties shall be true and correct in all material respects on
and as of the Closing Date as though made on and as of the Closing Date and Seller shall deliver
a certificate to that effect at Closing.

	

12

	
                                                (b)        Performance of Obligations. Seller shall have performed all obligations required to be performed by it prior to or on the Closing
Date under this Agreement.

                                                (c)        Title Insurance Commitment. At Seller’s expense, Purchaser shall have received a binding commitment from Transnation Title
Insurance Company for the issuance of the Title Policy, and any special endorsements thereto reasonably
required by Purchaser (which special endorsements shall be at Purchaser’s expense), subject
only to the Permitted Exceptions. It shall be reasonable for Purchaser to require a special endorsement
to the Title Policy which insures that the Declaration (as defined in Section 14.1(h) below) and
the Murray Pacific Habitat Conservation Plan (“HCP”), Amended HCP, Implementation Agreement
and Amended Implementation Agreement, as described in the Declaration, do not affect or bind the
Timberlands or any portion thereof.

                                                (d)        Suits, Actions or Proceedings. No suit, action, arbitration or other proceeding shall be pending before any court or governmental
agency, which may result in the restraint or prohibition of the consummation of the transactions
contemplated by this Agreement, or which could reasonably be expected to have a material adverse
effect on the value of the Assets or the use of the Timberlands as commercial timberlands, and all
governmental and regulatory approvals and clearances which are required to consummate such transactions,
if any, shall have been obtained. 

                                                (e)        Casualty, Loss or Condemnation. The Timberlands shall not have become subject, subsequent to the date of this Agreement and prior
to the Closing Date, to physical damage by fire, flood, windstorm, earthquake or other similar occurrence,
or to any condemnation proceeding, which causes or may result in a diminution in the value of the
Timberlands by at least $800,000. If Purchaser elects to waive the condition set forth in this Paragraph
14.1(e), or if any material casualty or condemnation loss diminishes the value of the Timberlands
by less than $800,000, the Purchase Price shall be reduced to reflect the diminution in value resulting
or expected to result from the casualty or condemnation, in which event Seller shall be entitled
to retain any compensation awards, insurance proceeds or other payment or relief resulting from such
casualty or condemnation. If the parties cannot agree upon the extent of the diminution in value,
the determination shall be made by an independent expert mutually agreed upon by the parties. The
foregoing notwithstanding, if the amount of the casualty or condemnation loss diminishes or is expected
to diminish the value of the Timberlands, by $25,000 or less, there shall be no adjustment to the
Purchase Price; provided, however, that in such event Purchaser shall be entitled to receipt and
assignment of any compensation awards, insurance proceeds or other payment or relief resulting from
such casualty or condemnation.

	

13

	
                                                (f)         Due Diligence Review.  Purchaser may, at Purchaser’s sole cost and expense, conduct a due diligence review of
the Maps and Records, Access Rights and Easements, and the following conditions affecting or pertaining
to the Timberlands: environmental, title, access, endangered or threatened species and any nesting
site(s) or habitat thereof or waterways containing any such species, and “owl circles,“
such due diligence review to be completed not later than the date that is ten (10) business days
after the date of mutual execution and delivery of this Agreement. Purchaser’s due diligence
review may include review and analysis of all documentation, determinations, reports, files and studies
of any state or other governmental agency relating to endangered or threatened species, or any nesting
site(s) or habitat thereof or waterways containing any such species, or any “owl circles”
on or affecting the Timberlands. Purchaser’s obligations to consummate the transactions described
herein are subject to and conditioned upon Purchaser’s acceptance of the findings of such due
diligence review in Purchaser’s sole good faith discretion. In the event Purchaser fails to
give notice to Seller of Purchaser’s nonacceptance of its due diligence review by the expiration
of the 10 business day due diligence contingency period, Purchaser shall be deemed to have waived
this condition to Closing. 

                                                (g)        Approval of Continuance Request.  Purchaser’s request for continuance of the forestland or timberland designation or classification
of the Timberlands shall have been granted by the Lewis County Assessor at or prior to Closing.

                                                (h)        Removal of  Declaration of Covenant from Timberlands. Prior to Closing, the Declaration of Covenant recorded
under Lewis County Rec. No. 9313627, as amended by Amendment recorded under Lewis County Rec. No.
9512060 (the “Declaration”), relating to the Murray Pacific HCP, Amended HCP, Implementation
Agreement, and Amended Implementation Agreement, shall be removed from title with respect to the
Timberlands and all portions thereof by a recorded release or other documentation reasonably satisfactory
to Purchaser and the underwriters for Transnation Title Insurance Company (“Release”).
Purchaser shall be deemed to have a reasonable basis to disapprove such release or other documentation
if it is revocable, conditional, effective on a date later than the date of its recordation, or is
not signed by all necessary parties. If this condition to Closing has not been satisfied by January
9, 2004, the Closing Date shall be automatically extended to allow said contingency to be satisfied,
provided that the Closing Date shall not be extended beyond January 30, 2004. Seller shall use its
reasonable efforts to cause the Release to be timely signed and recorded. Seller agrees to be a party
to the Release. If this condition to Closing is satisfied, the Declaration shall not show as an exception
on Purchaser’s title policy.

                In
the event any of the above conditions to Purchaser’s obligations hereunder are not satisfied
or waived by Closing or the earlier dates indicated above, Purchaser will have the right, exercisable
at Purchaser’s sole election, to terminate this Agreement, whereupon the Earnest Money will
be refunded to Purchaser and no party hereto will have any further rights, duties or obligations
hereunder other than those which expressly survive a termination hereof.

                                14.2.        Conditions to Seller’s Obligations. The obligations of Seller to perform this Agreement are subject to the satisfaction, in all material
respects on or before the Closing Date, of each of the following conditions and any other conditions
to Seller’s obligations hereunder specified elsewhere in this Agreement, unless waived in writing
by Seller in its sole discretion:

	

14

	
                                                (a)        Material Inaccuracies. Purchaser’s representations and warranties shall be true and correct in all material respects
on and as of the Closing Date and Purchaser shall have delivered a certificate to that effect at
Closing.

                                                (b)        Performance of Obligations. Purchaser shall have performed all obligations required to be performed by it prior to or on the
Closing Date under this Agreement.

                                                (c)        Suits, Actions or Proceedings. No suit, action, arbitration or other proceedings shall be pending before any court or governmental
agency which may result in the restraint or prohibition of the consummation of the transactions contemplated
by this Agreement, and all governmental and regulatory approvals and clearances which are required
to consummate such transactions, if any shall have been received.

                In
the event any of the above conditions to Seller’s obligations hereunder are not satisfied or
waived by Closing, Seller will have the right, exercisable at Seller’s sole election, to terminate
this Agreement, whereupon the Earnest Money will be refunded to Purchaser and no party hereto will
have any further rights, duties or obligations hereunder other than those which expressly survive
a termination hereof.

                                14.3        Prorations. All real property taxes shall be prorated to the Closing Date.

                               
14.4       Closing Costs.

                                                (a)        At
Closing Seller shall pay the following costs and expenses associated with the closing of the transactions
contemplated hereunder:

                                                            (i)        The
cost of the standard owner’s policy or policies of title insurance;

                                                           
(ii)        One-half of escrow fees;

                                                            (iii)        All
transfer, excise, and recording taxes or fees due on the transfer or conveyance of the Assets, including
without limitation real estate excise tax on the conveyance of the Timberlands; and

                                                            (iv)        Seller’s
Broker’s fees and commissions and Seller’s attorney’s fees.

                                                            (v)        Any
and all compensating or “roll-back” taxes that may become due or assessable as a result
of the removal of the Timberlands or any portion thereof from its present property tax classification
or designation as “timberlands” or “forestland” prior to Closing or as a result
of the inability of Purchaser to obtain a requested continuance of such classification or designation
at Closing based upon any prior act or omission of Seller.

	

15

	
                                                (b)        Purchaser shall pay:

                                                            (i)        One-half of the escrow fees;

                                                            (ii)        Title
insurance premium attributable to extended coverage, if any, or any endorsements;

                                                            (iii)        Recording fees for deeds; and

                                                            (iv)        Purchaser’s attorneys’ fees.

                                                            (v)        Any
and all compensating or “roll-back” taxes that may become due or assessable as a result
of the removal of the Timberlands or any portion thereof from its present property tax classification
or designation as “timberlands” or “forestland” as of or after Closing, unless
caused by action or failure to act on the part of Seller.

Except as otherwise provided in this Agreement, each party shall be responsible for the payment of
costs incurred by said party in connection with the transaction contemplated by this Agreement.

                               
14.5        Closing.  At Closing:

                                                (a)        Seller
shall deliver to Purchaser the following:

                                                                (i)        Special
Warranty Deed for the Timberlands in the form attached as Schedule 14.5(a)(i). 

                                                                (ii)        Nonforeign
Affidavit to the effect that Seller is not a foreign person as that term is used in Section 1445
of the Internal Revenue Code;

                                                                (iii)        An
Assignment and Assumption Agreement for the Access Rights and Easements to be recorded in Lewis County
in substantially the form attached hereto as Schedule 10; 

                                                                (iv)        A
prepaid binding commitment for a standard coverage Policy of Title Insurance; and

                                                                (v)        An
Officer’s Certificate regarding representations and warranties.

	

16

	
                                                (b)        Purchaser
shall deliver to Seller the following:

                                                                (i)        Executed
copy of the Assignment and Assumption Agreement of the Access Rights and Easements in substantially
the form attached hereto as Schedule 10; 

                                                                (ii)        An
Officer’s Certificate regarding representations and warranties; and

                                                               
(iii)        The Purchase Price.

                At
least ten (10) business days prior to Closing, Seller and Purchaser shall complete and sign
appropriate Real Estate Excise Tax Affidavit with respect to the conveyance of the Timberlands in
which Purchaser covenants that it will request continuance of the present “timberlands”
or “forestland” property tax classification of the Timberlands, and Purchaser may
then, prior to Closing, submit such Real Estate Excise Tax Affidavits to the County Assessor to obtain
approval of the continuance request. 

                At
Closing Seller and Purchaser shall sign and deliver into escrow notices to the State Department of
Natural Resources (“DNR”), on DNR approved forms, wherein notice is given by Seller to
the DNR of the assignment to Purchaser of the approved Forest Practices Application to be assigned
to Purchaser under this Agreement, and Purchaser affirms, as the new landowner, timber owner and
operator, that it agrees to be bound by all conditions on such approved Forest Practices Application.
Upon Closing, such notices shall be transmitted to the DNR. 

                15.
         Indemnification.        Seller shall defend and indemnify Purchaser and hold it harmless from any claim, damage, liability,
loss, cost, deficiency, judgment or expense (reference to “expense” shall include, without
limitation, reasonable attorneys’ fees and other costs and expenses incident to any actions,
suits, proceedings or investigations or the defense of any claims, whether prior to or at trial or
in appellate proceedings) (i) arising out of, resulting from or relating to claims by third parties
arising out of any acts or omissions of Seller prior to Closing or any injuries, accidents, occurrences,
activities or events occurring on the Timberlands prior to Closing, and (ii) for obligations or liabilities
arising or accruing with respect to the Assets prior to the Date of Closing. Purchaser shall defend
and indemnify Seller and hold it harmless from any claim, damage, liability, loss, cost, deficiency,
judgment or expense (reference to “expense” shall include, without limitation, reasonable
attorneys’ fees and other costs and expenses incident to any actions, suits, proceedings or
investigations or the defense of any claims, whether prior to or at trial or in appellate proceedings)
(i) arising out of, resulting from or relating to claims by third parties arising out of any acts
or omissions of Purchaser for activities conducted by Purchaser or its employees, agents or contractors
inspecting the Timberlands prior to Closing or any injuries, accidents, occurrences, activities or
events occurring on the Timberlands after Closing (except to the extent caused by Seller or its agents,
contractors or employees), and (ii) for obligations or liabilities arising or accruing with respect
to the Assets after the Date of Closing. Purchaser’s and Seller’s respective defense and
indemnity obligations under this Paragraph 18 shall survive Closing.

	

17

	
                16.
         Closing and Post-Closing Adjustments and Post-Closing Matters.

                                16.1
         Reforestation Obligations.  Seller shall complete prior to Closing all statutory reforestation obligations it may have with respect
to the Timberlands, except as expressly provided in the following sentence. Seller and Purchaser
acknowledge and agree that approximately 65 acres of the Timberlands located in the area shown on
the map attached hereto as Exhibit “B” are subject to reforestation obligations that Seller will not complete prior to Closing. Purchaser
agrees to assume this reforestation obligation as to said approximate 65 acres; provided, however,
Seller agrees to provide to Purchaser, at Seller’s sole cost and expense, 26,000 suitable planting
stock elevation and geographic zone Douglas-fir seedlings to fulfill such reforestation obligations;
and provided, further, that Purchaser shall receive a credit at closing in the amount of $6,000 which
the parties approximate is the cost of planting such seedlings.

                                16.2
         Third Party Consents.   Notwithstanding anything to the contrary in this Agreement, the Access Rights and Easements
identified on Schedule 16.2  require the consent or approval of a third party, and if such consent is not obtained prior to
Closing, such Access Rights and Easements for which required consent has not been obtained shall
be assigned to Purchaser at Closing on the following basis, terms and conditions: (1) Seller
shall assign such Access Rights and Easements subject to and effective only at such time as such
consent is obtained; (2) Seller shall continue to use reasonable and diligent efforts, at its cost
and expense, to obtain any such consent or approval after the Closing Date; (3) until such time as
such consent has been obtained, Seller will cooperate in all reasonable respects with the Purchaser
in any lawful and economically feasible arrangement to provide that the Purchaser shall receive the
interest of the Seller in the benefits under any such Access Rights and Easements (except that
any such arrangement shall not require performance by Seller as agent) provided that the Purchaser
shall undertake to and shall pay or satisfy the corresponding liabilities for the enjoyment of such
benefit to the extent Purchaser would have been responsible therefor if such consent or approval
had been obtained; and (4) Purchaser shall have no obligations or liabilities under or with respect
to such Access Rights and Easements until the earlier of (i) the date such consent is obtained
and (ii) the date that Purchaser receives the benefits thereunder, and then only for obligations
or liabilities arising thereunder or with respect thereto after such date. If this transaction closes
on the foregoing basis, the Assignment and Assumption Agreement pertaining to any such Access Rights
and Easements where such required consent has not been obtained as of Closing, shall contain appropriate
provisions consistent with the provisions of this Paragraph 16.2.

	

18

	
                17.          Miscellaneous.

                                17.1
         Further Assurances. If, at any time after the Closing Date, either party shall consider or be advised that any further
instruments or assurance or any other things are necessary or desirable to carry out the terms of
this Agreement, the other party shall execute and deliver all such instruments and assurances and
do all things reasonably necessary and proper to carry out the terms of this Agreement.

                                17.2
         Integration. This Agreement and the documents delivered pursuant hereto contain the entire agreement among the
parties with respect to the subject matter hereof and supersede all prior negotiations. None of the
parties shall be bound by nor shall be deemed to have made any representations, warranties or commitments
except those required to be made by the terms of this Agreement, or those which are contained herein
or in the documents delivered pursuant hereto.

                                17.3
         Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be
an original instrument, and all such counterparts together shall constitute one Agreement.

                                17.4
         Severability. Any term or provision of this Agreement that is invalid or unenforceable in any jurisdiction shall,
as to that jurisdiction, be ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this Agreement or affecting
the validity or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction.
If any term or provision of this Agreement is so broad as to be invalid or unenforceable, the provision
shall be interpreted to be only so broad as is valid or enforceable. Subject to the foregoing provisions
of this Paragraph 20.4, if any term or provision of this Agreement is invalid or unenforceable
for any reason, such circumstances shall not have the effect of rendering such term or provision
invalid or unenforceable in any other case or circumstance.

                                17.5
         Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.

                                17.6
         Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State
of Washington.

                                17.7
         Assignment. Except as expressly permitted pursuant to Paragraph 13, neither party may assign its rights hereunder
prior to the Closing without the prior written consent of the other, which may be withheld for any
reason.

                                17.8
         Captions and Paragraph Headings. The headings used in this Agreement are for convenience only and shall not affect the construction
of any of the terms of this Agreement.

	

19

	                                17.9          Notices. Notices under this Agreement shall be in writing and shall be effective when actually delivered or, if mailed, on the earlier of receipt (or refusal of receipt) or three (3) business days after being deposited, postage prepaid, in the United States’ mails as certified mail, return receipt requested, directed to the other party at the address set forth below, or, if sent via facsimile transmission, on the date such facsimile transmission to the facsimile number of the other party set forth below is confirmed by machine-printed confirmation of the sender’s facsimile machine. The address or facsimile numbers for notices to a party hereunder may be changed by such
party by written notice to the other party.
	 

	If to Seller:	 	Plum Creek Timberlands, L.P.
	 	 	999 Third Avenue, Suite 4300
	 	 	Seattle, WA 98104
	 	 	Attention: Sheri L. Ward, Director Law
	 	 	Facsimile: (206) 467-3799
	 	 	 
	If to Purchaser:	 	Pope Resources, L.P.
	 	 	19245 Tenth Avenue Northeast
	 	 	Poulsbo, WA  98370-0239
	 	 	Attn:  John Shea, Director of Business Development
	 	 	Facsimile:  (360) 697-1156
	 	 	 
	With a Copy to: 	 	 Warren Koons, Esq.
	 	 	Davis Wright Tremaine LLP
	 	 	777 – 108th Ave. NE, Suite 2300
	 	 	Bellevue, Washington 98004-5149
	 	 	Facsimile: (425) 646-6199
	 	 	 

	
                                17.10
        Time is of the Essence. Time is of the essence of this Agreement.

                                17.12.        Default. If either party defaults (that is, fails to perform the acts required of it) in its contractual performance
herein or breaches any of its representations or warranties contained herein, the non-defaulting
party, subject to the following paragraph, shall be entitled to exercise all rights and remedies
available to it at law or equity, including but not limited to specific performance pursuant to the
terms of this Agreement, damages or rescission. If the non-defaulting party seeking damages or rescission
is the Purchaser, the Earnest Money, together with any interest thereon, shall be refunded. 

	

20

	
                Purchaser acknowledges that if Purchaser fails to purchase the Assets so as to constitute a default
by Purchaser hereunder, for any reason other than the breach of Seller, Seller shall be entitled
to forfeit the Earnest Money as compensation for the detriment resulting from the removal of the
Property from the market, and entering into this Agreement rather than selling to other potential
purchasers. Therefore, in the event of Purchaser’s failure to purchase the Assets so as to constitute
Purchaser’s default hereunder, Seller shall have, as Seller’s sole and exclusive remedy,
the right to receive the Earnest Money, together with any interest thereon, which sum shall represent
liquidated damages for breach and not a penalty therefor. The parties acknowledge and agree that
the Earnest Money is presently a reasonable estimate of Seller’s damages, considering all of
the circumstances existing on the date of this Agreement, including the relationship of the sum to
the range of harm to Seller that reasonably could be anticipated and the expectation that proof of
actual damages would be impractical or extremely difficult. Factors taken into consideration by the
parties include Seller’s loss of opportunity during the pendency of this Agreement to sell the
Assets to others on better terms, or at a higher price; Seller’s risk of loss of a bargain if
the market turns negative; Seller’s damages related to its continuing obligations for the payment
of taxes and insurance; and Seller’s loss of earnings on the amount of the purchase price resulting
from a delay in closing. Purchaser hereby waives all rights or benefits of any law, rule or regulation,
now or hereafter existing, which would allow Purchaser, following Purchaser’s failure to purchase
the Assets so as to constitute Purchaser’s default, to claim a refund of the Earnest Money,
together with any interest thereon, as unearned earnest money, a penalty or for any other purpose.
Seller hereby waives all rights, remedies and claims, other than forfeiture of the Earnest Money
that Seller may otherwise have for Purchaser’s failure to purchase the Assets so as to constitute
a default by Purchaser under this Agreement.

                                17.13   Schedules Incorporated.  The schedules attached to this Agreement (“Schedules”) are incorporated herein by reference: 

	 

	Schedule	 	Description
	
	 	

	1.2	 	Access Rights and Easements
	 	 	 
	4.13	 	Unrecorded Contracts, Agreements, FPAs, etc.
	 	 	 
	14.5(a)(i)	 	Form of Special Warranty Deed for Washington
	 	 	 
	10 	 	Assignment of Access Rights and Assumption Agreement
	 	 	 
	16.2	 	Third Party Consents for Assignment of Access Rights and Easements

	 
	
                                17.14   Costs and Expenses. Except as otherwise expressly provided in this Agreement, each party to this Agreement shall pay
its own costs and expenses (including, without limitation, the fees and expenses of its agents, representatives,
counsel and accountants) incurred in connection with the closing of the transactions contemplated
under this Agreement.

                                17.15   Attorneys Fees and Other Costs. If either party initiates any proceeding in law, equity or arbitration concerning this Agreement
or any of its provisions, the party that substantially prevails in such proceeding shall be paid
by the party not so prevailing therein all costs and expenses incurred in such proceeding, including
reasonable attorneys’ fees at the pretrial, trial and appellate levels as determined by the
court or courts considering the matter.

	

21

	
                                17.16   No Third Party Beneficiaries.  This Agreement is made and entered into for the sole protection and legal benefit of the parties
and, subject to the restrictions on assignment set forth herein, their respective successors and
assigns, and no other person or entity shall be a direct or indirect legal beneficiary of, or have
any direct or indirect cause of action or claim in connection with, this Agreement.

	

22

	
                IN
WITNESS WHEREOF, the parties hereto have executed this instrument the day and year first above written.

PLUM CREEK TIMBERLANDS, L.P.

	 	 
	By Plum Creek Timber I, L.L.C.,	Attest
	      Its General Partner	 

	 	 	 	 
	 	 	 	 
	By	____________________________	By:	_______________________________
	 	James A. Kraft	 	Sheri L. Ward, Assistant Secretary
	 	Senior Vice President, General Counsel	 	 
	 	and Secretary	 	 
	 	 	 	 
	POPE RESOURCES, A Delaware Limited Partnership	 	 
	 	 	 	 
	By:	________________________________	 	 
	 	David L. Nunes	 	 
	 	CEO	 	 

	

23

	
EXHIBIT “A”  

That certain real property located in Lewis County, Washington described as follows:

Township 12 North, Range 4 East, W.M.

	 

	 	Section 36: ALL; Except that portion of the S1/2 lying Southerly of the following described line:
		 

	 	BEGINNING at a point on the West line of said Section 36, which is 657.4 feet South of the West quarter
corner thereof; thence Southeasterly to the South quarter corner of said Section; thence Northeasterly
to a point on the East line of said Section which is 662.34 feet South of the East quarter corner
thereof and the terminus of said line.

	

                        

	Township 13 North, Range 4 East, W.M.

	 	 
	 	Section 36: NE1/4, SW1/4 and SE1/4.
	 	 
	Township 13 North, Range 5 East, W.M.
	 	 
	 	Section 16: ALL
	 	 
	 	Section 18: That portion of the SE1/4NE1/4 lying within a 50 foot wide strip of land, the centerline
of which is described as follows:
		 
	 	BEGINNING at a point on the East line of said subdivision which is 1109 feet North of the Southeast
corner thereof; thence South 80°30’ West a distance of 67 feet; thence on a curve to the left having a radius of 146.2 feet a
distance of 141.2 feet; thence South 24°  West a distance of 89 feet; thence on a curve to the right having a radius of 287.9 feet a distance
of 370 feet; thence North 82°  West a distance of 116 feet to the Southerly line of the right of way of the Tacoma and Eastern
Railway and the terminus of said centerline.
		 
	 	ALSO that portion of the E1/2SE1/4NE1/4 lying Southerly of the Tacoma and Eastern Railway right of
way and Northerly of the above described property.
	 	 
	 	Section 22:           S1/2SW1/4 and S1/2SE1/4
	 	 
	 	Section 26: ALL
	 	 
	 	Section 27: E1/2

	

24

	 	Section 29: That portion of the NW1/4 lying Northerly of the St. Regis Paper Company Logging Road
as described in deed recorded April 15, 1959 under Auditor’s File No. 598947.
	 	 
	 	Section 34: NE1/4, N1/2NW1/4, S1/2SW1/4, NE1/4SE1/4 and S1/2SE1/4.
	 	 
	 	Section 35: N1/2NW1/4 and NW1/4NE1/4.

	

25

	
	 
	EXHIBIT “B”
	 
	Reforestation Map

	

26

	
  SCHEDULE 1.2
      

  Access Rights and Easements  

	 

	Grantor	Grantee	Date	Recording Info.
	 	 	 	 
	State of 

      Washington, DNR 	Plum Creek Timber

      Company, L.P.	11/28/1990	Rec. 12/13/90

      AF# 9013191, Vol.459, Pg. 

      557, subsequently amended 

      under Easement No. 50-

      51161, AF#3127415,

      recorded 12/12/2001
	 	 	 	 
	Burlington

      Northern Railroad 

      Company	State of Washington, 

      DNR	4/10/84	AF#922072, Rec. 4/16/84,

      Vol. 283, Pg. 824
	 	 	 	 
	Northern Pacific 

      Railway Company	State of Washington, 

      DNR	6/30/66	AF#697932. Rec. 7/14/66,

      Vol.446, Pg. 837
	 	 	 	 
	Murray Pacific

      Corporation	State of Washington, 

      DNR	11/3/93	AF#9316199, Rec. 11/3/93

      Vol.574, Pg. 744
	 	 	 	 
	Milwaukee Land 

      Company; Northern 

      Pacific Railway 

      Company; West 

      Tacoma Newsprint 

      Company; United 

      States Plywood

      Corporation	State of Washington, 

      DNR	2/14/67	AF#715221, Rec. 9/7/1967

      Vol. 454, Pg. 532
	 	 	 	 
	Boise Cascade 

      Corporation	State of Washington, 

      DNR	1/12/77	AF#825376, Rec. 1/19/77

      Vol. 134, Pg. 374
	 	 	 	 
	Murray Pacific

      Corporation	State of Washington, 

      DNR	8/8/79	AF#867261, Rec. 8/21/79

      Vol. 194, Pg. 810

	

27

	Chicago, 

      Milwaukee, St. 

      Paul and Pacific 

      Railroad Company	State of Washington, 

      DNR	10/8/79	Rec. 3/17/80 

      Vol. 205, Pg. 787
	 	 	 	 
	St. Regis Paper 

      Company	Northern Pacific

      Railway Company	6/30/64	AF#669471

      Vol. 435, Pg. 472
	 	 	 	 
	St. Regis Paper

      Company	Northern Pacific 

      Railway Co.	8/19/60	Rec. 9/30/60

      Vol. 33, Pg.589

      AF#617389
	 	 	 	 
	United States 

      Plywood Corp.	Northern Pacific 

      Railway Co.	5/24/65	Recorded 6/4/65

      Vol.439/Pg.727

      AF#680424

	

28

	
SCHEDULE 4.13

Unrecorded Contracts, Agreements, FPAs

1.             Forest Practices Application/Notification
No. 2510283 dated November 5, 2002

	

29

	
SCHEDULE 14.5(a)(i)

Form of Special Warranty Deed

After recording return to:

TRANSNATION TITLE INSURANCE COMPANY

1200 Sixth Avenue, Suite 1910

Seattle, WA 98101

Attn: Kim Azure

File No. _____________________ (slw)

SPECIAL WARRANTY DEED

Grantor:  PLUM CREEK TIMBERLANDS, L.P., a Delaware limited partnership

Grantee:  POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP 

Legal Description (abbreviated): ______________________________________

Assessor’s Tax Parcel ID #: __________________________________________

                KNOW ALL PERSONS BY THESE PRESENTS: That PLUM CREEK TIMBERLANDS, L.P. a Delaware limited partnership,
successor by merger to Plum Creek Timber Company, L.P., a Delaware limited partnership, qualified
to do business and to own property in the State of Washington with its principal place of business
located in Seattle, Washington, GRANTOR, in consideration of the sum of Ten and 00/100 Dollars ($10.00)
and other good and valuable consideration, the receipt of which is hereby admitted, does hereby grant,
bargain, sell, convey and confirm unto POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP, whose address
is 19245 10th Avenue NE, Poulsbo, Washington 98370-0239, hereinafter referred to as GRANTEE, and to its successors
and assigns, FOREVER, the real property situated in the County of Lewis, State of Washington, described
on Exhibit “A” attached hereto and incorporated herein by this reference as though fully
set forth.

                SUBJECT TO only those encumbrances listed on the attached Exhibit “B” [Exhibit “B”
would be the recorded Permitted Exceptions.]]

                TOGETHER, with all and singular the tenements, hereditaments and appurtenances thereto belonging or
in anywise appertaining. 

                And the said GRANTOR, for itself and its successors, further hereby covenants that it will forever
WARRANT and DEFEND all right, title, and interest in and to said premises, and the quiet and peaceable
possession thereof, unto the said GRANTEE, its successors and assigns, against the acts and deeds
of said GRANTOR, and all and every person and persons whomsoever lawfully claiming or to claim by,
through or under GRANTOR . 

	

30

	
                IN WITNESS WHEREOF, said GRANTOR has caused its limited partnership name to be subscribed and its seal
to be affixed, by its proper officers, thereunto duly authorized, on this ______ day of January,
2004.

	 

	 	PLUM CREEK TIMBERLANDS, L.P.
	 	 
	Attest:	By Plum Creek Timber I, L.L.C.,
	 	 	General Partner
	 	 	 
	 	 	 
	By  ___________________________	 	By  ___________________________
	    Sheri L. Ward, Assistant	 	    Rick R. Holley, President 
	    Secretary	 	    and Chief Executive Officer

	

31

	ACKNOWLEDGMENT
	 	 
	STATE OF WASHINGTON  	)
	 	 )ss:
	COUNTY OF KING	 )
	 	 

	

                On this _____ day of _______________, 200__, before me personally appeared Rick R. Holley and Sheri
L. Ward, to me known to be the President and Chief Executive Officer and the Assistant Secretary,
respectively, of Plum Creek Timber I, L.L.C., general partner of Plum Creek Timberlands, L.P., the
limited partnership that executed the within and foregoing instrument, and acknowledged the said
instrument to be the free and voluntary act and deed of said limited partnership for the uses and
purposes therein mentioned, and on oath stated that they were authorized to execute said instrument
on behalf of the limited partnership and that the seal affixed is the seal of said limited partnership.

                IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year last

above written.

	 

	   	————————————————————
	 	Notary Public in and for the
	 	State of Washington
	 	Residing at __________________________
	 	My Commission Expires ________________
	 	Printed Name: _____________________

	

32

	
SCHEDULE 10

Form of Assignment of Access Rights and Easements

After Filing Return To:

Warren Koons

Davis Wright Tremaine LLP

777 – 108th Ave. NE, Suite 2300

Bellevue, WA 98004-5149

                                      Assignment of Access Rights and Easements and Assumption Agreement

Assignor:              PLUM CREEK
TIMBERLANDS, L.P., a Delaware limited partnership

Assignee:              POPE RESOURCES,
A DELAWARE LIMITED PARTNERSHIP

Ref. Nos. of Documents Assigned: ____________________________________________

                This
Assignment of Access Rights and Easements and Assumption Agreement (this “Assignment”),
is made the ____ day of January, 2004, between PLUM CREEK TIMBERLANDS, L.P., a Delaware limited partnership
(the “Assignor”), whose address is 999 Third Avenue, Suite 2300, Seattle, Washington 98104,
and POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP (the “Assignee”), whose address is 19245
Tenth Avenue Northeast, Poulsbo, Washington 98370-0239; 

                WHEREAS, by Timberland Purchase and Sale Agreement for the Morton, Washington Timberlands between the
Assignor and the Assignee, dated December __, 2003 (the “Purchase and Sale Agreement”)
and subsequent documents conveying the Assets described therein, Assignee purchased certain real
property, and all rights and appurtenances associated therewith located in Lewis County, Washington;
and

                WHEREAS, Assignor and Assignee desire that Assignor’s right, title and interest in, to and under
certain access rights and easements located in Lewis County, Washington, be assigned to Assignee,
as part of the transfer and conveyance of the Assets to Assignee pursuant to the Purchase and Sale
Agreement.

                NOW, THEREFORE, the parties hereto, for good and valuable consideration and in accordance with the
terms of the Purchase and Sale Agreement, hereby agree as follows:

                1.             Assignor assigns, transfers,
and sets over to Assignee all of Assignor’s right, title and interest in, to and under the rights-of-way,
easements, use agreements and other access rights appurtenant to, relating to or benefiting the Timberlands
(as hereinafter defined), as such rights-of-way, easements, use agreements and other access rights
were granted to or reserved by Assignor or its predecessors in interest and as are further described
on Exhibit “A” attached hereto and incorporated herein by this reference as though fully
set forth (the “Access Easements”). Assignee may, at its option, record this Assignment
in the real property records of Lewis County, Washington.

	

33

	
                2.             Assignor assigns, transfers,
and sets over to Assignee all of Assignor’s right, title and interest in, to and under any and
all other rights-of-way, easements, use agreements and other access rights presently held or claimed
by Assignor in Lewis County, Washington, which are appurtenant and provide access to or otherwise
benefit the real property being concurrently conveyed by Assignor to Assignee and legally described
on the attached Exhibit B (the “Timberlands”).

                3.
            Assignee hereby accepts this
Assignment of the Access Easements and assumes and agrees to be bound by and perform all of the Assignor’s
obligations and liabilities arising under the Access Easements after the date of this Assignment. 

                4.
            Notwithstanding anything
to the contrary in this Assignment, (1) this Assignment (including Assignee’s obligations and
liabilities) shall automatically be effective as to any such Access Easement for which third party
consent to this assignment is required and has not yet been obtained (the “Unconsented
To Access Easements”) at such time, and only at such time, as the required third party consent
to its assignment is obtained; (2) Assignor shall use reasonable and diligent efforts, at its cost
and expense, to obtain any such required consent or approval for this assignment of any Unconsented
To Access Easement; (3) until such time as such consent has been obtained, Assignor will cooperate
in all reasonable respects with the Assignee in any lawful and economically feasible arrangement
to provide the Assignee with the benefits of the Assignor’s interest in or under any such Unconsented
To Access Easement (except that any such arrangement shall not require performance by Assignor as
agent) provided that the Assignee shall undertake to and shall pay or satisfy the corresponding liabilities
for the enjoyment of such benefits to the extent Assignee would have been responsible therefor if
such consent or approval had been obtained; and (4) Assignee shall have no obligations or liabilities
under or with respect to any such Unconsented To Access Easement until the earlier of (i) the date
such consent is obtained and (ii) the date that Assignee receives the benefits under such Unconsented
To Access Easement, and then only for obligations or liabilities arising thereunder or with respect thereto after such date. 

                5.
            Assignee hereby agrees to
indemnify and hold harmless Assignor from and against any and all claims, liabilities, obligations,
penalties, causes of action or damages (including attorney’s fees, expenses of litigation and
costs of appeal), if any, arising or accruing under the Access Easements after the date of this Assignment,
or for any claim, loss, damage, cost or expense resulting from Assignee’s failure to fulfill
and perform the same after the date of this Assignment, or arising out of Assignee’s use and
enjoyment of the Access Easements, or to enforce this indemnification provision. Assignor hereby
agrees to indemnify and hold harmless Assignee from and against any and all claims, liabilities,
penalties, causes of action or damages (including attorney’s fees, expenses of litigation and
costs of appeal), if any, arising or accruing under the Access Easements prior to the date of this
Assignment, or for any claim, loss, damage, cost or expense resulting from Assignor’s failure
to fulfill and perform the same prior to the date of this Assignment, or arising out of Assignor’s
use and enjoyment of the Access Easements, or to enforce this indemnification.

                6.             This Assignment shall be
interpreted and construed under the laws of the State of Washington.

	

34

	                IN WITNESS WHEREOF, the parties hereto have executed this Assignment of Access Rights and Easements and Assumption Agreement the day and year first above written.
	 

	Assignor:	 
	 	PLUM CREEK TIMBERLANDS, L.P.
	Attest:	By Plum Creek Timber I, L.L.C., General Partner
	 	 
	By ___________________________	By ______________________________
	         Sheri L. Ward	         Rick R. Holley, President
	         Assistant Secretary	         and Chief Executive Officer
	 	 
	 	 
	Assignee:	POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
	 	 
	 	 
	 	By: ___________________________
	 	 Name:  ________________________
	 	 Title:  ________________________

	STATE OF WASHINGTON  	)
	 	 )ss:
	COUNTY OF KING	 )
	 	 

	

                On this ___ day of ______________, 2004, before me personally appeared RICK R. HOLLEY and SHERI L.
WARD, to me known to be the President and Chief Executive Officer and Assistant Secretary, respectively,
of Plum Creek Timber I, L.L.C., the general partner of Plum Creek Timberlands, L.P., the partnership
that executed the within and foregoing instrument, and acknowledged the said instrument to be the
free and voluntary act and deed of said partnership for the uses and purposes therein mentioned,
and on oath stated that they are authorized to execute said instrument on behalf of the partnership
and that the seal affixed is the seal of said partnership.

                IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year last

above written.

	 

	   	———————————————————
	 	Notary Public in and for the
	 	State of __________________________
	 	Residing at _______________________
	 	My Commission Expires _____________
	 	Printed Name: _____________________

	

35

	STATE OF WASHINGTON   	)
	 	 )ss:
	COUNTY OF KING	 )
	 	 

	

                On this ___ day of ______________, 2004, before me personally appeared ___________________, to me known
to be the ____________________ of Pope Resources, A Delaware Limited Partnership, the limited
partnership that executed the within and foregoing instrument, and acknowledged the said instrument
to be the free and voluntary act and deed of said limited partnership for the uses and purposes therein
mentioned, and on oath stated that he is authorized to execute said instrument on behalf of the limited
partnership.

                IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official seal the day and year last

above written.

	 

	 	—————————————————————
	 	Notary Public in and for the
	 	State of __________________________
	 	Residing at _______________________
	 	My Commission Expires _____________
	 	Printed Name: _____________________

	

36

	
SCHEDULE 16.2

Required Consents

1.             Private Road Crossing Agreement
between Richard B. Ogilvie, Trustee of Chicago, Milwaukee, St. Paul & Pacific Railroad Company
and Burlington Northern, Inc., Menasha Corporation and the State of Washington dated October 8, 1979
and recorded in the records of Lewis County, Washington in Volume 205, Page 787.

	

37AMENDMENT NO. 1 TO OPTION AGREEMENT

                THIS AMENDMENT NO. 1 TO OPTION AGREEMENT (this “Amendment”) dated for reference purposes
only as of May 24, 2004, amends and modifies that certain Option Agreement dated August 14, 2003
(the “Agreement”), by and between POPE RESOURCES, a Delaware limited partnership, and OPG
PROPERTIES LLC, a Washington limited liability company, formerly known as OLYMPIC PROPERTY GROUP
LLC, a Washington limited liability company (collectively, “Optionor”), and KITSAP COUNTY,
a political subdivision of the State of Washington (“Optionee”).

                NOW,
THEREFORE, in consideration of the mutual covenants, conditions, and agreements of the parties, it
is agreed by and between the parties as follows:

AGREEMENT

                I.                EFFECT OF AMENDMENT.  Capitalized terms not otherwise defined herein shall have the meanings given them under the
Agreement. This Amendment amends and modifies the Agreement and shall be effective as of the date
of mutual execution and delivery hereof. In the event of any conflict between the Agreement and this
Amendment, this Amendment shall control. Except as contained within the Agreement and this Amendment,
there are no other agreements or understandings between Optionor and Optionee relating to the Subject
Property. 

                II.              RATIFICATION.  The Agreement is hereby reinstated, revived, and ratified as of the effective date of this Amendment.
Except as expressly amended by this Amendment, the Agreement shall be in full force and effect.

                III.             EXTENSION OF PHASE 1 OPTION TERM.  The Option Term for Phase 1 shall be extended to June 30, 2004. If Optionee either does not
complete the purchase of Phase 1 under the Agreement on or before June 30, 2004, or does not complete
the purchase of Phase 2 and Phase 3 under the Agreement on or before July 1, 2008, then the Agreement
shall terminate automatically and neither party shall have any further rights or obligations under
the Agreement except those obligations intended to survive the expiration or termination of the Agreement.

                IV.            EXERCISE OF PHASE 1 OPTION.  Optionee desires to exercise the Phase 1 Option. A complete and accurate copy of the Phase 1
Appraisal has been delivered to Optionor. Optionee and Optionor hereby waive the requirement of Section
4 of the Agreement, as to the Phase 1 Option only, that the Phase 1 Option Notice include a survey
of Phase 1 prepared by or for Optionee. Therefore, this Amendment, which among other things establishes
the legal description and purchase price of Phase 1, shall constitute an Option Notice that Optionee
hereby exercises the Option as to Phase 1.

                V.              PHASE 1 LEGAL DESCRIPTION.  The legal description of Phase 1 is set forth on Exhibit A attached hereto. The parties estimate that Phase 1 comprises 426.11 acres of land (the “Estimated
Phase 1 Acreage”) but acknowledge that the actual Phase 1 acreage will not be determined until
completion of the Phase 1 survey, as described in Section 4 of the Agreement.

	

1

	
                VI.            PHASE 1 SURVEY.  The Phase 1 survey, as described in Section 4 of the Agreement, is not yet complete. Optionee
covenants to cause the Phase 1 survey to be completed as soon as possible. Optionee estimates but
does not covenant that the Phase 1 survey will be completed and delivered to Optionee and Optionor
on or before July 31, 2004.

                VII.           PHASE 1 APPRAISAL.  Optionee has obtained the Phase 1 Appraisal, which comprises both the initial appraisal and
review appraisal, in accordance with Section 5 of the Agreement. The initial appraisal is dated April
30, 2004, and was prepared by Stephen Shapiro and Anthony Gibbons, of Bainbridge Island, Washington.
The review appraisal is dated May 13, 2004, and was prepared by James Nowadnick, of Bainbridge Island,
Washington. Optionee and Optionor have reviewed and approved the Phase 1 Appraisal.

                VIII.          PHASE 1 PURCHASE PRICE.  The purchase price of Phase 1, which is based on the estimated Phase 1 acreage, the Phase 1
Appraisal, and a unit price per acre of Four Thousand Three Hundred Ninety Dollars (US$4,390.00),
shall be One Million Eight Hundred Seventy Thousand Six Hundred Twenty-three Dollars (US$1,870,623),
payable in cash at closing.

                IX.            PHASE 1 CLOSING DATE.  The closing of the purchase and sale of Phase 1 shall occur on or before June 30, 2004.

                X.              PHASE 1 POST-CLOSING ADJUSTMENTS.  

                                A.  Actual Acreage Less than Estimate. If the Phase 1 survey prepared by or for Optionee, as described in Section 4 of the Agreement,
discloses that Phase 1 comprises fewer acres than the Estimated Phase 1 Acreage, and if Optionor
does not show proof by a preponderance of the evidence that the Phase 1 survey is clearly erroneous,
then within sixty (60) days after mutual receipt of the Phase 1 survey Optionor shall refund
to Optionee that portion of Purchase Price equal to the unit price per acre set forth in Section VIII hereof multiplied by the number of deficit acres.

                                B.  Actual Acreage More than Estimate.  If the Phase 1 survey prepared by or for Optionee, as described in Section 4 of the Agreement,
discloses that Phase 1 comprises more acres than the Estimated Phase 1 Acreage, and if Optionee does
not show proof by a preponderance of the evidence that the Phase 1 survey prepared by or for Optionee
is clearly erroneous, then within sixty (60) days after mutual receipt of the Phase 1 survey Optionee
shall at its option either (1) pay to Optionor an amount equal to the unit price per acre set forth in Section VIII hereof multiplied by the number of surplus acres, or (2) if possible, make agreement with Optionor
on the form of a Correction Deed, for execution, acknowledgment, and recording by the parties in
the real property records of Kitsap County, Washington, which shall be in the form of the Deed except
for the removal of such portion of Phase 1 as the parties may mutually approve, the effect of which
shall be to reduce the actual acreage of Phase 1 to the Estimated Phase 1 Acreage, provided, however, that if the parties do not make agreement on the form of the Correction Deed within (60) days after
Closing, then Optionee shall have no option except to pay to Optionor an amount equal to the unit
price per acre set forth in Section VIII hereof multiplied by the number of surplus acres.

	

2

	
                XI.            FORMS OF EASEMENTS.  Prior to Closing, the parties mutually shall execute and deliver into escrow with Escrow Holder
a Trail Easement Agreement in the form of Exhibit B attached hereto (the “Trail Easement Agreement”), as contemplated under Section 3 of the
Agreement, and an Access and Utilities Easement Agreement in the form of Exhibit C attached hereto (the “Access and Utilities Easement Agreement”), as contemplated under Section
8 of the Agreement. Immediately after the recording of the Deed at Closing, the parties shall cause
Escrow Holder to record the Trail Easement Agreement and Access and Utilities Easement Agreement
in the real property records of Kitsap County, Washington. If a determination is made within ten
(10) years after Closing by a court of competent jurisdiction that either the Trail Easement Agreement
or Access and Utilities Easement Agreement or both are legally insufficient to accomplish their purposes
as described in the Agreement, then the parties or their successors and assigns shall cooperate with
each other and shall mutually prepare, execute, acknowledge, deliver, and record such amendments
or restatements as are reasonably necessary to remedy the defects.

                IN WITNESS WHEREOF, this Amendment has been duly executed by the parties hereto.

	 

	OPTIONOR: 	POPE RESOURCES, a Delaware limited partnership, by POPE MGP, Inc., a Delaware corporation, its managing general partner
	 	 
	 	By: _______________________________________ 
	 	Printed Name: David L. Nunes
	 	Its: President and Chief Executive Officer
	 	Date: _________________________________ 
	 	 
	 	OPG PROPERTIES LLC, a Washington limited liability company
	 	 
	 	By: _______________________________________ 
	 	Printed Name: Jon Rose
	 	Its:  President
	 	Date: _________________________________ 

	

3

	
	 

	OPTION EE:	KITSAP COUNTY, a political
subdivision of the State of Washington
	 	 
	 	By: _______________________________________ 
	 	Printed Name: _______________________________ 
	 	Its: _______________________________________ 
	 	Date: _________________________________ 

	 
	
EXHIBITS:

A     -       Phase 1 Legal Description

B     -       Form of Trail Easement Agreement

C     -       Form of Access and Utilities
Easement Agreement

	

4

	
                1.                General.  This Agreement shall be recorded in the real property records of Kitsap County, Washington.
This Agreement shall be governed by and construed in accordance with the laws of the State of Washington.
This Agreement may be executed and delivered in counterparts, which together shall comprise a complete
original Agreement.

	 

	GRANTOR:	POPE RESOURCES, a Delaware limited liability company, by POPE MGP, INC., a Delaware corporation, its managing general partner
	 	 
	 	 
	 	——————————————————————
	 	By:    David L. Nunes
	 	Its:    President and Chief Executive Officer
	 	Date: _____________________________________
	 	 
	 	OPG PROPERTIES LLC, a Washington limited liability company
	 	 
	   	——————————————————————
	 	By:   Jon Rose
	 	Its:    President
	 	Date: ____________________________________
	 	 
	GRANTEE:	KITSAP COUNTY, a political subdivision of the State of Washington
	 	 
	 	 
	 	——————————————————————
	 	By:   ______________________________________
	 	Its:    ______________________________________
	 	Date: ______________________________________ 
	 	 

	STATE OF WASHINGTON	)
	 	)  ss.
	COUNTY OF KITSAP	)

	

5

	
                On
this _____ day of June, 2005, before me, a Notary Public in and for the State of Washington, personally
appeared DAVID L. NUNES, personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that he was authorized to execute the
instrument, and acknowledged it as the PRESIDENT and CHIEF EXECUTIVE OFFICER of POPE MGP, INC., the
managing general partner of POPE RESOURCES, to be the free and voluntary act and deed of said corporation
and partnership for the uses and purposes mentioned in the instrument.

                IN

WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written.

	 

	 	———————————————————————
	 	NOTARY PUBLIC in and for the State of Washington, residing at  _________________________________
	 	My appointment expires ____________________ 
	 	Print Name _____________________________ 
	 	 

	STATE OF WASHINGTON	)
	 	) ss. 
	COUNTY OF KITSAP	)

	 
	
                On
this _____ day of June, 2005, before me, a Notary Public in and for the State of Washington, personally
appeared JON ROSE, personally known to me (or proved to me on the basis of satisfactory evidence)
to be the person who executed this instrument, on oath stated that he was authorized to execute the
instrument, and acknowledged it as the PRESIDENT of OPG PROPERTIES LLC to be the free and voluntary
act and deed of said limited liability company for the uses and purposes mentioned in the instrument.

                IN

WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written.

	 

	 	———————————————————————
	 	NOTARY PUBLIC in and for the State of Washington, residing at  _________________________________
	 	My appointment expires ____________________ 
	 	Print Name _____________________________ 

	 

	STATE OF WASHINGTON	)
	 	)  ss.
	COUNTY OF KITSAP	)

	

6

	
                On
this _____ day of June, 2005, before me, a Notary Public in and for the State of Washington, personally
appeared , personally known to me (or proved to me on the basis of satisfactory evidence) to
be the person who executed this instrument, on oath stated that  was authorized to execute the
instrument, and acknowledged it as the of KITSAP COUNTY, a political subdivision of the State
of Washington to be the free and voluntary act and deed of said limited liability company for the
uses and purposes mentioned in the instrument.

                IN

WITNESS WHEREOF, I have hereunto set my hand and official seal the day and year first above written.

	 

	 	———————————————————————
	 	NOTARY PUBLIC in and for the State of Washington, residing at  _________________________________
	 	My appointment expires ____________________ 
	 	Print Name _____________________________ 

	 

	 
	
EXHIBITS:

1      -     Description of Grantor’s Property
[PHASE 2 AND 3 LANDS]

	

7

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