Pope Resources Ltd Partnership – ‘DEFS14A’ for 3/14/97

As of:  Friday, 2/14/97   ·   For:  3/14/97   ·   Accession #:  891020-97-210   ·   File #:  1-09035

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Definitive Proxy Solicitation Material — Special Meeting   —   Schedule 14A
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Document/Exhibit                   Description                      Pages   Size 

 1: DEFS14A     Definitive Special Proxy Statement                    66    275K 

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SCHEDULE 14A
(RULE 14a-101)
 INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
 PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant [x]                                                     

Filed by a Party other than the Registrant [ ]                                  

Check the appropriate box:                                                      
[ ] Preliminary Proxy Statement            [ ] Confidential, for Use of the     
                                              Commission Only (as permitted by
                               Rule 14a-6(e)(2))

[x] Definitive Proxy Statement                                                  

[ ] Definitive Additional Materials                                             

[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12               

POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):                              
[x] No fee required.                                                            
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.    

(1) Title of each class of securities to which transaction applies:     

(2) Aggregate number of securities to which transaction applies:        

(3) Per unit price or other underlying value of transaction computed    
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):                                 

(4) Proposed maximum aggregate value of transaction:                    

(5) Total fee paid:                                                     

[ ] Fee paid previously with preliminary materials.                     

  [ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid   
previously. Identify the previous filing by registration statement number, or   
the Form or Schedule and the date of its filing.                                

(1) Amount Previously Paid:                                             

(2) Form, Schedule or Registration Statement No.:                       

(3) Filing Party:                                                       

(4) Date Filed:                                                         

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 [POPE RESOURCES LETTERHEAD]

To the Partners of Pope Resources:                                              

   A meeting of the Partners of Pope Resources, A Delaware Limited Partnership
(the "Partnership"), will be held on Friday, March 14, 1997, at 1:00 p.m., local
time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,        
Washington (the "Partnership Meeting").                                         

   At the Partnership Meeting, you will be asked to consider and vote upon the
approval and adoption of certain amendments to the Limited Partnership Agreement
of the Partnership, dated as of November 7, 1985, as amended as of December 16, 
1986. The proposed amendments would amend the Limited Partnership Agreement to: 

(i) permit the Partnership to engage in a new business enterprise   
  involving the location, acquisition, management and/or development of land
and related resources directly or through acquisition of land-holding   
entities, primarily or exclusively for the account of individuals and/or
   entities who are not otherwise Affiliates of the Partnership (the "Investor
Portfolio Management Business"); and                                    

 (ii) authorize an incremental, sliding-scale allocation of net income
derived from the Investor Portfolio Management Business between the     
Partnership and the Managing General Partner,                           

all as more particularly described in the accompanying Proxy Statement.         

   You will also be asked to consider and vote upon a waiver (the "Waiver") of
the application of an age-related eligibility requirement for service on the    
Board of Directors of the Managing General Partner (the "MGP Board") set forth  
in the Shareholders Agreement of the Managing General Partner (the "Shareholders
Agreement") to Adolphus Andrews, Jr., an existing member of the MGP Board. The  
Waiver would permit Mr. Andrews to continue to serve on the MGP Board for two   
(2) years beyond the age of 75. The MGP Board believes that Mr. Andrews'        
continued service on the MGP Board is valuable to the Managing General Partner  
and to the Partnership in that he will provide continuity to the MGP Board in   
the oversight and evaluation of the Investor Portfolio Management Business as   
the Partnership enters into this new business enterprise.                       

 THE PROPOSED AMENDMENTS AND THE WAIVER HAVE BEEN CAREFULLY CONSIDERED AND
APPROVED BY THE MGP BOARD AS BEING IN THE BEST INTERESTS OF THE PARTNERS AND THE
PARTNERSHIP (MR. ANDREWS ABSTAINED FROM VOTING ON THE WAIVER). THE MANAGING     
GENERAL PARTNER RECOMMENDS YOUR APPROVAL OF THE PROPOSED AMENDMENTS AND THE     
WAIVER.                                                                         

In the material accompanying this letter, you will find a Notice of     
Partnership Meeting, a Proxy Statement relating to the actions to be taken by   
the Partners at the Partnership Meeting, and a proxy card. The Proxy Statement  
more fully describes the proposed amendments and Waiver.                        

All Partners are cordially invited to attend the Partnership Meeting in 
person. However, whether or not you plan to attend the Partnership Meeting,     
please complete, sign, date and return your proxy or proxies in the enclosed    
postage paid envelope. If you attend the Partnership Meeting, you may vote in   
person if you wish, even though you have previously returned your proxy. It is  
important that your Units be represented and voted at the Partnership Meeting.  

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I look forward to seeing you at the Partnership Meeting.                

Sincerely,          

/s/ GARY F. TUCKER  
             ---------------------------------
             Gary F. Tucker, President and CEO
                    Pope MGP, Inc., Managing General Partner

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POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
19245 10TH AVE. NE
 POULSBO, WA 98370

 NOTICE OF PARTNERSHIP MEETING

TO BE HELD ON MARCH 14, 1997

   A meeting of the Partners of Pope Resources, A Delaware Limited Partnership
(the "Partnership"), will be held on Friday, March 14, 1997, at 1:00 p.m., local
time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,        
Washington (the "Partnership Meeting"), for the following purposes:             

1.To consider and vote upon amendments (the "Amendments") to the Limited
      Partnership Agreement of the Partnership, dated as of November 7, 1985, as
amended as of December 16, 1986 (the "Partnership Agreement"), to:  

    (a) permit the Partnership to engage in a new business
            enterprise, the Investor Portfolio Management Business, specifically
       the business of the Partnership, its Affiliates, and/or related
          businesses, involving the location, acquisition, management and/or
     development of land and related resources directly or through
            acquisition of land-holding entities, including, but not limited to,
           timberlands and lands with development potential for residential or
          commercial use, within and without the United States, primarily or
          exclusively for the account of individuals and/or entities who are
not otherwise Affiliates of the Partnership; and        

              (b) authorize an annual incremental, sliding-scale allocation of
     the net income derived from the Investor Portfolio Management
         Business between a subsidiary of the Partnership and the Managing
            General Partner, beginning at 80% for the new subsidiary and 20% for
        the Managing General Partner and adjusting gradually to 50% each
when net income exceeds $7 million in a fiscal year.    

    2.To consider and vote upon a waiver (the "Waiver") of the application of an
     age-related eligibility requirement for service on the Board of Directors
of the Managing General Partner (the "MGP Board") set forth in the  
     Shareholders Agreement of the Managing General Partner (the "Shareholders
      Agreement") to Adolphus Andrews, Jr., an existing member of the MGP Board,
   that would permit Mr. Andrews to continue to serve on the MGP Board for
two (2) years beyond the age of 75.                                 

3.To transact such other business as may properly come before the       
Partnership Meeting or any continuance(s) or adjournment(s) thereof.

   The foregoing proposals are more particularly described in the accompanying
Proxy Statement.                                                                

Only Partners of record at the close of business on January 31, 1997 are
entitled to receive notice of and to vote at the Partnership Meeting, or at any 
continuance(s) or adjournment(s) thereof. ADOPTION OF THE AMENDMENTS AND        
APPROVAL OF THE WAIVER EACH REQUIRE THE AFFIRMATIVE VOTE OF THE PARTNERS OF     
RECORD HOLDING MORE THAN FIFTY PERCENT (50%) OF THE UNITS HELD BY ALL           

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PARTNERS OF RECORD (A "MAJORITY INTEREST"), AS WELL AS THE SEPARATE APPROVAL OF 
THE MANAGING GENERAL PARTNER. The Managing General Partner has approved the     
Amendments and the Waiver. Because of their integral relationship, the          
Amendments are to be considered and voted on by the Partners as a single        
proposal.                                                                       

           By Order of the Board of Directors of Pope MGP,
Inc., Managing General Partner                                

/s/ GARY F. TUCKER                  
---------------------------------   
Gary F. Tucker, President and CEO   

Poulsbo, Washington                                                             
February 14, 1997                                                             

=============================================================================== 
IMPORTANT: Even if you plan to be present at the meeting, please fill in, date, 
sign and promptly mail the enclosed proxy or proxies in the postage paid        
envelope provided to ensure that your Units are represented at the Partnership  
Meeting. If you attend the Partnership Meeting, you may vote in person if you   
wish to do so even though you have previously sent in your proxy or proxies.    
=============================================================================== 

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 PROXY STATEMENT
OF
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
 FOR A MEETING OF PARTNERS
TO BE HELD ON MARCH 14, 1997

    This Proxy Statement is being furnished to all of the Partners (as that term
is defined in the Partnership Agreement referred to below) of Pope Resources, A 
Delaware Limited Partnership (the "Partnership"), formed pursuant to the Limited
Partnership Agreement of the Partnership, dated as of November 7, 1985, as      
amended as of December 16, 1986 (the "Partnership Agreement"), in connection    
with the solicitation of proxies by Pope MGP, Inc., as Managing General Partner 
of the Partnership ("MGP" or the "Managing General Partner"), for use at the    
Meeting of Partners to be held on Friday, March 14, 1997, at 1:00 p.m., local   
time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,        
Washington (the "Partnership Meeting"), and at any continuance(s) or            
adjournment(s) thereof. This Proxy Statement is first being mailed to Partners  
on or about February 14, 1997.                                                  

At the Partnership Meeting, Partners will be asked to authorize certain 
amendments (the "Amendments") to the Partnership Agreement to (i) permit the    
Partnership to engage in a new business enterprise (the "Investor Portfolio     
Management Business"), specifically the business of the Partnership, its        
Affiliates, and/or related businesses, involving the location, acquisition,     
management and/or development of land and related resources directly or through 
acquisition of land-holding entities, including, but not limited to, timberlands
and lands with development potential for residential or commercial use, within  
and without the United States, primarily or exclusively for the account of      
individuals and/or entities who are not otherwise Affiliates of the Partnership 
("Third Party Investors") and to further permit the Partnership to engage in the
Investor Portfolio Management Business through one or more entities             
(collectively, the "Portfolio Business Affiliate") wholly-owned and controlled, 
directly or indirectly, by the Partnership or by the Partnership and the        
Managing General Partner; and (ii) authorize an annual incremental,             
sliding-scale allocation of the net income derived from the Investor Portfolio  
Management Business (the "IPMB Net Income") between a new subsidiary of the     
Partnership (the "New Partnership Subsidiary") and the Managing General Partner 
(the "IPMB Income Allocation"), beginning at 80% for the New Partnership        
Subsidiary and 20% for the Managing General Partner and adjusting gradually to  
50% each when IPMB Net Income exceeds $7 million in a fiscal year, all as more  
particularly described in the this Proxy Statement. See "Background and Reasons 
for the Amendments - Conduct of Investor Portfolio Management Business,"        
"Background and Reasons for the Amendments - The ORM/LLC Operating Agreement,"  
"Background and Reasons for the Amendments - Net Income Distribution" and "The  
Amendments." Pursuant to the Amendments, the Partnership will be authorized to  
engage in the Investor Portfolio Management Business only to the extent that the
Partnership's cumulative financial commitment to the Investor Portfolio         
Management Business (including the amount of money contributed or loaned by the 
Partnership to the Portfolio Business Affiliate in connection with the Investor 
Portfolio Management Business, guarantees, negative pledges, and other financial
commitments made by the Partnership and the Portfolio Business Affiliate in     
connection with the Investor Portfolio Management Business, and all costs and   
expenses incurred in, or properly allocated to, the conduct of the Investor     
Portfolio Management Business), net of the cumulative amount of IPMB Net Income 
not allocated to the Managing General Partner (the "IPMB Cumulative             
Commitment"), does not exceed $5 million (the "Maximum Commitment Level"). If   
the Partnership's participation in the Investor Portfolio Management Business   
would result in its IPMB Cumulative Commitment exceeding the Maximum Commitment 
Level, such continued participation, and the related financial commitment in    
excess of the Maximum Commitment Level, will require the approval of Partners   
holding more than 50% of the Units held by all Partners (a "Majority Interest").

   In addition, Partners will be asked to consider and vote upon a waiver (the
"Waiver") of the application of an age-related eligibility requirement for      
service on the Board of Directors of the Managing General Partner (the "MGP     
Board"), as set forth in the Shareholders Agreement entered into in 1985 among  
the Partnership, Pope & Talbot, Inc., Pope EGP, Inc. (the equity general partner
of the Partnership), the Shareholders of MGP, and the members of the MGP Board  
(the "Shareholders Agreement") to Adolphus Andrews, Jr., an existing            

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member of the MGP Board. The Waiver would permit Mr. Andrews to continue to     
serve on the MGP Board for two (2) years beyond the age of 75. See "Background  
and Reasons for the Waiver."                                                    

THE MANAGING GENERAL PARTNER, BY THE UNANIMOUS APPROVAL OF ITS BOARD OF 
DIRECTORS (BASED UPON THE UNANIMOUS RECOMMENDATION OF A BOARD COMMITTEE COMPOSED
OF INDEPENDENT DIRECTORS) HAS APPROVED THE AMENDMENTS, AND BY THE UNANIMOUS     
APPROVAL OF ITS BOARD OF DIRECTORS (MR. ANDREWS NOT VOTING) HAS APPROVED THE    
WAIVER, AND RECOMMENDS THAT THE PARTNERS VOTE FOR APPROVAL AND ADOPTION OF THE  
AMENDMENTS AND APPROVAL OF THE WAIVER. SUCH APPROVAL OF THE AMENDMENTS BY THE   
MANAGING GENERAL PARTNER IS SPECIFICALLY CONDITIONED ON APPROVAL OF THE         
AMENDMENTS BY THE LIMITED PARTNERS AS A SINGLE PROPOSAL.                        

 The date of this Proxy Statement is February 14, 1997

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 TABLE OF CONTENTS

SUMMARY..................................................................    1  
  General..............................................................    1
  The Meeting of Partners..............................................    1
  Background...........................................................    2
  The Amendments.......................................................    2
  The Waiver...........................................................    3

THE MEETING OF THE PARTNERS..............................................    3  
  General..............................................................    3
  Matters to be Considered at the Meeting..............................    3
  Record Date; Partnership Units Entitled to Vote; Vote Required.......    3
  Proxies; Proxy Solicitation..........................................    4

BACKGROUND AND REASONS FOR THE AMENDMENTS................................    5  
  Historical Business..................................................    5
  Consideration of Investor Portfolio Management Business..............    5
  Conduct of Investor Portfolio Management Business....................    6
  The ORM/LLC Operating Agreement......................................    8
  Net Income Distribution..............................................    9
  Management Incentive Program.........................................   10
  Factors Considered by MGP Board......................................   10
  Recommendations and Opinion of Financial Advisor.....................   12
  Federal Income Tax Considerations....................................   14

THE AMENDMENTS...........................................................   15  
  General..............................................................   15
  Amendment of "Purpose" of the Partnership............................   15
  Allocation of IPMB Net Income to Managing General Partner............   16

INTEREST OF CERTAIN PERSONS IN THE AMENDMENTS............................   18  
  General..............................................................   18
  Managing General Partner.............................................   18
  Shareholders and Directors of the Managing General Partner...........   18

EXECUTIVE COMPENSATION...................................................   19  
  Summary Compensation Table...........................................   19
  Compensation of Directors............................................   20
  Employee Benefit Plans...............................................   20

BACKGROUND AND REASONS FOR THE WAIVER....................................   21  
  Background...........................................................   21
  Reasons for the Waiver...............................................   21
  Consequences of the Waiver...........................................   22

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                                        
OWNERS AND MANAGEMENT....................................................   22  

AVAILABLE INFORMATION....................................................   24  

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 SUMMARY

    Certain significant matters discussed in this Proxy Statement are summarized
below. This summary is not intended to be complete and is qualified in all      
respects by reference to the more detailed information appearing or incorporated
by reference in this Proxy Statement (including the Appendices hereto).         

 This Proxy Statement contains forward-looking statements regarding future
events relating to the Partnership that involve significant risks and           
uncertainties. Parties are advised that such statements are predictions and     
beliefs of the Partnership, and the Partnership's actual results may differ     
materially from those discussed herein.                                         

GENERAL                                                                         

This Proxy Statement relates to certain proposed amendments to the      
Partnership Agreement to (i) expand the purpose of the Partnership to permit the
Partnership to engage in the Investor Portfolio Management Business, and (ii)   
authorize the annual incremental, sliding-scale allocation of IPMB Net Income   
between the New Partnership Subsidiary and the Managing General Partner (the    
"Amendments"). Pursuant to Amendments, the Partnership's authority to engage in 
the Investor Portfolio Management Business will be limited in that the          
Partnership's cumulative financial commitment to the Investor Portfolio         
Management Business, net of cumulative IPMB Net Income not allocated to the     
Managing General Partner, may not exceed $5 million unless approved by a        
Majority Interest. A copy of the Amendments is attached hereto as Appendix I.   

    This Proxy Statement also relates to a proposed waiver (the "Waiver") of the
application of one of the provisions of the Shareholders Agreement of the       
Managing General Partner to permit an existing director of the Managing General 
Partner, Adolphus Andrews, Jr., to continue to serve on the MGP Board for two   
(2) years beyond the age of 75.                                                 

A glossary of defined terms as used in this Proxy Statement is attached 
hereto as Appendix II.                                                          

THE MEETING OF PARTNERS                                                         

   Date, Time, Place and Purpose of the Meeting. The Meeting of Partners is to
be held on Friday, March 14, 1997, at 1:00 p.m., local time, at the Four Seasons
Olympic Hotel, 411 University Street, Seattle, Washington (the "Partnership     
Meeting"). At the Partnership Meeting, Partners will consider and vote upon the 
Amendments and the Waiver described herein.                                     

Record Date. Only partners of record of the Partnership at the close of 
business on January 31, 1997 (the "Partners") are entitled to receive notice of 
and to vote at the Partnership Meeting, or at any continuance(s) or             
adjournment(s) thereof.                                                         

Vote Required. The affirmative vote of Partners holding more than fifty 
percent (50%) of the Units held by all Partners (a "Majority Interest"),        
together with the separate approval of the Managing General Partner, is required
for the approval and adoption of the Amendments and for approval of the Waiver. 
See "Meeting of Partners - Record Date; Units Entitled to Vote; Vote Required." 
The Managing General Partner has approved the Amendments, but such approval was 
conditioned on the approval of both of the Amendments by the Limited Partners as
a single proposal. The Managing General Partner and the shareholders of the     
Managing General Partner have also approved the Waiver. As of the Record Date,  
there were 903,150 Units with voting rights outstanding, of which the Managing  
General Partner, Pope EGP, Inc., the Equity General Partner of the Partnership, 
and the directors, executive officers and shareholders of the Managing General  
Partner or the Partnership, as the case may be, held 162,789 Units. See         
"Security Ownership of Certain Beneficial Owners and Management."               

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Principal Executive Office. The principal executive office of the       
Partnership is located at 19245 10th Avenue N.E., Poulsbo, Washington 98370.    

BACKGROUND                                                                      

The Partnership was formed in 1985 as a result of a split-off of certain
timberland resources and property development operations of Pope & Talbot, Inc. 
and its subsidiaries. Since its formation, the Partnership has operated its     
timberland resources and property development businesses. See "Historical       
Business."                                                                      

    In late 1995, as part of the Partnership's long-range planning for continued
growth, the MGP Board began to consider the development of expanded lines of    
business that would build upon those lines of business historically pursued by  
the Partnership. In early 1996, the MGP Board concluded that the timber and real
estate management experience gained by the Partnership in the operation of its  
historical businesses, combined with the specific prior experience of Gary F.   
Tucker, the Partnership's newly-hired Chief Executive Officer, in developing and
managing timber investment portfolios for large institutional investors, could  
be leveraged into expanded lines of business that have the potential for        
bolstering the Partnership's long-term growth. In addition, the MGP Board       
concluded that these expanded lines of business could provide investment        
opportunities for the Partnership. Beginning in early 1996, the MGP Board began 
analyzing the feasibility and advisability of establishing the Investor         
Portfolio Management Business. During this process, the MGP Board considered a  
variety of factors, including the amount and structure of fees that could       
reasonably be charged to Third Party Investors in connection with the Investor  
Portfolio Management Business, the potential costs involved in establishing the 
Investor Portfolio Management Business, potential staffing and management       
requirements, projected returns, the risks and liabilities associated with      
engaging in the Investor Portfolio Management Business, the possible opportunity
for the Partnership to gain equity participation in the properties acquired and 
managed through the Investor Portfolio Management Business and the risks and    
liabilities associated therewith, and various other business, legal, accounting 
and tax issues relating to the establishment and operation of the Investor      
Portfolio Management Business. See "Background And Reasons For The Amendments - 
Factors Considered by MGP Board" and "The Amendments." In December of 1996, the 
MGP Board resolved to authorize the establishment of the Investor Portfolio     
Management Business subject to requisite approval by the Partners of the        
Amendments to the Partnership Agreement described in this Proxy Statement.      

THE AMENDMENTS                                                                  

The Partners are being asked to approve a proposal to amend certain     
provisions of the Partnership Agreement. The proposed Amendments would permit   
the Partnership to engage in the Investor Portfolio Management Business and to  
do so through the Portfolio Business Affiliate in which the Partnership,        
initially through the New Partnership Subsidiary, and the Managing General      
Partner are the sole equity owners, and to authorize a sliding-scale allocation 
of the IPMB Net Income between the New Partnership Subsidiary and the Managing  
General Partner. Pursuant to the Amendments, the Partnership's authority to     
participate in the Investor Portfolio Management Business will be limited in    
that the IPMB Cumulative Commitment may not exceed $5 million unless approved   
by a Majority Interest. See "The Amendments."                                   

The Managing General Partner, through the MGP Board, and based upon the 
unanimous recommendation of a committee of the MGP Board composed of independent
directors (the "Board Committee"), has determined that the Amendments are fair  
and in the best interests of the Partners and the Partnership, has approved the 
Amendments, and recommends that the Partners approve the Amendments. In         
considering whether to approve and adopt the Amendments, Partners should        
consider the information set forth under the captions "Background and Reasons   
for the Amendments" and "Interest of Certain Persons in the Amendments."        

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    If the amendments are not duly adopted in the manner set forth in this Proxy
Statement, the Partnership will not pursue the Investor Portfolio Management    
Business, and one or more principals of the Managing General Partner may        
separately pursue such a business through other entities.                       

THE WAIVER                                                                      

    The Partners are also being asked to approve a proposal to waive a provision
of the Shareholders Agreement which limits eligibility for membership on the MGP
Board to persons who are not in excess of 75 years of age, so as to permit an   
existing member of the MGP Board, Adolphus Andrews, Jr., to continue to serve on
the MGP Board for two (2) years beyond the mandatory retirement age of 75 years 
set forth in the Shareholders Agreement.                                        

The Managing General Partner, through the MGP Board (Mr. Andrews not    
voting), has determined that the Waiver is in the best interests of the Partners
and the Partnership, has approved the Waiver, and recommends that the Partners  
approve the Waiver. In considering whether to approve the Waiver, Partners      
should consider the information set forth under the caption "Background and     
Reasons for the Waiver."                                                        

 THE MEETING OF THE PARTNERS

GENERAL                                                                         

  This Proxy Statement is being furnished to the Partners in connection with
the solicitation of proxies by the Managing General Partner for use at the      
Partnership Meeting to be held on Friday, March 14, 1997, at 1:00 p.m., local   
time, at the Four Seasons Olympic Hotel, 411 University Street, Seattle,        
Washington, and at any continuance(s) or adjournment(s) thereof. This Proxy     
Statement and the accompanying form of proxy are first being mailed to Partners 
on or about February 14, 1997.                                                  

MATTERS TO BE CONSIDERED AT THE MEETING                                         

 At the Partnership Meeting, Partners of record as of the Record Date will
consider and vote upon proposals to approve and adopt the Amendments and to     
approve the Waiver. See "The Amendments" and "The Waiver."                      

    THE MANAGING GENERAL PARTNER, BASED UPON THE UNANIMOUS RECOMMENDATION OF THE
BOARD COMMITTEE, HAS APPROVED THE AMENDMENTS, AND THE MANAGING GENERAL PARTNER  
(MR. ANDREWS NOT VOTING) HAS APPROVED THE WAIVER, AND THE MANAGING GENERAL      
PARTNER RECOMMENDS THAT THE PARTNERS VOTE "FOR" APPROVAL AND ADOPTION OF THE    
AMENDMENTS AND APPROVAL OF THE WAIVER. See "Background and Reasons for the      
Amendments," "Interest of Certain Persons in the Amendments," "Background and   
Reasons for the Waiver," and "Interest of Certain Persons in the Waiver."       

RECORD DATE; PARTNERSHIP UNITS ENTITLED TO VOTE; VOTE REQUIRED                  

   The close of business on January 31, 1997 has been fixed as the record date
for determining Limited Partners who are entitled to notice of and to vote at   
the Partnership Meeting (the "Record Date"). As of the Record Date, there were  
903,150 Units outstanding and entitled to vote. In accordance with the          
Partnership Agreement, only those holders of record of Limited Partners' Units  
who have previously been admitted as Limited Partners pursuant to the           
Partnership Agreement ("Limited Partners") are entitled to vote at the          
Partnership Meeting. The Partnership Agreement requires the presence in person  
or by proxy of Partners holding a Majority Interest to constitute a quorum for  
the transaction of business at the Partnership Meeting. Under the Partnership   
Agreement, the affirmative vote of Partners representing a Majority Interest is 
required for approval of the Amendments, in addition to the separate approval of
the Managing General Partner, which approval has been obtained. Similarly, the  
affirmative vote of Partners representing a Majority Interest is                

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required for approval of the Waiver, in addition to the separate approval of the
Managing General Partner, which approval has been obtained. Approval of the     
Waiver has the additional requirement of the approval of the other parties to   
the Shareholder Agreement, which approval has also been obtained. As of the     
Record Date, Peter T. Pope, a director of the Managing General Partner, and     
Emily T. Andrews, the spouse of Adolphus Andrews, Jr. a director of the Managing
General Partner, beneficially owned 162,289 Units, or approximately 18% of the  
outstanding Units entitled to vote on the Amendments and the Waiver. It is the  
intention of Peter T. Pope and Emily T. Andrews to vote these units in favor of 
approval and adoption of the Amendments and approval of the Waiver.             

  Because approval and adoption of the Amendments and approval of the Waiver
require approval by a Majority Interest, abstentions from voting and failures to
vote in person or by proxy will have the practical effect of voting against the 
approval and adoption of the Amendments and approval of the Waiver.             

PROXIES; PROXY SOLICITATION                                                     

Limited Partners' Units held of record by Limited Partners which are    
represented by properly executed proxies received at or prior to the Partnership
Meeting that have not been revoked will be voted at the Partnership Meeting (and
at any continuance(s) or adjournment(s) thereof) in accordance with the         
instructions contained therein. Limited Partners' Units held of record by       
Limited Partners which are represented by properly executed proxies for which no
instruction is given will be voted "FOR" approval and adoption of the Amendments
and approval of the Waiver. Limited Partners are urged to complete, sign, date, 
and return promptly the enclosed proxy card in the postage prepaid return       
envelope provided to ensure that their Limited Partners' Units are voted. A     
Limited Partner may revoke a proxy by submitting at any time prior to the vote  
on the Amendments and the Waiver written notice to the Managing General Partner 
or by attending the Partnership Meeting and voting in person. Mere attendance at
the Partnership Meeting will not in and of itself revoke a proxy.               

If the Partnership Meeting is postponed, continued, or adjourned for any
reason, at any subsequent reconvening of the Partnership Meeting all proxies    
will be voted in the same manner as such proxies would have been voted at the   
original convening of the Partnership Meeting (except for any proxies that have 
theretofore effectively been revoked), notwithstanding that they may have been  
effectively voted on the same or any other matter at a previous meeting.        

The costs of soliciting proxies will be borne by the Partnership. In    
addition to solicitations by mail, officers, directors and regular employees of 
the Managing General Partner and the Partnership may solicit proxies personally 
or by telephone without additional compensation. The Partnership will also      
employ Georgeson & Company Inc., at a cost of approximately $10,000, to solicit 
proxies.                                                                        

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 BACKGROUND AND REASONS FOR THE AMENDMENTS

HISTORICAL BUSINESS                                                             

    The Partnership was organized in December 1985 as a result of a split-off by
Pope & Talbot, Inc. ("P&T") of certain of its assets. The Partnership is a      
successor to Pope & Talbot Development, Inc. and other P&T affiliates. The      
Partnership currently has three corporate subsidiaries, Ludlow Water Company,   
Gamble Village Water & Sewer Company, and Ludlow Bay Realty, Inc., and a 50%    
general partnership interest in Ludlow Associates, a Washington general         
partnership that owns the Inn at Ludlow Bay.                                    

   The Partnership's current operations ("Historical Business") are classified
into two segments: (i) timberland resources and (ii) property development. The  
Partnership's largest segment, timberland resources, encompasses the growing and
harvesting of timber and leasing of the timberlands for mineral extraction and  
communications towers. The bulk of the Partnership's land ownership (totalling  
approximately 76,000 acres) is allocated to this segment. Its principal         
operations consist of the sale of logs in export and domestic markets and sales 
of standing timber to buyers who log it under the terms of purchase contracts.  
This segment produced 73%, 63%, and 76% of the Partnership's consolidated gross 
revenues in 1995, 1994, and 1993, respectively.                                 

The Partnership's other segment, property development, consists of      
residential development and income properties. Residential development involves 
the sale of single-family homes, finished lots, and undeveloped acreage. Income 
properties consist of utilities providing water and sewer services to properties
in the Port Ludlow and Port Gamble, Washington area; a marina, golf course,     
commercial shopping center, and RV park operated by the Partnership; certain    
property leased to Pope & Talbot, Inc.; a restaurant/lounge and related         
facilities leased to and operated by Village Resorts, Inc.; and a 50% general   
partnership interest in a 36-room inn. This segment produced 27%, 37%, and 24%  
of the Partnership's consolidated gross revenues in 1995, 1994, and 1993,       
respectively.                                                                   

CONSIDERATION OF INVESTOR PORTFOLIO MANAGEMENT BUSINESS                         

    In late 1995, as part of the Partnership's long-range planning for continued
growth, the MGP Board began to consider the development of expanded lines of    
business that would build upon those lines of business historically pursued by  
the Partnership. In early 1996, the MGP Board concluded that the timber and real
estate management experience gained by the Partnership in the operation of its  
historical businesses, combined with the specific prior experience of Gary F.   
Tucker, the Partnership's newly-hired Chief Executive Officer, in developing and
managing timber investment portfolios for large institutional investors, could  
be leveraged into expanded lines of business that have the potential for        
bolstering the Partnership's long-term growth. The MGP Board thereupon began    
analyzing the feasibility and advisability of establishing the Investor         
Portfolio Management Business. During this process, the MGP Board considered a  
variety of factors, including the amount and structure of fees that could       
reasonably be charged to Third Party Investors in connection with the Investor  
Portfolio Management Business, the potential costs involved in establishing the 
Investor Portfolio Management Business, potential staffing and management       
requirements, projected returns, the risks and liabilities associated with      
engaging in the Investor Portfolio Management Business, the possible opportunity
for the Partnership to gain equity participation in the properties acquired and 
managed through the Investor Portfolio Management Business and the risks and    
liabilities associated therewith, and various other business, legal, accounting 
and tax issues relating to the creation and operation of the Investor Portfolio 
Management Business. See "- Factors Considered by MGP Board." In December, 1996,
the MGP Board, based upon the unanimous recommendation of the Board Committee,  
resolved to authorize the establishment of the Investor Portfolio Management    
Business subject to requisite approval by the Partners of the Amendments to the 
Partnership Agreement described in this Proxy Statement.                        

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CONDUCT OF INVESTOR PORTFOLIO MANAGEMENT BUSINESS                               

  If the Amendments discussed herein are duly approved, the Partnership will
be authorized to engage in the Investor Portfolio Management Business through   
the Portfolio Business Affiliate but only to the extent that the Partnership's  
IPMB Cumulative Commitment to such business does not exceed the Maximum         
Commitment Level, unless the continued participation of the Partnership in the  
Investor Portfolio Management Business, and any related additional financial    
commitment, shall have been approved by a Majority Interest. Although the       
Amendments do not specify the form of entity that the Portfolio Business        
Affiliate will take, the Partnership intends that the Investor Portfolio        
Management Business will initially be managed by a Washington limited liability 
company, Olympic Resource Management LLC ("ORM/LLC"). Moreover, the Partnership 
will form a new corporate subsidiary, ORM, Inc. ("ORMI") to hold the            
Partnership's member interest in ORM/LLC. The other member of ORM/LLC will be   
the Managing General Partner. For the foreseeable future, ORM/LLC and ORMI will 
collectively constitute the Portfolio Business Affiliate and ORMI will be the   
New Partnership Subsidiary. This structure was chosen for a variety of business,
legal and tax reasons. However, the Amendments do not commit the Partnership to 
a structure in which the Investor Portfolio Management Business is conducted    
through a limited liability company in which the Partnership holds an equity    
interest indirectly through a corporate subsidiary. Rather, the Amendments are  
designed to give the Partnership the flexibility to hold the member interest in 
ORM/LLC directly, to change the form of ORMI to a non-corporate entity, or      
otherwise to change the form of the Portfolio Business Affiliate if business,   
legal and/or tax considerations make any such change necessary or desirable in  
the future.                                                                     

    The Partnership, through ORMI, is expected to provide essentially all of the
funding required for the start-up phase of ORM/LLC, as capital contributions or 
as loans. It is currently anticipated that approximately $2 million (exclusive  
of expenses of shared employees, facilities and other resources allocated to the
Investor Portfolio Management Business) will be required in 1997, which will be 
in the form of a capital contribution. It is possible that some additional      
capital contributions and/or loans from the Partnership through ORMI will be    
required during and after 1997. There can be no assurance that the amounts      
estimated by the Partnership for capital required by ORM/LLC in 1997 and beyond 
will be sufficient. To the extent that revenues from the Investor Portfolio     
Management Business are not sufficient to fund the expenses of the Investor     
Portfolio Management Business, the Partnership expects that it will contribute  
additional capital. Pursuant to the operating agreement governing ORM/LLC, any  
capital contribution by ORMI in excess of $2 million will require ORMI's and the
Managing General Partner's consent. See " - The ORM/LLC Operating Agreement."   

As presently contemplated, ORM/LLC will be the manager of new general or
limited partnerships, joint ventures, limited liability companies, or other new 
entities (each individually an "Investment Entity" and collectively the         
"Investment Entities") to be formed with one or more Third Party Investors. It  
is anticipated that ORMI, utilizing its share of the income from the Investor   
Portfolio Management Business and other assets contributed by the Partnership,  
will be an equity participant in a number of the Investment Entities with       
participating Third Party Investors. Such investment decisions will be made on a
case-by-case basis by the ORMI Board with the consent of the Third Party        
Investors involved. It is expected that ORM/LLC will have primary management    
responsibility and authority for the Investment Entities. The Investment        
Entities will be organized to acquire (either directly or through the           
acquisition of land-holding entities), manage, and operate natural resource and 
other real estate-based assets consistent with the investment goals of the Third
Party Investors. The Partnership expects that multiple Investment Entities will 
be created, each with a very limited number of Third Party Investors (including,
in some cases, a single Third Party Investor).                                  

A chart summarizing the structure of the new organization is set forth  
below:                                                                          

There follows an organizational diagram under the heading "New Business 
Organizational Structure." Centered at the top of the diagram is a triangle     
labeled "Pope Resources." To the left of this "Pope Resources" triangle, joined 
by a line, is a square labeled "Limited Partners." To the right of the "Pope    
Resources" triangle,                                                            

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in each case joined by a line, is one square labeled "Pope EGP" and another     
square labeled "Pope MGP." Underneath the "Pope Resources" triangle, joined by a
line, is a square labeled "ORMI." Underneath the "ORMI" square and the "Pope    
MGP" square, joined by a line from each such square, is a rectangle labeled     
"ORM/LLC." Underneath the "ORM/LLC" rectangle, joined by a line, is a hexagon   
labeled "Investment Entity." To the left of the "Investment Entity," joined by a
line, is a square labeled "Third Party Investor." Beneath the "Investment       
Entity" hexagon is a circle labeled "Property."                                 

    The Managing General Partner believes that favorable opportunities exist for
acquisition of land and related resources, especially timberlands. On-going     
forest products industry restructuring, fluctuating product prices, restricted  
timber supply, and market demand have created a current opportunity for         
acquisition and investment. The Managing General Partner believes that timber   
and timberland investments compare favorably to other investments in terms of   
rates of return and risk factors. For example, according to a study reported in 
the September 1996 Journal of Forestry, the annual rate of return on timberland 
investments during the period 1960-1994, as calculated from the John Hancock    
Timber Index, was approximately 13%, while the annual rates of return on other  
investments such as U.S. Treasury Bills, U.S. bonds, corporate bonds, common    
stocks, and small company stocks during the same periods, as calculated by      
Ibbotson Associates, were approximately 6%, 7%, 7.5%, 11% and 15%, respectively.
On the other hand, the study concluded that the level of risk associated with   
timberland investments, when determined by reference to traditional financial   
economic models (such as the capital asset pricing model) was relatively low.   
Because of the favorable comparison to other investments, the Managing General  
Partner believes that timber and timberland investments are a useful means of   
diversifying portfolio exposure and return. This should be attractive to Third  
Party Investors that can accept the relative illiquidity involved and possess   
well-diversified portfolios. The Managing General Partner believes that the     
Partnership is favorably positioned to pursue these opportunities based upon its
unique heritage and experience.                                                 

    The Partnership expects that ORM/LLC will focus initially on identifying and
seeking to attract potential Third Party Investors for the Investor Portfolio   
Management Business and on identifying timber and other natural resource and    
real estate assets throughout the United States and the rest of North America   
that represent potentially attractive investment opportunities. ORM/LLC will    
target potential Third Party Investors who have a minimum of $100 million to    
commit to the acquisition of real estate assets in connection with the Investor 
Portfolio Management Business. The assets most likely to be targeted for        
investment will be large timberland properties. However, it is not anticipated  
that Investment Entities will own or operate forest products manufacturing or   
conversion facilities for any sustained period of time. Other assets that may be
acquired include other real property containing marketable natural resources,   
large commercial properties, and large development properties suitable for      
large-scale residential, commercial and mixed use development. Acquisitions may 
be made directly or through the acquisition of landholding entities.            

As currently contemplated, ORM/LLC will enter into portfolio development
agreements with Third Party Investors. The Partnership expects that pursuant to 
a portfolio development agreement, a Third Party Investor will appoint ORM/LLC  
to acquire and manage, for development, sale or other investment purposes, a    
variety of real estate assets that meet predetermined investment objectives.    
Once a portfolio development agreement has been entered into, ORM/LLC will      
search for and identify real estate assets and, subject to the approval of the  
Third Party Investors, will negotiate for the purchase of assets, undertake due 
diligence, hire necessary experts and professional advisors, and purchase and   
manage acquired assets on behalf of the Third Party Investor. The Partnership   
expects that the Portfolio Business Affiliate and Third Party Investors will    
form Investment Entities for the purpose of purchasing and holding portfolio    
assets. More than one Third Party Investor may invest in portfolio assets, in   
which case they would all be equity owners of the Investment Entities.          

 In some cases, and with the consent of the Third Party Investor involved,
ORMI may invest as an equity owner in an Investment Entity, thereby leveraging  
the amount of funds the Partnership is capable of committing through ORMI with  
potentially more significant amounts committed by Third Party Investors and also
resulting in more asset diversification for the Partnership. It is not expected 
that ORMI's position in any Investment                                          

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Entity will represent more than a small percentage of the outstanding equity    
interests in the Investment Entity. Such equity investments will likely be made 
from ORMI's distributed share of IPMB Net Income and from other assets          
contributed by the Partnership. The Managing General Partner will set the       
general parameters for such investments by ORMI, and each individual investment 
will be approved by the ORMI Board.                                             

Under the portfolio development agreements, ORM/LLC will be entitled to 
certain fees. The fees, payable by the Third Party Investors and/or Investment  
Entities, will be calculated against the value of the assets held or acquired,  
and will usually consist of the following (collectively the "Portfolio          
Management Revenue"): (1) an Investment Acquisition Fee applied against the cost
of assets located and acquired on behalf of an Investment Entity at the time the
assets are acquired; (2) an annual Management Fee for management of the assets  
acquired on behalf of and held in each Investment Entity; (3) a Portfolio       
Development Fee, applied on a one-time basis for services performed by ORM/LLC  
in developing the investment portfolios of Third Party Investors; and (4) an    
Incentive Fee based on asset and/or portfolio performance and ORM/LLC's success 
in increasing the value of and producing a return on the properties owned by    
Investment Entities. The Partnership expects that the fees charged by ORM/LLC   
will be competitive with those charged by others performing similar services.   

ORM/LLC's costs in carrying out and administering the Investor Portfolio
Management Business are expected to consist, among other things, of salaries,   
benefits and other compensation costs, professional fees (accounting, legal,    
consulting), travel and related expenses, public relations, marketing and       
facilities and equipment expenses (collectively the "Portfolio Management       
Costs"). It is possible that the Partnership, ORMI, and/or ORM/LLC will utilize 
the same facilities and some of the same employees, who will be involved in     
management of the Historical Business as well as the Investor Portfolio         
Management Business. Accordingly, to the extent that facilities and/or employees
are shared, costs and expenses relating to the Historical Business and the      
Investor Portfolio Management Business will be allocated among these entities on
a fair and arm's-length basis.                                                  

THE ORM/LLC OPERATING AGREEMENT                                                 

The relationship between ORMI and the Managing General Partner will     
initially be governed by the Olympic Resource Management LLC Limited Liability  
Company Agreement attached hereto as Appendix III (the "ORM/LLC Operating       
Agreement"). In the event that ORMI and the Managing General Partner determine  
to change the form of ORM/LLC for business, legal or tax reasons, ORMI and the  
Managing General Partner will enter into an appropriate agreement relating to   
their respective management and economic interests having terms substantially   
similar to those set forth in the ORM/LLC Operating Agreement. The following    
summary of the proposed ORM/LLC Operating Agreement is not intended to be       
complete and is qualified in its entirety by reference to the complete ORM/LLC  
Operating Agreement.                                                            

The Managing General Partner will be the Managing Member of ORM/LLC. As 
such, the Managing General Partner will have the responsibility and authority to
conduct the business of ORM/LLC, which will be carried out under the direction  
of the MGP Board. Certain major decisions with respect to the conduct of        
ORM/LLC's business are reserved to the members of ORM/LLC and will require the  
unanimous approval of ORMI and the Managing General Partner.                    

Once ORM/LLC has been organized, it is expected that a number of the    
existing employees of the Partnership will become employees of ORM/LLC, and     
involved in the management and operation of the Investment Portfolio Management 
Business. The Partnership expects that a substantial percentage of its employee 
base will be employed on a prorated basis both in the existing business of the  
Partnership and the management and operation of the Investor Portfolio          
Management Business. During the initial start-up period for the Investor        
Portfolio Management Business (expected to be approximately two years) ORM/LLC  
will likely need to hire additional management and employees to operate the     
Investor Portfolio Management Business. During the first year, ORM/LLC's direct 
start-up and operational costs (exclusive of expenses of shared                 

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employees, facilities and other resources allocated to the Investor Portfolio   
Management Business), currently estimated to be approximately $2 million in     
1997, will be financed by capital contributions from the Partnership through    
ORMI. Thereafter, additional funds that are necessary may be acquired through   
additional capital contributions from the Partnership through ORMI or through   
loans from the Partnership through ORMI. Pursuant to the ORM/LLC Operating      
Agreement, any future capital contributions by ORMI (including by the           
Partnership through ORMI) to ORM/LLC in excess of a total of $2 million will    
require the approval of ORMI and the Managing General Partner. In addition,     
without the approval of a Majority Interest of the Limited Partners, the IPMP   
Cumulative Commitment, consisting of the cumulative sum of Portfolio Management 
Costs and Portfolio Financial Commitments, net of cumulative IPMB Net Income not
allocated to MGP, cannot at any time exceed $5 million (the "Maximum Commitment 
Level"). Portfolio Management Costs will consist of all of the costs and        
expenses incurred by the Partnership, ORM/LLC or ORMI in the conduct,           
management, and administration of the Investor Portfolio Management Business    
including the portions of shared or prorated expenses, such as salaries,        
benefits and other compensation costs, professional fees, and travel, public    
relations, marketing, facilities, and equipment expenses allocated to the       
Investor Portfolio Management Business. Portfolio Financial Commitments will    
consist of capital contributions, loans, guarantees, negative pledges, and other
financial commitments made or incurred by the Partnership, ORM/LLC and ORMI in  
the conduct, management, and administration of the Investor Portfolio Management
Business.                                                                       

   The ORM/LLC Agreement also provides that MGP may be removed as the Managing
Member of ORM/LLC by the vote of the other Member of ORM/LLC (i.e. ORMI) for    
"cause" (as defined in the ORM/LLC Operating Agreement) or following the        
removal, resignation or withdrawal of MGP as the Managing General Partner of the
Partnership. The Partnership Agreement provides that MGP may be removed as the  
Managing General Partner of the Partnership by the affirmative vote of Partners 
of record holding at least (i) 66 2/3% of all outstanding Qualifying Units (as  
defined in the Partnership Agreement) or (ii) 90% of the Units held of record by
all Partners (excluding Units held by MGP). Removal of MGP as the Managing      
Member of ORM/LLC, together with MGP's voluntary or involuntary insolvency, or  
involvement in a bankruptcy proceeding, or dissolution, constitutes an "Event of
Dissociation" under the ORM/LLC Agreement. Upon the occurrence of an Event of   
Dissociation, ORM/LLC will be dissolved and wound up unless the remaining Member
(i.e., ORMI) votes to continue the business of ORM/LLC and MGP's successor as   
the Managing General Partner of the Partnership agrees to become the successor  
Managing Member of ORM/LLC and further agrees to hold MGP harmless from         
liabilities and expenses related to ORM/LLC after the date of the Event of      
Dissociation. If the business of ORM/LLC is so continued, ORM/LLC will be       
required to redeem MGP's member interest in ORM/LLC in exchange for an initial  
payment equal to MGP's capital account balance in ORM/LLC as of the date of the 
Event of Dissociation and further payments, if any, equal to the amount of the  
Managing Member's allocable share of IPMB Net Income attributable to property   
acquisition fees thereafter received by ORM/LLC which result from the closing of
property acquisition contracts entered into by or on behalf of Investment       
Entities and in effect prior to the Event of Dissociation.                      

NET INCOME DISTRIBUTION                                                         

Pursuant to the ORM/LLC Operating Agreement, IPMB Net Income will be    
allocated between ORMI and the Managing General Partner on an annual basis. IPMB
Net Income is defined in the ORM/LLC Operating Agreement as that portion of the 
net profit of ORM/LLC derived from the Investor Portfolio Management Business,  
as determined by deducting Portfolio Management Costs from Portfolio Management 
Revenues. Portfolio Management Revenue will consist of the fees payable by Third
Party Investors and/or Investment Entities to ORM/LLC in connection with the    
Investor Portfolio Management Business. Portfolio Management Costs will consist 
of ORM/LLC's costs of carrying out and administering the Investor Portfolio     
Management Business, including salaries, benefits and other compensation costs, 
professional fees (accounting, legal, consulting), travel and related expenses, 
public relations, marketing and facilities, and equipment expenses properly     
allocable thereto. See " - Conduct of the Investor Portfolio Management         
Business." The allocation of                                                    

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IPMB Net Income will be on an annual incremental basis as follows, without      
taking into account any loss in a prior year:                                   

                                                                [Download Table]

    IPMB                 ORMI                MGP 
  NET INCOME          PERCENTAGE      PERCENTAGE 
  ----------          ----------      ---------- 
                                                 
Up to $3 million         80%                  20%
$3-5 million             70%                  30%
$5-7 million             60%                  40%
More than $7 million     50%                  50%

  Because it is contemplated that the Partnership's interest in ORM/LLC will
be held indirectly through ORMI, the Partnership's share of IPMB Net Income will
be allocated to ORMI. The amount and timing of distributions of IPMB Net Income 
to ORMI and MGP will require the approval of the members of ORM/LLC (i.e., ORMI 
and MGP). Further, although ORMI will be a wholly-owned subsidiary of the       
Partnership, there will be no requirement for ORMI to make distributions of cash
in the form of dividends to the Partnership on any established schedule. It is  
possible that some or all of ORMI's share of the IPMB Net Income for a          
particular year will be invested in Investment Entities rather than distributed 
to the Partnership. See " - Conduct of the Investor Portfolio Management        
Business." Moreover, since ORMI's allocable share of net income from the        
Investor Portfolio Management Business will be subject to federal income tax,   
ORMI will retain out of IPMB Net Income enough cash to satisfy its income tax   
liabilities prior to any distribution of IPMB Net Income to the Partnership. See
"- Federal Income Tax Considerations." Payment of dividends by ORMI to the      
Partnership will also be subject to the requirements of the Washington Business 
Corporation Act relating to permissibility of corporate dividends.              

MANAGEMENT INCENTIVE PROGRAM                                                    

A Management Incentive Program (the "MIP") related to the Investment    
Portfolio Management Business will be implemented concurrent with the           
commencement of the Investor Portfolio Management Business. The goal of the MIP 
will be to provide financial incentives to the management group that are        
directly aligned with the goals and the best interests of the Partnership and   
its Limited Partners and will be paid out of the share of the IPMB Net Income to
be allocated to MGP (the "MGP Allocation") and not out of the ORMI share of IPMB
Net Income. A Board Incentive Plan (the "BIP") with similar goals may be        
implemented for the members of the MGP Board, also to be paid out of the MGP    
Allocation and not out of the ORMI share of IPMB Net Income.                    

FACTORS CONSIDERED BY MGP BOARD                                                 

At the December 18, 1996 meeting of the MGP Board, the Managing General 
Partner, upon the unanimous recommendation of the Board Committee, unanimously  
voted to authorize the establishment of the Investor Portfolio Management       
Business, subject to the requisite approval by the Partners of the Amendments to
the Partnership Agreement described in this Proxy Statement. Such Amendments    
have been unanimously adopted by the MGP Board by written consent. In reaching  
its conclusion, the Board Committee and the MGP Board considered the following  
factors:                                                                        

1. The potential long-term benefits of pursuing the Investor Portfolio  
Management Business. The MGP Board believes that the Investor Portfolio         
Management Business presents an opportunity for current portfolio risk          
diversification and an opportunity for geographic and business diversification  
that will potentially bolster long-term growth and increase interest in the     
Partnership's publicly-traded Units. Given the favorable opportunities the MGP  
Board believes currently exist for acquisition of land and related resources,   
ongoing changes in the forest products and related industries, and the          
historically favorable returns on timber and timber-related                     

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investments, the MGP Board believes that favorable market conditions exist for  
the establishment of the Investor Portfolio Management Business. See " - Conduct
of the Investor Portfolio Management Business." The MGP Board believes that the 
establishment and operation of the Investor Portfolio Management Business will  
benefit the Partnership's Historical Business as a result of sharing of         
resources brought to bear by the Investor Portfolio Management Business,        
including additional management expertise, market information, new business     
opportunities and the possible reduction of costs of the Historical Business. In
addition, the MGP Board believes, although there can be no assurance, that the  
Investor Portfolio Management Business will generate additional revenues and    
cash flows for the Partnership, enabling the Partnership to increase the rate of
its asset growth without the need for significant debt or dilutive equity       
financing. Further, the MGP Board believes, although there can be no assurance, 
that the Investor Portfolio Management Business will provide opportunities for  
equity participation by ORMI in large-scale real estate and timber investment   
acquisitions that would be out of reach financially for the Partnership acting  
alone and to do so at attractive prices based on the large size of the          
acquisitions and the buying power provided by the funds received from Third     
Party Investors.                                                                

  2. The potential increased return to holders of Limited Partner Units. The
MGP Board believes that the Investor Portfolio Management Business represents a 
significant new business opportunity that has the potential to increase         
diversification of the Partnership's business and assets, accelerate asset      
growth, and generate additional returns for the Partnership. The MGP Board      
believes that if ORM/LLC successfully develops and maintains the Investor       
Portfolio Management Business, the overall return to holders of the Limited     
Partners' Units will be increased over the rates of return historically         
generated as a result of the Partnership's operation of its Historical Business,
both from fees generated by the Investor Portfolio Management Business and from 
possible equity participation of ORMI in the Investment Entities. There can be  
no assurance, however, that ORM/LLC will be successful in implementing its      
business strategy for the Investor Portfolio Management Business or achieving or
maintaining profitability for the Investor Portfolio Management Business.       

    3. The risks associated with the Investor Portfolio Management Business. The
MGP Board identified a number of risks associated with establishing and         
operating the Investor Portfolio Management Business. The establishment and     
operation of the Investor Portfolio Management Business will involve additional 
business and legal risks to the Partnership and the Portfolio Business Affiliate
that the Partnership does not currently face in the operation of its Historical 
Business. In particular, while the Partnership and the Managing General Partner 
have significant relevant experience, including the prior experience of the     
Partnership's current Chief Executive Officer in managing timber-based          
portfolios on behalf of large institutional investors, the Partnership as a     
whole, the Portfolio Business Affiliate, and the Managing General Partner all   
lack a proven track record to market to investors who may be potential customers
of the Investor Portfolio Management Business and to manage large real estate   
portfolios on behalf of Third Party Investors. Additionally, the actual costs of
establishing and operating the Investor Portfolio Management Business may exceed
the actual revenues from the Investor Portfolio Management Business. The failure
of the Investor Portfolio Management Business to generate positive returns could
have a negative impact on the market price of the Partnership's Units and upon  
the earnings of the Partnership and, consequently, the returns to the Partners. 
Further, the success of the Investor Portfolio Management Business will be      
dependent upon ORM/LLC's ability to secure engagements from large institutions  
or very high net worth individuals and to locate attractive real estate         
investment opportunities for Third Party Investors, and there can be no         
assurance either that ORM/LLC will be successful in securing such engagements or
that attractive investment opportunities will be available at the outset or in  
the future. Finally, engaging in the Investor Portfolio Management Business is  
likely to present additional liability exposure to the Partnership and/or to the
Portfolio Management Affiliate, including without limitation potential liability
to Third Party Investors in the event that returns to such investors do not meet
expectations, potential liability for environmental problems, and other risks   
inherent in managing and operating real estate assets. Although a key purpose   
for the formation of ORMI is to assist the Partnership in segmenting and        
isolating various risks associated with the Investor Portfolio Management       
Business, it is unlikely that the Partnership can eliminate its exposure to all 
of the risks associated with the Investor Portfolio Management Business.        

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    4. The recommendation of the financial advisor with respect to allocation of
profits to the Managing General Partner for managing the Investor Portfolio     
Management Business and the fairness opinion of the financial advisor regarding 
the IPMB Income Allocation ultimately approved by the MGP Board. As contemplated
by the Amendments, the Managing General Partner will not receive any additional 
fee from the Partnership for managing the Investor Portfolio Management Business
but will be entitled to receive the MGP Income Allocation. See "-               
Recommendations and Opinion of Financial Advisor," "The Amendments - Allocation 
of IPMB Net Income to Managing General Partner" and "Interest of Certain Persons
in the Amendments." The terms of the IPMB Income Allocation between the         
Partnership and MGP were based upon recommendations of Houlihan Lokey Howard &  
Zukin ("Houlihan Lokey"), the financial advisor engaged on behalf of the        
Partnership. The MGP Board determined that the IPMB Income Allocation is        
reasonable in light of compensation and other financial arrangements pertaining 
to managing general partners of other comparable publicly-traded partnerships.  
In approving the Amendments and recommending that the Partners approve the      
Amendments, the MGP Board took into account the opinion of Houlihan Lokey that  
the IPMB Income Allocation as set forth in the Amendments is fair, from a       
financial point of view, to the holders of Limited Partners' Units. See "-      
Opinion of Financial Advisor."                                                  

RECOMMENDATIONS AND OPINION OF FINANCIAL ADVISOR                                

  Houlihan Lokey, a nationally-recognized specialty investment banking firm,
was retained by the Partnership to advise the MGP Board with regard to possible 
financial arrangements between the Partnership and the Managing General Partner 
that would appropriately reward the Managing General Partner for its management 
of the Investor Portfolio Management Business and to render an opinion to as to 
the fairness, from a financial point of view, of the terms of the IPMB Income   
Allocation ultimately approved by the MGP Board. Houlihan Lokey was selected on 
the basis of its qualifications, expertise and reputation. After its engagement 
in July, 1996, Houlihan Lokey worked with the MGP Board to identify a number of 
possible alternative structures for the IPMB Income Allocation and related      
arrangements. In November, 1996, Houlihan Lokey proposed the structure of the   
IPMB Income Allocation reflected in the proposed Amendments set forth in this   
Proxy Statement and presented its analysis of this proposed structure and       
materials supporting its analysis. Those materials included Houlihan Lokey's    
summary of certain benefits and risks of the Partnership engaging in the        
Investor Portfolio Management Business and proposed arrangements to be made on  
behalf of the Managing General Partner, an overview of compensation arrangements
for certain publicly-traded partnerships it deemed relevant to its              
recommendations, and internal rate of return, yield and total return analyses   
which applied the recommended IPMB Income Allocation to certain preliminary base
case financial projections for the Investor Portfolio Management Business       
provided by management of the Partnership.                                      

   The MGP Board relied in part on the final recommendations of Houlihan Lokey
in determining the final terms of the proposed IPMB Income Allocation. In       
addition, the MGP Board considered the incremental risk being undertaken by the 
Managing General Partner, which is ultimately liable for all debts and          
liabilities of the Partnership (although the Managing General Partner is        
entitled to indemnification under the terms of the Partnership Agreement), the  
fact that a review of financial and compensation arrangements in other          
publicly-traded limited partnerships deemed relevant by Houlihan Lokey indicated
that the current management fee payable to the Managing General Partner         
($150,000 per year) is significantly below the level of compensation            
arrangements in comparable publicly-traded partnerships, and the MGP Board's    
assumption that the Investor Portfolio Management Business could legally be     
pursued by the shareholders, officers and other affiliates of the Managing      
General Partner without the involvement of the Partnership. Based upon these    
factors, the MGP Board determined to approve the terms of the IPMB Income       
Allocation described under the caption entitled "The Amendments - Allocation of 
IPMB Net Income to Managing General Partner," subject to the receipt by the     
Partnership of a fairness opinion of Houlihan Lokey.                            

At the December 18, 1996 meeting, Houlihan Lokey delivered its written  
opinion that the terms of the IPMB Income Allocation are fair, from a financial 
point of view, to the holders of Limited Partners' Units. The                   

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complete text of that opinion is attached as Appendix IV to this Proxy Statement
and should be read carefully in its entirety.                                   

  The Houlihan Lokey opinion does not constitute a recommendation to any
Partner as to how such Partner should vote at the Partnership Meeting. Houlihan 
Lokey was not requested to, and did not, opine as to the underlying business    
decision to proceed with the establishment of the Investor Portfolio Management 
Business or the implementation of the IPMB Income Allocation, nor was it        
requested nor did it initiate discussions with any third parties with respect to
possible alternatives to the terms of the IPMB Income Allocation.               

 In arriving at its opinion, Houlihan Lokey reviewed (i) the Partnership's
Annual Reports to Partners and Forms 10-K for the fiscal years ended December   
31, 1991 to December 31, 1995 and 10-Q for the period ended September 30, 1996, 
(ii) certain confidential internal planning and financial information regarding 
the Partnership and the Investor Portfolio Management Business, (iii) the       
Partnership Agreement, as amended to date, (iv) the proposed Amendments, (v)    
certain financial and trading data and partnership agreements of other          
publicly-traded limited partnerships deemed by Houlihan Lokey to be relevant to 
its analysis; and (vi) certain historical trading data of the Partnership's     
Units. Houlihan Lokey also engaged in discussions with management of the        
Partnership regarding the financial condition, current operating results and    
business outlook of the Partnership, including management's view of the business
outlook of the Partnership assuming it participates in the Investor Portfolio   
Management Business.                                                            

In reaching its conclusion as to the fairness of the terms of the IPMB  
Income Allocation and in its presentation to the MGP Board, Houlihan Lokey did  
not rely on any single analysis or factor described above or make any           
conclusions as to how the results of any given analysis, taken alone, supported 
its fairness opinion. The preparation of a fairness opinion is a complex        
process. Houlihan Lokey stressed that its analysis must be considered as a      
whole, and that considering portions of the analysis, without considering all   
aspects of the analysis, would create a misleading view of the processes        
underlying its opinion. No other partnership or management arrangement used in  
the analysis is exactly comparable to the Partnership or the IPMB Income        
Allocation relating to the Investor Portfolio Management Business. Accordingly, 
an analysis of the results is not entirely mathematical.                        

For purposes of its opinion, Houlihan Lokey relied upon and assumed the 
accuracy, completeness and fairness of the financial and other information made 
available to it by the Partnership's management and did not attempt             
independently to verify such information. Houlihan Lokey relied upon            
management's assurance that the estimates provided by the Partnership were the  
most accurate estimates available and that they were not aware of any material  
fact that would make the information provided to Houlihan Lokey incomplete or   
misleading. Houlihan expressed no opinion as to the prices at which the         
Partnership's Units have traded historically or will trade in the future, nor   
did Houlihan Lokey conduct any physical inspection or independent appraisal of  
the Partnership's properties. The Houlihan Lokey opinion is based upon          
information available to Houlihan Lokey and the facts and circumstances as they 
existed and were subject to evaluation on the date of the Houlihan Lokey        
opinion. Events occurring after such date could materially affect the           
assumptions used in preparing that opinion. Houlihan Lokey did not receive any  
instruction or limitations on what it could consider for purposes of rendering  
its opinion.                                                                    

    For Houlihan Lokey's services as financial advisor, the Partnership will pay
Houlihan Lokey a fee of $65,000. The Partnership has also agreed to reimburse   
Houlihan Lokey for all of its out-of-pocket expenses incurred in connection with
its role as financial advisor and to indemnify Houlihan Lokey and its officers, 
directors, employees and controlling persons for liabilities under applicable   
federal and state laws arising from actions or omissions of the Partnership or  
actions or omissions of Houlihan Lokey taken in conformity with the             
Partnership's consent or instructions, unless involving gross negligence,       
willful misconduct or bad faith.                                                

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FEDERAL INCOME TAX CONSIDERATIONS                                               

The Partnership believes that it has structured the Investor Portfolio  
Management Business to achieve the most efficient risk management, marketing,   
and tax structure available. The Partnership intends to participate in the      
Investor Portfolio Management Business through ORMI and ORM/LLC and undertake   
equity investments in the Investment Entities through ORMI. The Partnership     
believes that participation by the Partnership in the Investor Portfolio        
Management Business through ORMI and ORM/LLC and equity investment in the       
Investment Entities through ORMI will accomplish the Partnership's business     
objectives of minimizing the legal and economic exposure to the Partnership     
associated with its participation in the Investor Portfolio Management Business 
and the equity investments in Investment Entities, and serve as a vehicle for   
creating an identity separate and apart from the Partnership for the marketing  
and conduct of the Investor Portfolio Management Business. The economic cost of 
the Partnership's participation in the Investor Portfolio Management Business   
and the anticipated equity investments in Investment Entities through ORMI is   
that the Partnership's portion of the net income of those activities will be    
taxed once at the ORMI corporate subsidiary level before ORMI distributes cash  
in the form of a dividend to the Partnership. This dividend is not deductible to
ORMI. As with all Partnership income, dividends paid by ORMI to the Partnership 
out of its share of the net income of the Investor Portfolio Management Business
will be subject to tax again in the hands of the Partners, thereby subjecting   
that income to double taxation.                                                 

The role of ORMI in the Partnership's participation in the Investor     
Portfolio Management Business will also serve to ensure that these activities do
not jeopardize the status of the Partnership as a partnership for federal income
tax purposes. If the Partnership were to be allocated Investor Portfolio        
Management Business income directly, it would potentially jeopardize the overall
treatment of the Partnership as a partnership for federal tax purposes. Under   
the "90-10 Qualifying Income Test," at least 90 percent of the gross income of  
publicly traded limited partnerships such as the Partnership must consist of    
"qualifying income," which generally includes interest, dividends, real property
rents (other than rents received by the partnership from related entities), gain
from the sale or other disposition of real property, income and gain derived    
from the development, processing, or marketing of natural resources (including  
timber), and certain other passive-type income described in the Internal Revenue
Code (the "Code"), in order for the partnership to maintain its status as a     
partnership for federal income tax purposes. This requirement must be satisfied 
in each year in which the partnership is subject to the 90-10 Qualifying Income 
Test. If a partnership fails to satisfy the 90-10 Qualifying Income Test in a   
particular taxable year, it will from and after the first day of that taxable   
year be taxed as a corporation for federal income tax purposes (and, as a       
result, income of the Partnership would be taxed first to the Partnership at    
corporate tax rates and again to the Partners when distributed to the Partners  
as dividends or liquidating distributions). There is a significant risk that    
income allocated directly to the Partnership from the Investor Portfolio        
Management Business, rather than through ORMI, would constitute non-qualifying  
income, which could potentially jeopardize the Partnership's continuing status  
as a partnership for federal income tax purposes.                               

    Under a "grandfather" rule contained in the Code, certain partnerships, such
as the Partnership, which were publicly traded prior to December 18, 1987, will 
continue to be treated as partnerships for federal income tax purposes without  
regard to satisfaction of the 90-10 Qualifying Income Test, described above.    
This favorable grandfather status will expire for all publicly traded           
partnership's in their first taxable year commencing in 1998, after which time  
each partnership must satisfy the 90-10 Qualifying Income Test in order to      
retain its classification as a partnership for federal income tax purposes. In  
addition, a qualifying publicly traded partnership will cease to be eligible for
continued grandfather status prior to the expiration of those rules in the year 
in which it adds a "substantial new line of business."                          

   Under applicable Treasury regulations, a new line of business is considered
"substantial" as of the earlier of the taxable year of the partnership in which 
it derives more than 15 percent of its gross income from that line of business  
or directly uses in that line of business more than 15 percent (by value) of its
total assets. A new                                                             

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line of business is any business activity of the partnership not closely related
to a pre-existing business of the partnership to the extent that the activity   
generates income other than "qualifying income."                                

An activity conducted by a corporation controlled by a grandfathered    
partnership may be treated as an activity of the grandfathered partnership if,  
based on all facts and circumstances, the effect of the arrangement is to permit
that partnership to engage in an activity that would constitute a new line of   
business, the income of which is not subject to a corporate-level tax. The      
Treasury regulations establish a safe harbor pursuant to which activities       
conducted through wholly-owned corporations, such as ORMI, will not be treated  
as a new line of business of the controlling partnership unless more than 10    
percent of the gross income the partnership derives from that corporation is    
"recharacterized income." Recharacterized income potentially includes any       
qualifying income (such as interest) received by the grandfathered partnership  
from the corporation that is deductible by the corporation.                     

   The Partnership does not anticipate that the Partnership's participation in
the Investor Portfolio Management Business through ORMI and ORM/LLC and the     
anticipated investments by ORMI in Investment Entities will cause the           
Partnership to lose its favorable grandfather status under the foregoing rules. 

 The Partnership has not requested and does not intend to request a ruling
from the Internal Revenue Service (the "IRS") regarding the effect of the       
Partnership's participation, through ORMI, in the Investor Portfolio Management 
Business and investments in the Investment Entities on the status of the        
Partnership as a partnership for federal income tax purposes. In compliance with
Section 6.9 of the Partnership Agreement, the Partnership has obtained a        
favorable written opinion of Davis Wright Tremaine, tax counsel to the          
Partnership ("Counsel"), based upon certain assumptions contained in such       
opinion, a copy of which is attached as Appendix V to this Proxy Statement, that
the Partnership's participation, through ORMI, in the Investor Portfolio        
Management Business and equity investments in Investment Entities, if           
conducted in the manner described in that opinion, will not jeopardize the      
status of the Partnership as a partnership under applicable tax laws and        
regulations. It should be noted, however, that Counsel's opinion is based upon  
existing law, which is subject to interpretation and to change either           
prospectively or retroactively. Furthermore, Counsel's opinion represents merely
Counsel's considered legal judgment and has no binding effect or official       
status. Accordingly, no assurance can be give that the IRS will not challenge   
the opinion of counsel, nor can there be any certainty that a challenge by the  
IRS would not be sustained by a court.                                          

If the IRS successfully challenged the status of the Partnership as a   
partnership for federal income tax purposes, the Partnership would be deemed to 
have transferred all of its assets and liabilities to a new corporation         
("Newco") in exchange for stock, and that stock would then be deemed distributed
out to the Partners in liquidation of the Partnership. As a general rule, income
or gain is not recognized upon the contribution of assets to a corporation upon 
formation. However, if, and to the extent, that the liabilities assumed by Newco
on the conversion exceed the aggregate tax basis of the assets transferred to   
Newco by the Partnership, income or gain would be recognized by the Partnership 
on the conversion. Any income or gain resulting from a conversion where         
liabilities exceed basis, all or part of which may be ordinary income, would    
then be passed through to the Partners based upon their distributive share      
allocations under the Partnership Agreement, and subject to tax at the Partner  
level. A Limited Partner's tax basis in the stock of Newco would be equal to    
that Partner's tax basis in its Partnership interest immediately prior to the   
conversion, increased by any gain recognized by the Partner as a result of the  
conversion. In general, a Partner's holding period in the stock of Newco would  
include the period during which the Partner held its interest in the            
Partnership. Following the conversion, the income of the Partnership would be   
subjected to an entity-level tax at corporate tax rates, and that income would  
again be subject to tax to the Partners when distributed to the Partners as     
dividends or liquidating distributions.                                         

THE AMENDMENTS

GENERAL                                                                         

The Amendments are submitted with a view to enabling the Partnership to 
pursue the Investor Portfolio Management Business through the Portfolio Business
Affiliate and allocating the IPMB Net Income between ORMI and the Managing      
General Partner. Each of the proposed Amendments is further described below. A  
copy of the Amendments is attached as Appendix I to this Proxy Statement and    
should be reviewed carefully.                                                   

Under the Partnership Agreement, the Amendments must be approved by a   
Majority Interest and separately approved by the Managing General Partner. The  
Managing General Partner, based upon the unanimous recommendation of the Board  
Committee, has separately approved the Amendments, and recommends that the      
Amendments be adopted by the Partners. A condition to the MGP Board's approval  
of the Amendments is that they must be considered by the partners as a single   
proposal.                                                                       

AMENDMENT OF "PURPOSE" OF THE PARTNERSHIP                                       

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  Section 2.3 of the Partnership Agreement, setting forth the purpose of the
Partnership, will be amended to specifically authorize the Investor Portfolio   
Management Business. The Partnership's authority to participate in the Investor 
Portfolio Management Business will be limited in that its IPMB Cumulative       
Commitment cannot exceed the Maximum Commitment ($5 million) unless approved by 
a Majority Interest in accordance with Section 6.8 of the Partnership Agreement.

ALLOCATION OF IPMB NET INCOME TO MANAGING GENERAL PARTNER                       

Section 4.1(C) of the Partnership Agreement currently provides that the 
General Partners will be paid an annual fee of $150,000, to be allocated between
the General Partners in such manner as they agree.                              

Pursuant to the Amendment, the Partnership Agreement would provide the  
Managing General Partner an annual incentive-based allocation of the IPMB Net   
Income. The MGP Allocation will be calculated each fiscal year as an            
incrementally escalating percentage of the IPMB Net Income.                     

   There may also be shared expense issues in determining profit and cash flow
from the Investor Portfolio Management Business, to the extent the same         
employees work on the Historical Business and the Investor Portfolio Management 
Business. The Partnership's accountants will be responsible for reviewing       
allocations of the shared expenses for fairness, based on time and effort       
expended by particular individuals, the value of the business matters being     
worked on, and other relevant factors.                                          

IPMB Net Income will be divided between ORMI and the Managing General   
Partner on an annual basis. This IPMB Income Allocation will be on an annual    
incremental basis as follows, without taking into account any loss in a prior   
year:                                                                           

                                                                [Download Table]

     IPMB                      ORMI              MGP 
  NET INCOME                PERCENTAGE     PERCENTAGE
  ----------                ----------     ----------
                                                     
Up to $3 million           80%            20%        
$3-5 million               70%            30%        
$5-7 million               60%            40%        
More than $7 million       50%            50%        

   Under this arrangement, the Managing General Partner will receive no direct
compensation from the Partnership for managing the Investor Portfolio Management
Business. Instead, the Managing General Partner will be allocated a share of the
IPMB Net Income and receive related distributions.                              

    The cash flow from the Investor Portfolio Management Business distributed to
ORMI (the "ORMI Net Cash Flow") may be distributed to the Partnership by ORMI to
the extent determined by the Board of Directors of ORMI (which Board shall be   
subject to selection by the Managing General Partner) in its sole discretion,   
subject to applicable corporate law restrictions on permissibility of corporate 
dividends. In such case, such ORMI Net Cash Flow could be distributed to the    
Partners pursuant and subject to the distribution provisions of Article 10 of   
the Partnership Agreement, as amended by the Amendment. However, the Board of   
ORMI, in conjunction with the MGP Board, could determine in its discretion to   
retain some or all of its share of IPMB Net Income in ORMI to fund investments  
in Investment Entities or the expansion of ORM/LLC's activities in operating the
Investor Portfolio Management Business.                                         

In addition to the MGP Allocation, the Managing General Partner will    
continue to receive an annual flat fee of $150,000 for managing the             
Partnership's Historical Business. MGP will also continue to receive its share  
of the net income and cash distributions from the Partnership, including that   
attributable to the Historical                                                  

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Business and that attributable to the Investor Portfolio Management Business, as
the holder of 1,200 units in the Partnership.                                   

 INTEREST OF CERTAIN PERSONS IN THE AMENDMENTS

GENERAL                                                                         

In considering the recommendation of the Managing General Partner with  
respect to the Amendments, Limited Partners voting on the Amendments should be  
aware that the entities and persons described below, including certain members  
of the MGP Board, have certain interests described below that may present them  
with potential or actual conflicts of interest in connection with the           
Amendments. The MGP Board, in determining whether or not to approve the         
Amendments and recommend them for adoption and approval by the Partners, was    
aware of these interests and set up the Board Committee to study and make a     
recommendation to the MGP Board with respect to the Amendments.                 

MANAGING GENERAL PARTNER                                                        

Pursuant to the existing terms of the Partnership Agreement, the General
Partners are paid a flat fee of $150,000 per year for managing the Partnership. 
If the Amendments are duly adopted and approved by the Partners at the          
Partnership Meeting, the Partnership Agreement will be amended to include the   
opportunity for MGP to receive the MGP Allocation. Pursuant to the structure of 
the IPMB Income Allocation, MGP will realize a share of the financial benefits  
resulting from conduct of the Investor Portfolio Management Business to the     
extent that the Investor Portfolio Management Business generates net income and 
distributable cash flow. While the MGP Board believes that the financial        
interest of the Managing General Partner in the Investor Portfolio Management   
Business is incentive-based and therefore aligned with the interests of the     
Limited Partners, Limited Partners should note that the terms of the IPMB Income
Allocation mean that the Managing General Partner's relative share of the       
rewards from the Investor Portfolio Management Business will increase as the    
Investor Portfolio Management Business becomes more successful. In addition,    
decisions with respect to contributions and/or loans by the Partnership to      
defray start-up costs of the Investor Portfolio Management Business, and        
participation by ORMI in Investment Entities may be affected by the Managing    
General Partner or by members of the MGP Board, and such decisions could affect 
the success of the Investor Portfolio Management Business, and accordingly the  
MGP Allocation.                                                                 

SHAREHOLDERS AND DIRECTORS OF THE MANAGING GENERAL PARTNER                      

  All of the capital stock of the Managing General Partner is owned by Peter
T. Pope and Emily T. Andrews. As a result of their ownership of the capital     
stock of the Managing General Partner, Mr. Pope and Mrs. Andrews will ultimately
benefit from the financial arrangements made between the Partnership and the    
Managing General Partner. Mr. Pope and Mrs. Andrews beneficially own Limited    
Partners' Units representing approximately 18% of the Limited Partners' Units   
entitled to vote at the Partnership Meeting and have indicated that they will   
vote in favor of the Amendments. Mr. Pope and Adolphus Andrews, Jr., the spouse 
of Mrs. Andrews, are members of the MGP Board.                                  

Because of Mr. Pope's and Mrs. Andrews' ownership of the stock of the   
Managing General Partner, the MGP Board set up the Board Committee composed of  
Douglas Norberg, Gary F. Tucker, and Marco Vitulli, directors with no ownership 
interest in the Managing General Partner. The Board Committee, after reviewing  
the relevant information with respect to the Investor Portfolio Management      
Business, and the Amendments, and after consulting with Houlihan Lokey,         
unanimously recommended to the MGP Board approval of the Amendments.            

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The MIP related to the Investment Portfolio Management Business will be 
implemented concurrent with the commencement of the Investor Portfolio          
Management Business. The goal of the MIP will be to provide financial incentives
to the management group that are directly aligned with the goals and the best   
interests of the Partnership and its Limited Partners and will be paid out of   
the MGP Allocation and not out of the ORMI share of IPMB Net Income. A BIP with 
similar goals may be implemented for the members of the MGP Board, also to be   
paid out of the MGP Allocation and not out of the ORMI share of IPMB Net Income.
To the extent that the MIP and the BIP are adopted, management and the members  
of the MGP Board will benefit from the adoption of the Amendments and the       
establishment of the Investor Portfolio Management Business                     

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE                                                      

The following table sets forth certain information concerning the cash  
compensation paid to each of the five most highly compensated executive officers
of the Partnership whose individual aggregate cash compensation exceeded        
$100,000.                                                                       

                                                                [Download Table]

Name and Principal      Year     Salary      Bonus    Other Annual     All Other   
Position                           ($)      ($)(1)    Compensation   Compensation  
                                                         ($)(2)         ($)(3)     
-----------------------------------------------------------------------------------
                                                                                   
Gary F. Tucker          1996     240,000    110,000                                
  CEO & President (4)                                                              

-----------------------------------------------------------------------------------
George H. Folquet       1996      31,920    18,000                      25,000     
  CEO & President (5)   1995     195,600    90,000                      54,500     
                        1994     180,400    85,000                      54,500     

-----------------------------------------------------------------------------------
Greg McCarry            1996     136,048    50,000                       4,363     
  Senior V.P. Real      1995     132,400    60,500                       4,500     
  Estate                1994     129,850    52,000                       4,500     

-----------------------------------------------------------------------------------
David Cunningham        1996     105,136    30,000                       3,840     
  V.P. Public Affairs   1995     101,800    21,000                       3,540     
  & Governmental        1994      97,400    20,000                       3,444     
  Relations                                                                        

-----------------------------------------------------------------------------------
Tom Ringo               1996     107,925    50,000                       3,960     
  Senior V.P. Finance   1995     100,850    21,000                       3,510     
  & Client Relations    1994      96,500    20,000                       3,418     

-----------------------------------------------------------------------------------
Thomas A. Griffin       1996     86,088     26,000                       3,126     
  V.P. Income           1995     82,400     17,000                       2,990     
  Properties            1994     78,850     20,000                       2,788     
-----------------------------------------------------------------------------------

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(1) Amounts represent bonuses or commissions earned in the year shown but paid  
in either the current or following years.                               

(2) Perquisites and other personal benefits paid to each named executive officer
in each instance aggregated less than 10% of the total annual salary and
bonus for each officer and accordingly were omitted from the table as   
permitted by the rules of the Securities and Exchange Commission (SEC). 

(3) Amounts represent contributions to the Partnerships 401(k) plan deferred    
compensation plan, or supplemental executive retirement plan.           

(4) Mr. Tucker was hired as the Partnership's CEO and President effective       
January 1, 1996.                                                        

(5) Mr. Folquet served as the Partnership's CEO and President through December  
   31, 1995, but received transitional compensation for the first three months
of 1996.                                                                

COMPENSATION OF DIRECTORS                                                       

  Compensation of the directors of Pope MGP, Inc. consisted of a monthly fee
of $1,500 plus a $1,000 per day fee for each meeting attended.                  

EMPLOYEE BENEFIT PLANS                                                          

Full-time salaried employees with six months of service are eligible to 
receive benefits under a defined contribution plan. The Partnership is required 
to contribute 3% of eligible employee compensation into the plan, which amounted
to $50,000, $52,000 and $52,000 for each of the three years in the period ended 
December 31, 1996. Employees become fully vested over a six year period in the  
Partnership's contribution.                                                     

The Partnership has a supplemental executive retirement plan for a key  
employee. The plan provides for a retirement income of 70% of the employee's    
base salary at retirement after taking into account both 401(k) and social      
security benefits.                                                              

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BACKGROUND AND REASONS FOR THE WAIVER 

BACKGROUND                                                                      

One member of the MGP Board, Adolphus Andrews, Jr., will reach the age of 75 in 
March of 1997. Pursuant to the terms of the Shareholders Agreement, no member of
the MGP Board may be older than 75 years of age. Thus, unless the age provision 
of the Shareholders Agreement is amended or waived, Mr. Andrews will be required
to cease serving as a member of the MGP Board in March of 1997.                 

Each of the two shareholders of MGP has the right to designate a person to serve
as a member of the MGP Board. Emily T. Andrews is currently the "Andrews General
Partner Shareholder" as defined in the Shareholders Agreement. She has          
designated Mr. Andrews for service on the MGP Board. When Mr. Andrews ceases to 
serve on the MGP Board, Mrs. Andrews or her successor as the Andrews General    
Partner Shareholder has, pursuant to the Shareholders Agreement, the right and  
obligation to designate a successor. Mrs. Andrews has informed the MGP Board    
that she intends to designate Mr. and Mrs. Andrews' son, Gordon Andrews, as the 
successor to Adolphus Andrews, Jr. on the MGP Board at such time as Adolphus    
Andrews, Jr. no longer serves on the MGP Board.                                 

The provisions of the Shareholders Agreement can be amended or waived only by   
the unanimous agreement of the parties thereto and the affirmative vote of a    
Majority Interest.                                                              

REASONS FOR THE WAIVER                                                          

Mr. Andrews has served on the MGP Board since its inception and since the       
split-off of the Partnership from Pope & Talbot, Inc. He has extensive knowledge
of the activities and operating history of the Partnership. In particular, Mr.  
Andrews has been directly involved in the decision to authorize the commencement
of the Investor Portfolio Management Business and in the evaluation and analysis
underlying that decision. It is the unanimous conclusion of the other members of
the MGP Board and the Shareholders of MGP that the Partnership will benefit from
continuity on the MGP Board during the next two years as the Partnership        
implements the decision to undertake the Investor Portfolio Management Business 
and the MGP Board continues to evaluate the status and progress of this new     
business enterprise during its critical start-up phase. Consequently, both the  
MGP Board and the Shareholders have unanimously approved (Mr. Andrews did not   
participate in the vote by the MGP Board), and recommend to the Partners, the   
Waiver of the retirement age for Mr. Andrews for a period of two years.         

The Waiver has been proposed in preference to a permanent amendment to the      
Shareholders Agreement because it is the opinion of the MGP Board and the       
Shareholders of MGP that the age restriction set forth in the Shareholders      
Agreement remains reasonable and appropriate as a general rule. Such parties    
believe it is desirable to make the limited and specific exception represented  
by the Waiver because of the particular benefit that appears likely to be       
derived from Mr. Andrews' continued service on the Board during the next two    
years while the Board evaluates the performance of the Investor Portfolio       
Management Business on a detailed and continuing basis. The members of the MGP  
Board, including Mr. Andrews, are in the unique position of comparing the       
performance of the Investor Portfolio Management Business against the           
expectations of the Board and the issues, risks, and opportunities that the     
Board explored in its deliberations leading to the Board's decision to go       
forward and to request the approval of the Partners to do so. Thus, it appears  
to the MGP Board and to the Shareholders of MGP that it is in the best interests
of the Partnership to approve the Waiver. Mr. Andrews has stated his willingness
to continue to serve if the Waiver is approved.                                 

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CONSEQUENCES OF THE WAIVER                                                      

If the Waiver is approved, no change will be made to the text of the Partnership
Agreement or the Shareholders Agreement. For a limited period of two (2) years, 
the application of the provision of the Shareholders Agreement that limits      
service on the MGP Board to persons 75 years of age or younger will be suspended
as applied to Mr. Andrews only. In March of 1999, on Mr. Andrews' 77th birthday,
the Waiver will expire and cease to be effective and the Andrews General Partner
Shareholder will be required to designate a new director to serve as such       
Shareholder's designee on the MGP Board.                                        

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL                                        
OWNERS AND MANAGEMENT                                                           

The following table sets forth certain information as of the Record Date with   
respect to the beneficial ownership of Units by (i) all persons known to the    
Partnership to be the beneficial owners of more than 5% of all outstanding      
Units, (ii) the Managing General Partner, (iii) Pope EGP, Inc., as the equity   
general partner of the Partnership (the "Equity General Partner," and together  
with the Managing General Partner, the "General Partners"), (iv) the directors  
and executive officers of the each of the General Partners, (v) the executive   
officers of the Partnership, and (vi) the Managing General Partner, the Equity  
General Partner, and all officers and directors of the General Partners and the 
Partnership as a group.                                                         

                                                                [Download Table]

            Name & Address of             Amount & Nature of        Percent
             Beneficial Owner           Beneficial Ownership (1)   Of Class
                                                                           
Greater than 5% holders:                                                   

    Private Capital Management, Inc.        250,274 (2)              27.7% 
    3003 Tamiami Trail North                                               
    Naples, FL  33940                                                      

    Emily T. Andrews                        111,420 (3)              12.3% 
    600 Montgomery Street, 35th Floor                                      
    San Francisco, CA  94111                                               

    Adolphus Andrews, Jr.                   111,420 (4)              12.3% 
    600 Montgomery Street, 35th Floor                                      
    San Francisco, CA  94111                                               

    Peter T. Pope                            62,869 (5)               7.0% 
    1500 SW First Avenue                                                   
    Portland, OR  97201                                                    

    James F. Miller                          61,000 (6)               6.7% 
    700 Park Avenue                                                        
    New York, NY  10021-4930                                               

    Peter B. Cannell & Co., Inc.             46,775 (7)               5.2% 
    919 Third Avenue                                                       
    New York, NY  10022                                                    

Other management holders:                                                  

     Pope EGP, Inc.                          10,800 (8)               1.2% 

    Pope MGP, Inc.                            1,200 (9)                 *  

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                                                                [Download Table]

        Name & Address of             Amount & Nature of        Percent
         Beneficial Owner           Beneficial Ownership (1)   Of Class
                                                                       
Douglas Norberg                          200(10)                  *    

Marco Vitulli                            200(11)                  *    

Thomas M. Ringo                          100(12)                  *    

(1) Each beneficial owner has sole voting and investment power unless otherwise 
indicated.                                                              

(2) Private Capital Management, Inc. (PCM) is an investment adviser shown       
registered under the Investment Act of 1940. Units are held in various  
  accounts managed by PCM which shares dispositive powers as to those units.

(3) Includes 218 units owned by her husband, Adolphus Andrews, Jr. as to which  
 she disclaims beneficial ownership. Also includes a total of 12,000 units
    held by Pope MGP, Inc. and Pope EGP, Inc., as to which she shares voting and
investment power.                                                       

(4) Includes 99,202 owned by his wife, Emily T. Andrews, units as to which he   
 shares investment and voting power. Also includes a total of 12,000 units
    held by Pope, MGP, Inc. and Pope, EGP, Inc., as to all of which he disclaims
beneficial ownership. See footnote (3).                                 

(5) Includes 10,684 units held in trust for his children. Also includes a total 
 of 12,000 units held by Pope MGP, Inc. and Pope EGP, Inc., as to which he
shares investment and voting power.                                     

(6) James F. Miller is an investment adviser shown registered under the         
 Investment Act of 1940. Units are held in various accounts managed by Mr.
Miller who shares dispositive powers as to those units.                 

(7) Peter B. Cannell & Co., Inc. (PBCC) is an investment adviser shown          
registered under the Investment Act of 1940. PBCC is a wholly-owned     
   subsidiary of Eberstadt Fleming, Inc., a broker-dealer registered under the
Securities Exchange Act of 1934.                                        

(8) Equity General Partner.                                                     

(9) Managing General Partner.                                                   

(10) Director, Pope MGP, Inc.                                                   

(11) Director, Pope MGP, Inc.                                                   

(12) Senior Vice President Finance & Client Relations, Pope MGP, Inc. & the     
Partnership                                                             

*   Less than 1%.                                                               

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 AVAILABLE INFORMATION

   The Partnership is subject to the information reporting requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in        
accordance therewith files reports, proxy statements and other information with 
the Securities and Exchange Commission (the "Commission"). Such reports, proxy  
statements and information may be inspected and copied at the public reference  
facilities maintained by the Commission at 450 Fifth Street, N.W., Washington   
D.C. 20549, and at certain regional offices of the Commission located at Suite  
1400, Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois    
60661, and 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such information can be obtained at prescribed rates from the Public Reference  
Section of the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. Such 
reports, proxy statements and information are also available at the Commission's
Web site (http://www.sec.gov).                                                  

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APPENDIX I

   AMENDMENTS TO PARTNERSHIP AGREEMENT

I.    Definitions.  The following new definitions shall be added to Article 1:  

"IPMB  Cumulative Commitment" means the cumulative sum of           

(1) Portfolio Management Costs expended; and            

(2) Portfolio Financial Commitments made                

     by the Partnership, directly or through the Portfolio Business Affiliate,
    in the conduct, management, and administration of the Investor Portfolio
   Management Business, net of cumulative IPMB Net Income not allocated to
MGP.                                                                

  "IPMB Net Income" means net income of the Portfolio Business Affiliate
  conducting the Investor Portfolio Management Business derived from the
   conduct of such business, as determined annually by deducting Portfolio
Management Costs from Portfolio Management Revenue.                 

  "Investment Entities" means new general or limited partnerships, joint
     ventures, limited liability companies, or other new entities to be formed
    with Investors to acquire, hold, and manage land, land-holding entities,
and related resources.                                              

"Investor Portfolio Management Business" means the business of the  
 Partnership, its Affiliates, and/or related businesses, involving the
    location, acquisition, management and/or development of land and related
resources directly or through acquisition of land-holding entities, 
 including, but not limited to, timberlands and lands with development
      potential for residential or commercial use, within and without the United
States, primarily or exclusively for the account of Investors.      

 "Investors" means one or more individuals and/or entities who are not
   otherwise Affiliates of the Partnership who shall provide funds for the
    location, acquisition, management and/or development of land and related
resources directly or through acquisition of land-holding entities, 
 including, but not limited to, timberlands and lands with development
      potential for residential or commercial use, within and without the United
States.                                                             

"Maximum Commitment Level" means Five Million Dollars ($5,000,000). 

      "Portfolio Business Affiliate" means one or more entities wholly-owned and
controlled, directly or indirectly, by the Partnership or by the    
Partnership and the Managing General Partner.                       

 "Portfolio Financial Commitments" means capital contributions, loans,
 guarantees, negative pledges, and other financial commitments made or
  incurred by the Partnership directly or through the Portfolio Business
    Affiliate in the conduct, management, and administration of the Investor
Portfolio Management Business.                                      

     "Portfolio Management Costs" means all of the costs and expenses incurred
    in the conduct, management, and administration of the Investor Portfolio
      Management Business, including the portions of shared or prorated expenses
allocated thereto, all of which shall include but not be limited to 
salaries, benefits and other compensation costs; professional fees  
(including accounting,                                              

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  legal, and consulting fees); and travel, public relations, marketing ,
 facilities, and equipment expenses incurred by the Partnership or the
Portfolio Business Affiliate in the conduct, management, and        
administration of the Investor Portfolio Management Business.       

   "Portfolio Management Revenue" means the fees payable by the Investment
Entities and Investors to the Portfolio Business Affiliate.         

II. Purpose of Partnership. Section 2.3 of the Partnership Agreement shall be   
amended by adding the following words immediately after the words "transplant   
nurseries,":                                                                    

            "participating in the Investor Portfolio Management Business through
the Portfolio Business Affiliate (but only to the extent that the   
Partnership's IPMB Cumulative Commitment does not exceed the Maximum
Commitment Level unless the Partnership shall have approved the     
 continuation of the Investment Portfolio Management Business, and the
 commitment of funds in excess of the Maximum Commitment Level, in the
manner provided in Section 6.8(A)),"                                

III. Compensation of the General Partnership. Section 4.1 (C) shall be deleted  
and replaced in its entirety by the following:                                  

                  (C) (1) The Partnership shall pay an annual fee to the General
            Partners of $150,000 to be allocated between the General Partners as
the General Partners shall agree.                       

               (2) Investor Portfolio Management Business. For
           management of the Investor Portfolio Management Business, MGP shall
            be entitled to participate in the IPMB Net Income in accordance with
the terms of Section 4.3 of this Agreement.             

IV. Net Income Sharing from Investor Portfolio Management Business. A new       
Section 4.3 shall be added to the Agreement as follows:                         

           4.3 Net Income Sharing From Investor Portfolio Management Business.
    MGP shall be entitled to share in the IPMB Net Income in an amount equal
  to the following percentages, to be applied incrementally in each full
fiscal year:                                                        

IPMB Net Income                 MGP Share               
---------------                 ---------               
up to $3 Million                    20%                 

$3-5 million                        30%                 

$5-7 million                        40%                 

More than $7 million                50%                 

V. Voting Rights to Authorize Expenditures in Excess of the Maximum Commitment  
Level. A new subsection (9) shall be added to Section 6.8(A) of the Agreement as
follows:                                                                        

                      (9) Approval or disapproval of the continuation of the
    Investor Portfolio Management Business and the commitment of
additional funds to enable the                          

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          Portfolio Business Affiliate to continue to conduct the Investment
          Portfolio Management Business after the IPMB Cumulative Commitment
shall have reached the Maximum Commitment Level.        

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 APPENDIX II

 Glossary of Defined Terms

     "Amendments" means amendments to the Partnership Agreement which would 1)
permit the Partnership to engage in the Investor Portfolio Management Business  
and 2) authorize a sliding-scale allocation of the Portfolio Business Net Income
between the New Partnership Subsidiary and the Managing General Partner.        

"BIP" means the Board Incentive Program.                            

"Board Committee" means a committee of the MGP Board composed of    
independent directors without any equity interest in the Managing General       
Partner.                                                                        

"Commission" means the Securities and Exchange Commission.          

"Equity General Partner" means the equity general partner of the    
Partnership, Pope EGP, Inc., a Delaware corporation.                            

 "Exchange Act" means the Securities Exchange Act of 1934, as amended.

"General Partners" means the Equity General Partner and the Managing
General Partner.                                                                

"Historical Business" means the Partnership's current operations.   

"Houlihan Lokey" means Houlihan Lokey Howard & Zukin.               

"IPMB Cumulative Commitment" means the cumulative sum of            

(1) Portfolio Management Costs expended; and                        

(2) Portfolio Financial Commitments made                            

by the Partnership, directly or through the Portfolio Business Affiliate, in the
conduct, management, and administration of the Investor Portfolio Management    
Business, net of cumulative IPMB Net Income not allocated to MGP.               

  "IPMB Net Income" means net income of the Portfolio Business Affiliate
conducting the Investor Portfolio Management Business derived from the conduct  
of such business, as determined annually by deducting Portfolio Management Costs
from Portfolio Management Revenue.                                              

  "Investment Entities" means new general or limited partnerships, joint
ventures, limited liability companies, or other new entities to be formed with  
Third Party Investors to acquire, hold, and manage land, land-holding entities, 
and related resources.                                                          

"Investor Portfolio Management Business" means the business of the  
Partnership, its Affiliates, and/or related businesses, involving the location, 
acquisition, management and/or development of land and related resources        
directly or through acquisition of land-holding entities, including, but not    
limited to, timberlands and lands with development potential for residential or 
commercial use, within and without the United States, primarily or exclusively  
for the account of Third Party Investors.                                       

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"IPMB Income Allocation" means the annual incremental, sliding-scale
allocation of the IPMB Net Income between the New Partnership Subsidiary and the
Managing General Partner.                                                       

     "Limited Partners" means holders of record of Limited Partners' Units who
have previously been admitted as Limited Partners pursuant to the Partnership   
Agreement.                                                                      

"Majority Interest" means Partners of Record holding more than fifty
percent (50%) of the Units held by all Partners of Record.                      

"Managing General Partner" means the Managing General Partner of the
Partnership (Pope MGP, Inc.).                                                   

"Maximum Commitment Level" means Five Million Dollars ($5,000,000). 

"MGP" means Pope MGP, Inc., a Delaware corporation.                 

     "MGP Board" means the Board of Directors of the Managing General Partner.

    "MGP Allocation" means the share of the IPMB Net Revenue to be allocated
to the Managing General Partner pursuant to the Amendments.                     

"MIP" means the Management Incentive Program.                       

   "New Partnership Subsidiary" means a new subsidiary of the Partnership.

"ORMI" means ORM, Inc., a new corporate subsidiary to hold the      
Partnership's member interest in ORM/LLC.                                       

"ORMI Net Cash Flow" means the cash flow from the Investor Portfolio
Management Business distributed to ORMI.                                        

 "ORM/LLC" means Olympic Resource Management LLC, a Washington limited
liability company.                                                              

"P&T" means Pope & Talbot, Inc.                                     

"Partnership" means Pope Resources, A Delaware Limited Partnership. 

  "Partnership Agreement" means the Limited Partnership Agreement of the
Partnership as dated November 7, 1985 and as amended December 16, 1986.         
      "Partnership Meeting" means the meeting of the Partnership held on Friday,
March 14, 1997, at 1:00 p.m., local time, at the Four Seasons Olympic Hotel,    
411 University Street, Seattle, Washington.                                     
      "Portfolio Business Affiliate" means one or more entities wholly-owned and
controlled, directly or indirectly, by the Partnership or by the Partnership and
the Managing General Partner.                                                   

 "Portfolio Financial Commitments" means capital contributions, loans,
guarantees, negative pledges, and other financial commitments made or incurred  
by the Partnership directly or through the Portfolio Business Affiliate in the  
conduct, management, and administration of the Investor Portfolio Management    
Business.                                                                       

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     "Portfolio Management Costs" means all of the costs and expenses incurred
in the conduct, management, and administration of the Investor Portfolio        
Management Business, including the portions of shared or prorated expenses      
allocated thereto, all of which shall include but not be limited to salaries,   
benefits and other compensation costs; professional fees (including accounting, 
legal, and consulting fees); and travel, public relations, marketing ,          
facilities, and equipment expenses incurred by the Partnership or the Portfolio 
Business Affiliate in the conduct, management, and administration of the        
Investor Portfolio Management Business.                                         

   "Portfolio Management Revenue" means the fees payable by the Investment
Entities and Third Party Investors to the Portfolio Business Affiliate.         

    "Record Date" means the record date for determining Limited Partners who
are entitled to notice of and to vote at the Partnership Meeting (close of      
business on January 31, 1997).                                                  

     "Shareholders Agreement" means the Shareholders Agreement entered into in
1985 among the Partnership, P&T, Pope EGP, Inc. (the equity general partner of  
the Partnership), the Shareholders of the Managing General Partner, and the     
members of the MGP Board.                                                       

 "Third Party Investors" means individuals and/or entities who are not
Affiliates of the Partnership beyond involvement in the Investor Portfolio      
Management Business.                                                            

    "Waiver" means waiver for two years of an age-related board of directors
eligibility requirement, as set forth in the Shareholders Agreement of the      
Managing General Partner, to Adolphus Andrews, Jr.                              

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APPENDIX III

 LIMITED LIABILITY COMPANY AGREEMENT

OF

 OLYMPIC RESOURCE MANAGEMENT LLC

(A WASHINGTON LIMITED LIABILITY COMPANY)

 DATED AND EFFECTIVE

 AS OF

____________________, 1997

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 TABLE OF CONTENTS

                                                                [Download Table]
                                                                          
ARTICLE 1 -- FORMATION................................................  1 
      1.1   Certificate of Formation..................................  1 
      1.2   Name......................................................  1 
      1.3   Purpose...................................................  1 
      1.4   Term......................................................  1 
      1.5   Principal Place of Business...............................  1 
      1.6   Registered Office and Registered Agent....................  1 

ARTICLE 2 -- DEFINITIONS..............................................  1 

ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS.....................  3 
      3.1   Members' Names and Addresses..............................  3 
      3.2   Additional Members........................................  3 
      3.3   Initial Contributions.....................................  3 
      3.4   Additional Contributions..................................  4 
      3.5   No Interest On or Withdrawal of Capital...................  4 
      3.6   Capital Accounts..........................................  4 
      3.7   Restriction on Withdrawal or Transfer of Member's Interest  4 

ARTICLE 4 -- MEETINGS OF MEMBERS......................................  4 
      4.1   Meetings..................................................  4 
      4.2   Place of Meetings.........................................  4 
      4.3   Notice of Meetings........................................  4 
      4.4   Record Date...............................................  5 
      4.5   Quorum....................................................  5 
      4.6   Manner of Acting..........................................  5 
      4.7   Proxies...................................................  5 
      4.8   Waiver of Notice..........................................  5 
      4.9   Action Without Meeting....................................  5 
      4.10  Meetings by Telephone, Etc................................  5 

ARTICLE 5 -- MANAGEMENT...............................................  5 
      5.1   Management................................................  5 
      5.2   Major Decisions...........................................  6 
      5.3   Agents; Administrative Functions..........................  6 
      5.4   Right to Rely on the Managing Member......................  6 
      5.5   Removal of Managing Member................................  6 
      5.6   Redemption of MGP's Interest upon Dissociation............  6 

ARTICLE 6 -- ACCOUNTING AND RECORDS...................................  7 
      6.1   Books of Account..........................................  7 
      6.2   Fiscal Year...............................................  7 
      6.3   Accounting Reports........................................  7 
      6.4   Tax Returns...............................................  7 
      6.5   Tax Matters Member........................................  7 

ARTICLE 7 -- ALLOCATIONS AND DISTRIBUTIONS............................  8 
      7.1   Allocation of Net Profit and Loss - In General............  8 
      7.2   Special Allocations.......................................  8 

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                                                                [Download Table]
                                                                          
      7.3   Corrective Allocations....................................  9 
      7.4   Other Allocation Rules....................................  9 
      7.5   Determination of Net Profit or Loss....................... 10 
      7.6   Mandatory Tax Allocations Under Code Section 704(c)....... 10 
      7.7   Distributions............................................. 11 

ARTICLE 8  -- DISSOLUTION AND LIQUIDATION............................. 11 
      8.1   Events of Dissolution..................................... 11 
      8.2   Liquidation Upon Dissolution and Winding Up............... 11 
      8.3   No Obligation to Restore Negative Capital Account Balance     
            on Liquidation............................................ 11 

ARTICLE 9 -- LIMITATION OF LIABILITY; INDEMNIFICATION................. 11 
      9.1   Limitation of Liability................................... 11 
      9.2   Indemnification........................................... 12 

ARTICLE 10 -- MAXIMUM FINANCIAL COMMITMENT............................ 12 

ARTICLE  11 -- MISCELLANEOUS.......................................... 12 
      11.1  Notices................................................... 12 
      11.2  Governing Law............................................. 12 
      11.3  Amendments................................................ 13 
      11.4  Construction.............................................. 13 
      11.5  Headings.................................................. 13 
      11.6  Waivers................................................... 13 
      11.7  Remedies.................................................. 13 
      11.8  Severability.............................................. 13 
      11.9  Heirs, Successors and Assigns............................. 13 
      11.10 Creditors................................................. 13 
      11.11 Counterparts.............................................. 13 

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 LIMITED LIABILITY COMPANY AGREEMENT
OF
 OLYMPIC RESOURCE MANAGEMENT LLC

(A WASHINGTON LIMITED LIABILITY COMPANY)

     THIS LIMITED LIABILITY COMPANY AGREEMENT, dated the ____ day of ________,
1997, is made and entered into by and between Pope MGP, Inc., a Delaware        
corporation ("MGP") and ORM, Inc., a Washington corporation ("ORMI").           

ARTICLE 1 -- FORMATION

 1.1 CERTIFICATE OF FORMATION. A Certificate of Formation was filed on
_______________, 1997, stated to be effective _______________, 1997, the date on
which the term of the Company shall begin.                                      

    1.2 NAME. The name of the limited liability company is "Olympic Resource
Management LLC."                                                                

 1.3 PURPOSE. The principal purpose and business of the Company is the
location, acquisition, management and/or development of land (or interests in   
entities with land assets) and related resources, including, but not limited to,
timberlands and lands with development potential for residential or commercial  
use, within and without the United States, primarily or exclusively for the     
account of Investors, and to exercise all other powers necessary or reasonably  
connected or incidental to such purpose and business that may be legally        
exercised by the Company.                                                       

   1.4 TERM. The term of the Company shall continue for a period of thirty
years from the effective date of the Certificate of Formation, unless the       
Company is earlier dissolved in accordance with Article 8.                      

   1.5 PRINCIPAL PLACE OF BUSINESS. The principal place of business of the
Company shall be 19245 Tenth Avenue N.E., Poulsbo, Washington 98370. The        
Managing Member may relocate the principal place of business or establish       
additional offices from time to time.                                           

1.6 REGISTERED OFFICE AND REGISTERED AGENT. The Company's initial   
registered agent and the address of its initial registered office are as        
follows:                                                                        

Name                                Address             
----                                -------             
Craig L. Jones                19245 Tenth Avenue N.E.   
                              Poulsbo, Washington  98370

The registered office and registered agent may be changed by the Managing Member
from time to time by filing a statement of change in accordance with RCW        
25.15.020.                                                                      

ARTICLE 2 -- DEFINITIONS

The following terms used in this Agreement shall have the following 
meanings (unless otherwise expressly provided herein):                          

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     "ACT" means the Washington Limited Liability Company Act (RCW Ch. 25.15).

     "AGREEMENT" means this limited liability company agreement, as originally
executed and as amended from time to time.                                      

"ALLOCABLE INCOME" means the IPMB Net Income for a fiscal period,   
increased by amounts accrued under the Company's Management Incentive Plan for  
such fiscal period.                                                             

"CAPITAL ACCOUNT" has the meaning defined in Section 3.6.           

"CODE" means the Internal Revenue Code of 1986, as amended, or      
corresponding provisions of subsequent superseding federal revenue laws.        

     "COMPANY" means the limited liability company governed by this Agreement.

    "DEFICIT CAPITAL ACCOUNT" means, with respect to any Member, the deficit
balance, if any, in such Member's Capital Account as of the end of the taxable  
year, after giving effect to the following adjustments:                         

         (i) credit to such Capital Account any amount that such Member is
obligated to restore to the Company under Regulation Section                    
1.704-1(b)(2)(ii)(c), as well as any addition thereto pursuant to the next to   
last sentences of Regulation Sections 1.704-2(g)(1) and (i)(5); and             

            (ii) debit to such Capital Account the items described in Regulation
Section 1.704- 1(b)(2)(ii)(d)(4), (5) and (6).                                  

This definition is intended to comply with the provisions of Regulation Sections
1.704-1(b)(2)(ii)(d) and 1.704-2, and shall be interpreted consistently with    
those provisions.                                                               

     "EVENT OF DISSOCIATION" means, with respect to MGP, any one of the events
described in Section 8.1(c).                                                    

  "INVESTMENT ENTITIES" means new general or limited partnerships, joint
ventures, limited liability companies, or other new entities to be formed with  
one or more Investors to acquire, hold, and manage land, land-holding entities, 
and related resources.                                                          

 "INVESTORS" means one or more individuals and/or entities who are not
otherwise affiliates of the Company or its Members who shall provide funds for  
the location, acquisition, management and/or development of land and related    
resources directly or through acquisition of land-holding entities, including,  
but not limited to, timberlands and lands with development potential for        
residential or commercial use, within and without the United States.            

      "INVESTOR PORTFOLIO MANAGEMENT BUSINESS" means the business of the Company
involving the location, acquisition, management and/or development of land and  
related resources directly or through acquisition of land-holding entities,     
including, but not limited to, timberlands and lands with development potential 
for residential or commercial use, within and without the United States,        
primarily or exclusively for the account of Investors.                          

"IPMB CUMULATIVE COMMITMENT" means the cumulative sum of            

(1) Portfolio Management Costs expended; and            

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(2) Portfolio Financial Commitments made                

by the Partnership, directly or through ORMI and/or the Company, in the conduct,
management, and administration of the Investor Portfolio Management Business,   
net of cumulative IPMB Net Income not allocated to the Managing Member.         

     "IPMB NET INCOME" means that portion of the net profit of the Company, as
determined pursuant to Section 7.5, derived from the Investor Portfolio         
Management Business, as determined by deducting Portfolio Management Costs from 
Portfolio Management Revenue.                                                   

     "MANAGEMENT INCENTIVE PROGRAM" means the incentive program implemented to
provide financial incentives to the management group of the Company that are    
directly aligned with the goals and best interests of the Company, which        
incentive program is adopted by the Members pursuant to Section 5.2.            

   "MANAGING MEMBER" means MGP and any successor managing member appointed
pursuant to Section 8.1(c).                                                     

"MAXIMUM COMMITMENT LEVEL" means Five Million Dollars ($5,000,000). 

    "MEMBER" means each of MGP and ORMI and each person who may hereafter be
admitted to the Company as an additional or substituted Member and who executes 
a counterpart of this Agreement.                                                

"PARTNERSHIP" means Pope Resources, A Delaware Limited Partnership. 

  "PARTNERSHIP AGREEMENT" means the Limited Partnership Agreement of the
Partnership, as it may be amended from time to time.                            

 "PORTFOLIO FINANCIAL COMMITMENTS" means capital contributions, loans,
guarantees, negative pledges, and other financial commitments made or incurred  
by the Partnership directly or through ORMI and/or the Company in the conduct,  
management, and administration of the Investor Portfolio Management Business.   

      "PORTFOLIO MANAGEMENT COSTS" means the costs and expenses of carrying out,
managing, and administering the Investor Portfolio Management Business,         
including the portions of shared or prorated expenses allocated to the Investor 
Portfolio Management Business, which shall include but not be limited to        
salaries, benefits and other compensation costs, professional fees (including   
accounting, legal, and consulting fees), travel, public relations, marketing,   
facilities, and equipment expenses properly allocable thereto.                  

  "PORTFOLIO MANAGEMENT REVENUE" means the fees payable by Investors and
Investment Entities to the Company.                                             

      "REGULATION" includes temporary and final Treasury regulations promulgated
under the Code and the corresponding sections of any regulations subsequently   
issued that amend or supersede such regulations.                                

 ARTICLE 3 -- MEMBERS, CONTRIBUTIONS AND INTERESTS

    3.1 MEMBERS' NAMES AND ADDRESSES. The names and addresses of the Members
are set forth on attached Schedule 1, as amended from time to time.             

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      3.2 ADDITIONAL MEMBERS. Additional Members shall be admitted only upon the
consent of all Members.                                                         

3.3 INITIAL CONTRIBUTIONS.                                          

       3.3.1 MGP. MGP shall receive its interest in the Company, which
represents an interest in the future profits of the Company only, and not a     
capital interest in the Company of any kind, in consideration for services to be
rendered to the Company in MGP's capacity as Managing Member. MGP shall not be  
required to make an initial capital contribution to the Company, and MGP's      
initial Capital Account balance shall be zero (0).                              

    3.3.2 ORMI. Upon the call of the Managing Member, ORMI shall
contribute to the capital of the Company an aggregate amount not to exceed Two  
Million Dollars ($2,000,000).                                                   

     3.4 ADDITIONAL CONTRIBUTIONS. Subject to the following provisions of this
Section 3.4 and the provisions of Section 5.2, the Managing Member shall have   
the right to call for additional capital contributions when and as MGP          
determines additional capital is necessary or desirable. MGP shall have no      
obligation to contribute capital to the Company. ORMI shall not be required to  
contribute capital in excess of its initial contribution under Section 3.3.2    
unless the call for additional capital contributions is approved in accordance  
with Section 5.2.                                                               

     3.5 NO INTEREST ON OR WITHDRAWAL OF CAPITAL. No interest shall be paid on
capital contributions and no Member shall have the right to withdraw its capital
contribution.                                                                   

3.6 CAPITAL ACCOUNTS. A capital account ("Capital Account") shall be
determined and maintained for each Member in accordance with the principles of  
Regulation Section 1.704-1(b) at all times throughout the full term of the      
Company. In the event of a permitted sale or assignment of all or any part of a 
Member's interest in the Company, the Capital Account of the transferor shall   
become the Capital Account of the transferee to the extent it relates to the    
transferred Company interest.                                                   

   In the discretion of the Managing Member, the book value of all Company
properties may be adjusted to equal their respective gross fair market values,  
as determined by the Managing Member as of the following times: (1) in          
connection with the acquisition of an interest in the Company by a new or       
existing Member for more than a de minimis capital contribution; (2) in         
connection with the liquidation of the Company as defined in Regulation Section 
1.704-(1)(b)(2)(ii)(g); or (3) in connection with a more than de minimis        
distribution to a retiring or a continuing Member as consideration for all or a 
portion of its interest in the Company. In the event of a revaluation of any    
Company assets hereunder, the Capital Accounts of the Members shall be adjusted,
including continuing adjustments for depreciation, to the extent provided in    
Regulation Section 1.704-(1)(b)(2)(iv)(f).                                      

3.7 RESTRICTION ON WITHDRAWAL OR TRANSFER OF MEMBER'S INTEREST.     

     3.7.1 RESTRICTIONS ON WITHDRAWAL. No Member shall voluntarily
withdraw from the Company without the consent of all the other Members. A       
withdrawal in violation of this Section 3.7.1 shall constitute a breach of this 
Agreement for which the Company and other Members shall have the remedies       
provided under applicable law.                                                  

          3.7.2 RESTRICTIONS ON TRANSFER OF A MEMBER'S INTEREST. Without the
consent of the non-transferring Members, which consent may be withheld for any  
reason or for no reason, no Member shall assign, encumber, sell or otherwise    
transfer all or any portion of the Member's interest in the Company, or enter   
into any agreement or transaction as a result of which any person shall acquire 
an economic or beneficial interest in the Company or the Member's interest in   
the Company.                                                                    

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ARTICLE 4 -- MEETINGS OF MEMBERS

    4.1 MEETINGS. Meetings of Members are not required, but may be called by
any Member. No business shall be transacted at any meeting of Members except as 
is specified in the notice calling such meeting.                                

     4.2 PLACE OF MEETINGS. The Members may designate any place, either within
or outside the State of Washington, as the place of meeting for any meeting of  
the Members. If no designation is made, the place of meeting shall be the       
principal office of the Company specified in Section 1.5.                       

     4.3 NOTICE OF MEETINGS. Written notice stating the place, day and time of
the meeting and the purpose for which the meeting is called shall be delivered  
not less than ten (10) nor more than fifty (50) days before the date of the     
meeting, either personally or by mail, by or at the direction of the Members    
calling the meeting, to each Member entitled to vote at such meeting. If mailed,
such notice shall be deemed to be delivered three (3) calendar days after being 
deposited in the United States Mail, addressed to the Member at its address as  
it appears on the records of the Company, postage prepaid.                      

      4.4 RECORD DATE. For the purpose of determining Members entitled to notice
of or to vote at any meeting of Members or any adjournment thereof, or Members  
entitled to any distribution, the date on which notice of the meeting is first  
delivered or mailed, or the date on which a resolution declaring such           
distribution is adopted, as the case may be, shall be the record date for such  
determination of Members. When a determination of Members entitled to vote at   
any meeting of Members has been made as provided in this Section 4.4, such      
determination shall apply to any adjournment thereof.                           

    4.5 QUORUM. The presence of all of the Members, represented in person or
by proxy, entitled to vote on the issues or actions to be considered at the     
meeting shall be required to constitute a quorum at any meeting of Members. In  
the absence of a quorum at any such meeting, a majority of the Members so       
represented may adjourn the meeting from time to time for a period not to exceed
sixty (60) days without further notice. However, if the adjournment is for more 
than sixty (60) days, or if after the adjournment a new record date is fixed for
the adjourned meeting, notice of the adjourned meeting shall be given to each   
Member. At such adjourned meeting at which a quorum shall be present or         
represented, any business may be transacted which might have been transacted at 
the meeting as originally noticed.                                              

   4.6 MANNER OF ACTING. If a quorum is present, the unanimous vote of the
Members shall be the act of the Members, except as otherwise provided in        
Sections 3.7 and 8.1.                                                           

      4.7 PROXIES. At all meetings of Members, a Member may vote in person or by
proxy executed in writing by the Member or by the Member's attorney-in-fact or  
agent appointed in writing. Such proxy or appointment shall be filed with the   
Company before or at the time of the meeting. No proxy or appointment shall be  
valid after eleven (11) months from the date of its execution, unless otherwise 
provided in the proxy or appointment.                                           

4.8 WAIVER OF NOTICE. When any notice is required to be given to any
Member, a waiver thereof in writing signed by the Member entitled to such       
notice, whether before, at, or after the time stated therein, shall be          
equivalent to the giving of such notice. Attendance at a meeting shall          
constitute waiver of notice of the meeting unless the Member at the beginning of
the meeting objects to holding the meeting or transacting business at the       
meeting.                                                                        

    4.9 ACTION WITHOUT MEETING. Any action required or permitted to be taken
by the Members at a meeting may be taken without a meeting if a consent in      
writing, describing the action taken, is signed by all of the Members entitled  
to vote upon such action. Such action shall be included in the minutes of the   
Company's meetings.                                                             

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   4.10 MEETINGS BY TELEPHONE, ETC. Meetings of the Members may be held by
conference telephone or by any other means of communication by which all        
participants can hear each other simultaneously during the meeting, and such    
participation shall constitute presence in person at the meeting.               

 ARTICLE 5 -- MANAGEMENT

    5.1 MANAGEMENT. The business and affairs of the Company shall be managed
by the Managing Member. MGP shall be the Managing Member and shall serve in that
capacity throughout the term of the Company, unless and until MGP is the subject
of an Event of Dissociation. Without the prior written consent of all of the    
other Members of the Company, MGP shall not resign or withdraw as Managing      
Member. Except as provided in Section 5.2 or otherwise expressly provided in    
this Agreement, the Managing Member shall, to the full extent permitted by the  
Act, have complete authority, power and discretion to manage and control the    
business, affairs and properties of the Company, to make all decisions regarding
those matters and to perform any and all other acts or activities customary or  
incident to the management of the Company's business.                           

      Unless authorized to do so by this Agreement or by the Managing Member, no
Member, employee or other agent of the Company shall have any power or authority
to bind the Company in any way, to pledge its credit or to render it liable for 
any purpose.                                                                    

5.2 MAJOR DECISIONS. Major Decisions (as hereinafter defined) of the
Company shall be made only in accordance with this Section 5.2. Neither the     
Managing Member nor any other Member shall have authority to do any of the      
following ("Major Decisions") without the unanimous approval of the Members:    

          (a) approval of a call for additional capital contributions by the
Managing Member pursuant to Section 3.4;                                        

(b) approval of the sale or other disposition of all or 
substantially all of the assets of the Company (other than in the ordinary      
course of business);                                                            

            (c) adoption of the Management Incentive Program and the approval of
any amendments thereto; and                                                     

         (d) approval of the amount and timing of any distributions by the
Company to its Members pursuant to Section 7.7.                                 

Major Decisions shall be made at meetings of the Members called and held in     
accordance with Article 4.                                                      

    5.3 AGENTS; ADMINISTRATIVE FUNCTIONS. The Managing Member may authorize,
in writing, one or more agents or officers (each, an "Administrator") to        
implement the management decisions of the Company and to handle the day-to-day  
operational matters of the Company. Such authority may be general or limited to 
specific instances. The Managing Member shall determine the duties,             
compensation, term of service and other matters relating to any Administrator.  
The Managing Member may remove an Administrator at any time. The Administrator's
expenses incurred on behalf of the Company shall be paid by, or reimbursed by,  
the Company, subject to compliance with any rules, procedures, and requirements 
established by the Managing Member.                                             

 5.4 RIGHT TO RELY ON THE MANAGING MEMBER. Any person dealing with the
Company may rely (without duty of further inquiry) upon a certificate signed by 
the Managing Member as to the identity and authority of the Managing Member or  
other person to act on behalf of the Company.                                   

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    5.5 REMOVAL OF MANAGING MEMBER. MGP may be removed as Managing Member by
the affirmative vote of all of the other Members under the circumstances set    
forth in Section 5.5.1 or Section 5.5.2 below.                                  

          5.5.1 REMOVAL FOR CAUSE. MGP may be removed as Managing Member for
"cause." For this purpose, "cause" shall mean (a) the material, willful breach  
of this Agreement by MGP or (b) the taking of actions, or the failure to act, by
MGP that constitutes the material breach by MGP of the fiduciary duties it owes 
to the other Members and the Company.                                           

  5.5.2 REMOVAL FOLLOWING THE OCCURRENCE OF EVENTS UNDER THE
PARTNERSHIP AGREEMENT. MGP may be removed as Managing Member following the      
removal, resignation, or withdrawal of MGP as the Managing General Partner of   
the Partnership in accordance with the terms of Article 16 of the Partnership   
Agreement.                                                                      

      5.6 REDEMPTION OF MGP'S INTEREST UPON DISSOCIATION. Upon the occurrence by
MGP of an Event of Dissociation, the Company shall be dissolved and liquidated  
in accordance with Section 8.2 unless the business of the Company is continued  
pursuant to Section 8.1(c). If the business of the Company is continued pursuant
to Section 8.1(c), the Company shall redeem MGP's membership interest in the    
Company upon the following terms. Within one hundred twenty (120) days following
the Event of Dissociation, the Company shall make an initial payment to MGP in  
redemption of its membership interest in the Company in an amount equal to the  
Capital Account balance of MGP as of the date of such Event of Dissociation,    
calculated following an interim closing of the Company's books effective as of  
date of the Event of Dissociation. In addition to the foregoing initial payment,
the Company shall pay to MGP an amount equal to that portion of the Allocable   
Income otherwise allocable to the successor Managing Member pursuant to Section 
7.1.1(b) that is attributable to any property acquisition fees (net of properly 
allocable direct and indirect costs of the Company) resulting from the closing  
of executory property acquisition contracts in effect prior to the date of the  
Event of Dissociation. Any such additional payment shall be made by the Company 
to MGP within ninety (90) days following the close of the Company's taxable year
in which the closing of such executory contract takes place. If the business of 
the Company is continued following the occurrence of an Event of Dissociation   
with respect to MGP, from and after the date of the date of such Event of       
Dissociation MGP shall have no interest in the Company except as provided in    
this Section 5.6.                                                               

ARTICLE 6 -- ACCOUNTING AND RECORDS 

    6.1 BOOKS OF ACCOUNT. The Company shall maintain records and accounts of
all of its operations and expenditures. At a minimum the Company shall keep at  
its principal place of business the following records:                          

         (a) a current list and past list, setting forth the full name and
last known mailing address of each Member and Managing Member;                  

     (b) a copy of the Certificate of Formation and all amendments
thereto;                                                                        

          (c) copies of this Agreement and all amendments hereto, and a copy
of any prior limited liability company agreements no longer in effect;          

         (d) copies of the Company's federal, state, and local tax returns
and reports, if any, for the three (3) most recent years;                       

            (e) minutes of every meeting of the Members, if any, and any written
consents obtained from Members for actions taken by Members without a meeting;  
and                                                                             

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          (f) copies of the Company's financial statements for the three (3)
most recent years.                                                              

 6.2 FISCAL YEAR. The fiscal year of the Company shall be the calendar
year.                                                                           

  6.3 ACCOUNTING REPORTS. Within forty-five (45) days after the close of
each fiscal year, each Member shall receive an audited financial report of the  
activities of the Company for the preceding fiscal year, including the balance  
sheet of the Company as of the end of such year and a statement of income or    
loss for such year.                                                             

   6.4 TAX RETURNS. The Company shall prepare and timely file all required
federal and state income tax returns. Within forty-five (45) days after the end 
of each fiscal year, each Member shall be furnished a statement suitable for use
in the preparation of the Member's income tax return.                           

6.5 TAX MATTERS MEMBER. For purposes of the Code and any comparable 
provisions of state law, the "Tax Matters Partner" shall be MGP, or such other  
Member as the Members shall determine from time to time, by unanimous agreement 
of the Members.                                                                 

ARTICLE 7 -- ALLOCATIONS AND DISTRIBUTIONS

7.1 ALLOCATION OF NET PROFIT AND LOSS - IN GENERAL.                 

          7.1.1 ALLOCATION OF NET PROFIT OR LOSS. After giving effect to the
special allocations set forth in Sections 7.2 and 7.3, the net profit of the    
Company for any fiscal year shall be allocated between the Members in accordance
with the following formula:                                                     

        (a) ORMI ALLOCABLE INCOME ALLOCATION. ORMI shall be allocated an
amount of net profit equal to the following percentages (applied on an          
incremental basis) of the Company's Allocable Income for the fiscal year:       

Allocable Income             ORMI Percentage
----------------             ---------------
$0-3 Million                        80%     

$3-5 Million                        70%     

$5-7 Million                        60%     

Over $7 Million                     50%     

           (b) MGP ALLOCABLE INCOME ALLOCATION. All remaining Allocable Income
of the Company for the fiscal year shall be allocated to MGP.                   

      (c) ORMI RESIDUAL NET PROFIT ALLOCATION. The net profit of the
Company, if any, that is not properly included in Allocable Income shall be     
allocated entirely to ORMI.                                                     

7.1.2 ALLOCATION OF NET LOSS.                           

                (a) IN GENERAL. The net loss of the Company, if any, for any
fiscal year shall be allocated between the Members in accordance with their     
respective capital contributions to the Company.                                

                 (b) LIMITATION. The net loss allocated to each Member for any
Company fiscal year pursuant to Section 7.1.2(a) and this Section 7.1.2(b) shall
not exceed the maximum amount of net loss                                       

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that can be so allocated without causing such Member to have a Deficit Capital  
Account at the end of the fiscal year. All net losses in excess of the          
limitation set forth in this Section 7.1.2(b) shall be allocated to the other   
Members who do not have Deficit Capital Accounts in proportion to their         
respective capital contributions to the Company.                                

    7.2 SPECIAL ALLOCATIONS. The following special allocations shall be made
for any fiscal year of the Company in the following order:                      

    7.2.1 MINIMUM GAIN CHARGEBACK. If there is a decrease in the
Company's "partnership minimum gain," as defined in and determined under        
Regulation Sections 1.704-2(b)(2) and 1.704-2(d), the minimum gain chargeback   
provisions of Regulation Section 1.704-2(f), which are hereby incorporated into 
this Agreement by this reference, shall be applied.                             

           7.2.2 MEMBER MINIMUM GAIN CHARGEBACK. If there is a decrease in any
Member's share of "partner nonrecourse debt minimum gain," as defined in and    
determined under Regulation Section 1.704-2(i), the partner nonrecourse debt    
minimum gain chargeback provisions of Regulation Section 1.704-2(i)(4), which   
are hereby incorporated into this Agreement by this reference, shall be applied.

   7.2.3 QUALIFIED INCOME OFFSET. In the event that any Member
unexpectedly receives any adjustments, allocations, or distributions described  
in Regulation Sections 1.704-1(b)(2)(ii)(d)(4), (5) or (6), items of Company    
income and gain shall be specially allocated to such Member in accordance with  
Regulation Section 1.704-(1)(b)(2)(ii)(d).                                      

          7.2.4 NONRECOURSE DEDUCTIONS. "Nonrecourse deductions," as defined
in and determined under Regulation Sections 1.704-2(b)(1) and (c), shall be     
allocated among the Members in accordance with Section 7.1.2(a).                

 7.2.5 MEMBER NONRECOURSE DEDUCTIONS. "Partner nonrecourse
deductions," as defined in and determined under Regulation Sections             
1.704-2(i)(1) and (2), shall be specially allocated among the Members in        
accordance with Regulation Section 1.704-2(i).                                  

     7.3 CORRECTIVE ALLOCATIONS. The allocations set forth in Section 7.1.2(b)
and Section 7.2 are intended to comply with certain regulatory requirements     
under Code Section 704(b). The Members intend that, to the extent possible, all 
allocations made pursuant to such Sections will, over the term of the Company,  
be offset either with other allocations pursuant to Section 7.2 or with special 
allocations of other items of Company income, gain, loss, or deduction pursuant 
to this Section 7.3. Accordingly, the Managing Member is hereby authorized and  
directed to make offsetting allocations of Company income, gain, loss or        
deduction under this Section 7.3 in whatever manner the Managing Member         
determines is appropriate so that, after such offsetting special allocations are
made (and taking into account the reasonably anticipated future allocations of  
income and gain pursuant to Sections 7.2.1 and 7.2.2), the Capital Accounts of  
the Members are, to the extent possible, equal to the Capital Accounts each     
would have if the provisions of Section 7.2 were not contained in this Agreement
and all income, gain, loss and deduction of the Company were instead allocated  
pursuant to Section 7.1 and Section 7.1.2(a).                                   

7.4 OTHER ALLOCATION RULES.                                         

          7.4.1 GENERAL. Except as otherwise provided in this Agreement, all
items of Company income, gain, loss, deduction, credit, and any other           
allocations not otherwise provided for shall be divided among the Members in    
accordance with their Percentage Interests, or as otherwise may be required     
under the Code and the Regulations thereunder.                                  

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           7.4.2 ALLOCATION OF RECAPTURE ITEMS. In making any allocation among
the Members of income or gain from the sale or other disposition of a Company   
asset, the ordinary income portion, if any, of such income and gain resulting   
from the recapture of cost recovery or other deductions shall be allocated among
those Members who were previously allocated (or whose predecessors-in-interest  
were previously allocated) the cost recovery deductions or other deductions     
resulting in the recapture items, in proportion to the amount of such cost      
recovery deductions or other deductions previously allocated to them.           

      7.4.3 ALLOCATION OF EXCESS NONRECOURSE LIABILITIES. Solely for
purposes of determining a Member's proportionate share of the "excess           
nonrecourse liabilities" of the Company within the meaning of Regulation Section
1.752-3(a)(3), the Members' interests in the Company's profits shall be as set  
forth in Section 7.1.1.                                                         

            7.4.4 ALLOCATIONS IN CONNECTION WITH VARYING INTERESTS. If, during a
Company fiscal year, there is (i) a permitted transfer of all or a part of a    
Member's interest in the Company, or (ii) the admission or withdrawal of a      
Member, net profit, net loss, each item thereof, and all other tax items of the 
Company for such fiscal year shall be divided and allocated among the Members by
taking into account their varying interests during such fiscal year in          
accordance with Code Section 706(d) and using any conventions permitted by law  
and selected by the Managing Member.                                            

7.5 DETERMINATION OF NET PROFIT OR LOSS.                            

           7.5.1 COMPUTATION OF NET PROFIT OR LOSS. The net profit or net loss
of the Company, for each fiscal year or other period, shall be an amount equal  
to the Company's taxable income or loss for such period, determined in          
accordance with Code Section 703(a) (and, for this purpose, all items of income,
gain, loss or deduction required to be stated separately pursuant to Code       
Section 703(a)(1), including income and gain exempt from federal income tax,    
shall be included in taxable income or loss).                                   

          7.5.2 ADJUSTMENTS TO NET PROFIT OR LOSS. For purposes of computing
taxable income or loss on the disposition of an item of Company property or for 
purposes of determining the cost recovery, depreciation, or amortization        
deduction with respect to any property, the Company shall use such property's   
book value determined in accordance with Regulation Section 1.704-1(b).         

            7.5.3 ITEMS SPECIALLY ALLOCATED. Notwithstanding any other provision
of this Section 7.5, any items that are specially allocated pursuant to Section 
7.2 or Section 7.3 shall not be taken into account in computing the Company's   
net profit or net loss.                                                         

  7.6 MANDATORY TAX ALLOCATIONS UNDER CODE SECTION 704(c). In accordance
with Code Section 704(c) and Regulation Section 1.704-3, income, gain, loss and 
deduction with respect to any property contributed to the capital of the Company
shall, solely for tax purposes, be allocated among the Members so as to take    
account of any variation between the adjusted basis of such property to the     
Company for federal income tax purposes and its initial book value computed in  
accordance with Section 7.5.2. Prior to the contribution of any property to the 
Company that has a fair market value that differs from its adjusted tax basis in
the hands of the contributing Member on the date of contribution, the           
contributing Member and the non-contributing Members shall agree upon the       
allocation method to be applied with respect to that property under Regulation  
Section 1.704-3, which allocation method shall be set forth on attached Schedule
2, as amended from time to time. The same procedure shall apply to any          
revaluation of Company property as permitted under Regulation Section           
1.704-2(b)(iv)(f); provided, however, that all decisions regarding valuation of 
assets and allocation methods shall be made by the Managing Member..            

Allocations pursuant to this Section 7.6 are solely for purposes of 
federal, state, and local taxes and shall not affect, or in any way be taken    
into account in computing, any Member's Capital Account or share                

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of net profit, net loss, or other items as computed for book purposes, or       
distributions pursuant to any provision of this Agreement.                      

      7.7 DISTRIBUTIONS. Upon approval of the Members in accordance with Section
5.2(d), the Company may make distributions to the Members from time to time, to 
the extent permitted by the Act.                                                

         7.7.1 DISTRIBUTIONS ATTRIBUTABLE TO INVESTOR PORTFOLIO MANAGEMENT
BUSINESS. Each distribution of distributable funds derived from the Investor    
Portfolio Management Business shall be made to all Members, and divided among   
the Members in proportion to their respective shares, determined in accordance  
with Section 7.1.1, of the Allocable Income to which the distribution relates.  
For these purposes, distributions shall be applied against each Member's share  
of the Allocable Income of the Company in the chronological order in which that 
Allocable Income was earned by the Company. For example, distributions shall be 
first applied against the Allocable Income earned by the Company in the first   
year in which it had Allocable Income until each Member has received            
distributions equal to such Member's share of the Allocable Income of the       
Company in such year, and shall be subsequently applied against the Allocable   
Income earned by the Company in each succeeding year, in the same fashion.      

  7.7.2 DISTRIBUTIONS ATTRIBUTABLE TO OTHER ACTIVITIES. Each
distribution of distributable funds derived from activities of the Company other
than the Investor Portfolio Management Business shall be made entirely to ORMI. 

ARTICLE 8 -- DISSOLUTION AND LIQUIDATION

      8.1 EVENTS OF DISSOLUTION. Except as otherwise provided in this Agreement,
the Company shall dissolve upon the earlier of:                                 

(a) expiration of the term specified in Section 1.4;    

(b) the written agreement of all of the Members;        

      (c) The occurrence with respect to MGP of any of the following
events (each, an "Event of Dissociation") unless, within ninety (90) days       
following such event, (x) the successor to MGP as the Managing General Partner  
of the Partnership agrees in writing to become the Managing Member and to       
indemnify and hold harmless MGP from liabilities and expenses related to the    
Company from and after the date of such event and (y) the business of the       
Company is continued with the consent of all of the remaining Members           
(determined without regard to MGP):                                             

            (i) an event of voluntary or involuntary insolvency or a
         bankruptcy proceeding as specified in RCW 25.15.130(1)(d) or (e);

                (ii) the dissolution and commencement of liquidation of MGP;
or                                                      

                  (iii) the removal of MGP as Managing Member in accordance with
Section 5.5;                                            

       (d) the occurrence of any event not specified in Section 8.1(c)
which causes the Company to have fewer than two (2) Members unless, within      
ninety (90) days following the event of dissociation as a result of which the   
number of Members is reduced below two (2), one or more additional Members are  
admitted so that there are at least two (2) Members.                            

    8.2 LIQUIDATION UPON DISSOLUTION AND WINDING UP. Upon the dissolution of
the Company, the Managing Member (or, if there is no Managing Member, the       
remaining Members) shall wind up the affairs of the Company. A full account of  
the assets and liabilities of the Company shall be taken. The assets shall      

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be promptly liquidated and the proceeds thereof applied as required by the Act. 
Upon discharging all debts and liabilities of the Company, all remaining assets 
shall be distributed to the Members or their representatives by the end of the  
taxable year in which the liquidation occurs (or, if later, within ninety (90)  
days after the date of such liquidation) in proportion to the positive balances 
of their respective Capital Accounts, as determined after taking into account   
all Capital Account adjustments for the taxable year during which the           
liquidation occurs (other than those made pursuant to this Section 8.2). With   
the approval of the Members, the Company may, in the process of winding up the  
Company, distribute property in kind, in which case the Members' Capital Account
balances shall be adjusted in accordance with Regulation Section                
1.704-1(b)(2)(iv)(e).                                                           

8.3 NO OBLIGATION TO RESTORE NEGATIVE CAPITAL ACCOUNT BALANCE ON    
LIQUIDATION. No Member shall have any obligation to make any capital            
contribution to the Company to eliminate the negative balance, if any, of such  
Member's Capital Account upon a liquidation of the Company within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g) or liquidation of such Member's interest
in the Company, and any such negative balance shall not be considered a debt    
owed by such Member to the Company or to any other person for any purpose       
whatsoever.                                                                     

 ARTICLE 9 -- LIMITATION OF LIABILITY; INDEMNIFICATION

      9.1 LIMITATION OF LIABILITY. No current or former Member, Managing Member,
or director, officer, partner, member, Administrator, or other employee or agent
thereof (each, a "Covered Person") shall be liable, responsible or accountable  
in damages or otherwise to the Company or the Members for any act or omission by
such Covered Person performed in good faith pursuant to the authority granted to
such Covered Person by this Agreement or in accordance with its provisions, and 
in a manner reasonably believed by the Covered Person to be within the scope of 
its authority and in the best interest of the Company; provided, however, that  
such act or omission did not involve intentional misconduct, fraud, a knowing   
violation of law, conduct violating RCW 25.15.235, or any transaction from which
the Covered Person has personally received a benefit in money, property or      
services to which the Covered Person was not legally entitled. If the Act is    
hereafter amended to authorize Company action further limiting the personal     
liability of Covered Persons, then the liability of each Covered Person shall be
eliminated or limited to the full extent permitted by the Act, as so amended. No
repeal or modification of the Act or this Section 9.1 shall adversely affect any
right or protection of a Covered Person existing at the time of such repeal or  
modification for or with respect to an act or omission of such Covered Person   
occurring prior to such repeal or modification.                                 

     9.2 INDEMNIFICATION. The Company shall indemnify each Covered Person from
and against any judgments, settlements, penalties, fines or expenses incurred by
them on behalf of the Company or in furtherance of the Company's interests;     
provided, however, that a Covered Person shall not be indemnified from or on    
account of acts or omissions of the Covered Person finally adjudicated to be    
intentional misconduct, fraud, a knowing violation of law by such Covered       
Person, conduct of the Covered Person adjudged to be in violation of RCW        
25.15.235, or involving any transaction with respect to which it was finally    
adjudged that such Covered Person received a benefit in money, property or      
services to which such Covered Person was not legally entitled.                 

Any indemnification required to be made by the Company shall be made
promptly following the fixing of the liability, loss, damage, cost or expense   
incurred or suffered by a final judgment of any court, settlement, contract or  
otherwise. In addition, the Company may advance funds to a person claiming      
indemnification under this Section 9.2 for legal expenses and other costs       
incurred as a result of a legal action brought against such Covered Person only 
if (i) the legal action relates to the performance of duties or services by the 
Covered Person on behalf of the Company, (ii) the legal action is initiated by a
party other than a Member, and (iii) such Covered Person undertakes to repay the
advanced funds to the Company if it is determined that such person is not       
entitled to indemnification pursuant to the terms of this Agreement.            

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The right to indemnification and payment of expenses incurred in defending a    
proceeding conferred in this Section 9.2 shall not be exclusive of any other    
right any Covered Person may have or hereafter acquire under any statute, this  
Agreement, vote of Members or otherwise.                                        

    No repeal or modification of the Act or this Section 9.2 shall adversely
affect any right of a Covered Person to indemnification existing at the time of 
such repeal or modification for or with respect to indemnification related to an
act or omission of such Covered Person occurring prior to such repeal or        
modification.                                                                   

No Member shall have any personal liability with respect to the satisfaction
of any required indemnification of the above-mentioned Covered Persons.         

ARTICLE 10 -- MAXIMUM FINANCIAL COMMITMENT

    Notwithstanding anything to the contrary in this Agreement, the Managing
Member shall not permit the Company, without the prior approval of the partners 
of the Partnership pursuant to Section 6.8(A) of the Partnership Agreement, to  
incur any expense or take any action which would cause the IPMB Cumulative      
Commitment to exceed the Maximum Commitment Level.                              

 ARTICLE 11 -- MISCELLANEOUS

 11.1 NOTICES. Any notice or other communication required or permitted
under this Agreement shall be deemed to have been duly given if delivered       
personally to the party to whom directed or, if mailed, by registered or        
certified mail, postage and charges prepaid, addressed (a) if to a Member, to   
the Member's address specified on attached Schedule 1, and (b) if to the        
Company, to the Company's address specified in Section 1.5. Any such notice     
shall be deemed to be given when personally delivered or, if mailed, two (2)    
business days after the date of mailing. A Member or the Company may change its 
address for purposes of notices hereunder by giving notice specifying such      
changed address in the manner specified in this Section 11.1.                   

 11.2 GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the internal laws of the State of Washington, including without 
limitation, the Act.                                                            

      11.3 AMENDMENTS. This Agreement may not be amended except by the unanimous
written agreement of all of the Members.                                        

     11.4 CONSTRUCTION. Whenever the singular number is used in this Agreement
and when required by the context, the same shall include the plural and vice    
versa, and the masculine gender shall include the feminine and neuter genders   
and vice versa.                                                                 

      11.5 HEADINGS. The headings in this Agreement are inserted for convenience
only and shall not affect the interpretation of this Agreement.                 

    11.6 WAIVERS. The failure of any person to seek redress for violation of
or to insist upon the strict performance of any covenant or condition of this   
Agreement shall not prevent a subsequent act, which would have originally       
constituted a violation, from having the effect of an original violation.       

     11.7 REMEDIES. The rights and remedies of the parties hereunder shall not
be mutually exclusive, and the exercise of any one right or remedy shall not    
preclude or waive the right to exercise any other remedies. Said rights and     
remedies are in addition to any other rights the parties may have by law or     
otherwise.                                                                      

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    11.8 SEVERABILITY. If any provision of this Agreement or the application
thereof to any person or circumstance shall be invalid, illegal or unenforceable
to any extent, the remainder of this Agreement and the application thereof shall
not be affected and shall be enforceable to the fullest extent permitted by law.

     11.9 HEIRS, SUCCESSORS AND ASSIGNS. Each and all of the covenants, terms,
provisions and agreements herein contained shall be binding upon and inure to   
the benefit of the parties hereto and, to the extent permitted by this          
Agreement, their respective heirs, legal representatives, successors and        
assigns.                                                                        

      11.10 CREDITORS. None of the provisions of this Agreement shall be for the
benefit of or enforceable by any creditors of the Company.                      

    11.11 COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original but all of which shall constitute one and  
the same instrument.                                                            

Executed as of the date first above written by the undersigned.     

                  POPE MGP, INC., a Delaware
corporation                                             

                                    By__________________________________________
                                ________________________________
                              Its __________________________

               ORM, INC., a Washington
corporation                                             

                                    By__________________________________________
                                    ________________________________
                                  Its __________________________

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SCHEDULE 1
TO
 LIMITED LIABILITY COMPANY AGREEMENT
OF
 OLYMPIC RESOURCE MANAGEMENT LLC

Names and Addresses of Members

Pope MGP, Inc.                                                                  
19425 Tenth Avenue NE                                                           
PO Box 1780                                                                     
Poulsbo, WA  98370                                                              

ORM, Inc.                                                                       
19425 Tenth Avenue NE                                                           
PO Box 1780                                                                     
Poulsbo, WA  98370                                                              

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SCHEDULE 2
TO
 LIMITED LIABILITY COMPANY AGREEMENT
OF
 OLYMPIC RESOURCE MANAGEMENT LLC

 Mandatory Tax Allocations Under Code Section 704(c)

No property will be contributed to the Company upon its formation that will be  
subject to the mandatory tax allocation rules of Code Section 704(c).           

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 APPENDIX IV

 HOULIHAN LOKEY HOWARD & ZUKIN

 A SPECIALTY INVESTMENT BANKING FIRM

December 16, 1996                                                               

The Board of Directors                                                          
Pope Resources                                                                  
Post Office Box 1780                                                            
Poulsbo, Washington 98370                                                       

RE:  GENERAL PARTNER - COMPENSATION ADJUSTMENT                

Dear Board Members:                                                             

We understand that Pope Resources ("Partnership"), is considering forming a     
wholly-owned subsidiary to be named Olympic Resource Management, Inc. ("ORMI"), 
which will become a member of a newly formed limited liability company          
(hereinafter "LLC"). The LLC will be engaged in the acquisition and management  
of properties, and related entities on behalf of third parties for which it will
earn various fees ("Investor Portfolio Management Business"). In connection     
therewith, Pope MGP, Inc., the managing general partner ("General Partner") of  
the Partnership has proposed that it be compensated for managing the LLC based  
on the financial performance of the LLC. We further understand that providing   
additional compensation to Pope MGP in this fashion requires an amendment to the
terms of the Partnership Agreement (hereafter "Compensation Adjustment").       

You have requested our opinion (the "Opinion") as to the fairness to the Limited
Partners of the Partnership ("Limited Partners"), from a financial point of     
view, of the Compensation Adjustment. The Opinion does not address the          
Partnership's underlying business decision to enter into the Investor Portfolio 
Management Business.                                                            

In connection with this Opinion, we have made such reviews, analyses and        
inquiries as we have deemed necessary and appropriate under the circumstances.  
Among other things, we have:                                                    

        1.       reviewed the Partnership's annual reports to shareholders and
              Form 10-Ks for the fiscal years ended December 31, 1991 to
                 December 31, 1995 and 10-Q for the period ended September 30,
                  1996, which the Partnership's management has identified as the
 most current financial information available;

      2.       reviewed financial models based upon the Investor Portfolio
              Management Business plan for the Partnership and LLC which
             were prepared by the General Partner for the fiscal years
ended 1997 through 2001;                    

        3.       reviewed the Limited Partnership Agreement of Pope Resources,
            dated as of November 7, 1985, and the amendments thereto
approved December 16, 1986;                 

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The Board of Directors                                                 Page 2   
Pope Resources                                                                  
December 16, 1996                                                               

      4.       spoke with certain members of the General Partner regarding
          the current operations, financial condition and future
prospects of the Partnership and the LLC;   

       5.       reviewed the historical market prices and trading volume for
 the Partnership's publicly traded securities;

     6.       reviewed publicly available financial data and partnership
                 agreements of other publicly traded limited partnerships; and

     7.       conducted such other studies, analyses and inquiries as we
have deemed appropriate.                    

We were requested by the Board of Directors of the Partnership to identify      
possible incentive compensation structures. In connection with this analysis we:
(i) reviewed compensation arrangements for certain publicly-traded partnerships 
we deemed comparable to the Partnership; (ii) reviewed the rights and privileges
of the Limited Partners and the General Partner, including the ability of       
officers and other affiliates of the General Partner to pursue the activities of
the LLC without the involvement of the Partnership; and (iii) calculated yield  
and total return to the Limited Partners and General Partner using varying      
allocations of net cashflow. We presented a possible incentive compensation     
structure to the Board of Directors and, at its request, analyzed certain       
modifications to the proposed structure.                                        

We have relied upon and assumed, without independent verification, that the     
financial information provided to us have been reasonably prepared and reflect  
the best currently available estimates of the future financial results and      
condition of the Partnership and LLC, and that there has been no material change
in the assets, financial condition, business or prospects of the Partnership    
since the date of the most recent financial statements made available to us.    

We have not independently verified the accuracy and completeness of the         
information supplied to us with respect to the Partnership and LLC and do not   
assume any responsibility with respect to it. We have not made any physical     
inspection or independent appraisal of any of the properties or assets of the   
Partnership and/or LLC. Our opinion is necessarily based on business, economic, 
market and other conditions as they exist and can be evaluated by us at the date
of this letter.                                                                 

Based on the foregoing, and in reliance thereon, it is our opinion that the     
Compensation Adjustment more fully set forth in the proxy statement, to which   
this Opinion is attached, is fair to the Limited from a financial point of view.

HOULIHAN, LOKEY, HOWARD & ZUKIN, INC.                                           

/s/ Houlihan, Lokey, Howard & Zukin, Inc.                                       
------------------------------------------                                      

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APPENDIX V

[Letterhead]

FEBRUARY 14, 1997 

Mr. Gary F. Tucker, President and CEO                                           
Pope MGP, Inc., Managing General Partner                                        
Pope Resources, A Delaware Limited Partnership                                  
19245 10th Ave. N.E.                                                            
P.O. Box 1780                                                                   
Poulsbo, WA  98370                                                              

Re:  Partnership Classification of Pope Resources, A          
Delaware Limited Partnership (the "Partnership")    

Dear Mr. Tucker:                                                                

      Pursuant to Section 6.9 of the Limited Partnership Agreement of Pope
Resources, A Delaware Limited Partnership, dated as of November 7, 1985, as     
amended as of December 16, 1986 (as so amended, the "Partnership Agreement"),   
the rights of Limited Partners to vote upon proposed amendments to the          
Partnership Agreement are conditioned upon the Partnership having received a    
favorable written opinion of counsel for the Partnership to the effect that the 
action proposed to be taken will not jeopardize the status of the Partnership   
as a partnership under applicable tax laws and regulations.  In compliance with 
that provision, you have asked our opinion regarding the effect on the status   
of the Partnership as a partnership for federal income tax purposes of the      
Partnership's participation, through ORMI, in the Investor Portfolio Management 
Business and investments in the Investment Entities, on the terms described in  
Section I below.                                                                

  All capitalized terms used throughout this letter shall have the
meaning ascribed to such terms in the Proxy Statement of the Partnership dated  
FEBRUARY 14, 1997 (the "Proxy Statement"), unless the context clearly           
indicates otherwise.                                                            

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Pope Resources, A Delaware Limited Partnership                                  
FEBRUARY 14, 1997                                                               
Page 2                                                                          

I.  FACTUAL ASSUMPTIONS UPON WHICH OPINION IS BASED.                            

    For purposes of our analysis, we have assumed the following facts.
Any change in the assumed facts could materially and adversely affect our       
opinion regarding the effect on the status of the Partnership as a partnership  
for federal income tax purposes of the Partnership's participation, through     
ORMI, in the Investor Portfolio Management Business and investments in the      
Investment Entities.                                                            

A.  DESCRIPTION OF THE PARTNERSHIP'S HISTORICAL BUSINESS.     
The Partnership is a publicly traded limited partnership, which was organized   
in December 1985.  The Partnership's current operations ("Historical Business") 
are classified into two segments:  (i) timberland resources and (ii) real       
property development.  A discussion of the Partnership's Historical Business is 
set forth in the Proxy Statement, which discussion is incorporated herein by    
reference.                                                                      

B.      INVESTOR PORTFOLIO MANAGEMENT BUSINESS.  The Investor 
Portfolio Management Business involves the location, acquisition, management    
and/or development of land and related resources directly or through            
acquisition of land-holding entities, including, but not limited to,            
timberlands and lands with development potential for residential or commercial  
use, within and without the United States, primarily or exclusively for the     
account of individuals and/or entities who are not otherwise Affiliates of the  
Partnership.                                                                    

The Investor Portfolio Management Business will be conducted by a Washington
limited liability company, ORM/LLC.  The members of ORM/LLC will be ORMI, a     
wholly owned corporate subsidiary of the Partnership, and the Managing General  
Partner.  The Partnership, through ORMI, is expected to provide essentially all 
of the funding required for the start-up phase of ORM/LLC, as capital           
contributions or as loans.                                                      

    ORM/LLC will focus initially on identifying and seeking to attract
potential Third Party Investors who have a minimum of $100,000,000 to commit to 
the acquisition of real estate assets in connection with the Investor Portfolio 
Management Business.      The Partnership expects that pursuant to a portfolio  
development agreement, a Third Party Investor will appoint ORM/LLC to acquire   
and manage, for development, sale or other investment purposes, a variety of    
real estate assets meeting predetermined investment objectives.  Once a         
portfolio development agreement has been entered into, ORM/LLC will search for  
and identify real estate assets and, subject to the approval of the Third Party 
Investors, will negotiate for the purchase of assets, undertake due diligence,  
hire necessary experts and professional advisors, and purchase and manage       
acquired assets on behalf of the Third Party Investors.  The                    

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Pope Resources, A Delaware Limited Partnership                                  
FEBRUARY 14, 1997                                                               
Page 3                                                                          

Partnership expects that the Third Party Investors will form Investment         
Entities for the purpose of purchasing and holding portfolio assets.  It is     
anticipated that multiple Investment Entities will be created, each with a very 
limited number of Third Party Investors (including, in some cases, a single     
Third Party Investor).                                                          

       ORM/LLC will be the manager of the new Investment Entities (which may
be general or limited partnerships, joint ventures, limited liability           
companies, or other types of entities).  ORM/LLC will have primary management   
responsibility and authority for each of the Investment Entities.               

     ORMI, utilizing its share of the income from the Investor Portfolio
Management Business and other assets contributed by the Partnership, will       
actively pursue opportunities to be an equity participant in a number of the    
Investment Entities with participating Third Party Investors.  The Managing     
General Partner will set the general parameters for such investments by ORMI,   
and such investments will be considered and approved by the ORMI Board on a     
case-by-case basis.  Investment by ORMI in selected Investment Entities will    
provide the opportunity to leverage the amount of funds the Partnership is      
capable of committing through ORMI with more significant amounts committed by   
Third Party Investors, thereby potentially achieving more favorable terms than  
the Partnership could receive from a smaller transaction in which it was the    
sole participant.  This will also result in more asset diversification for the  
Partnership.  It is not expected that ORMI's position in any Investment Entity  
will represent more than a small percentage of the outstanding equity interests 
in that Investment Entity.                                                      

 C.  TERMS OF THE ORM/LLC OPERATING AGREEMENT.  The relationship
between ORMI and the Managing General Partner in ORM/LLC will be governed by    
the ORM/LLC Operating Agreement in substantially the form attached to the Proxy 
Statement.                                                                      

   D.  ADDITIONAL FACTUAL ASSUMPTIONS.  In addition to the foregoing
statement of facts, we have relied upon the following assumptions in our        
evaluation:                                                                     

              1.       EXISTING STATUS OF THE PARTNERSHIP AS A PARTNERSHIP
FOR FEDERAL INCOME TAX PURPOSES.  As of the date on which the Investor          
Portfolio Management Business is implemented, the Partnership is properly       
treated as (a) a partnership for federal income tax purposes under Code         
Sections 7701 and 7704 and (b) an "existing partnership" under the grandfather  
rule (the "Grandfather Rule") provided by Section 10211(c) of the Revenue Act   
of 1987, as amended by Section 2004(f)(2) of the Technical and Miscellaneous    
Revenue Act of 1988.                                                            

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Pope Resources, A Delaware Limited Partnership                                  
FEBRUARY 14, 1997                                                               
Page 4                                                                          

                2.       CONTINUED AVAILABILITY OF GRANDFATHER STATUS.  During
the Partnership's fiscal year ending December 31, 1997, (a) the Partnership's   
share of the gross income attributable to the Investor Portfolio Management     
Business and investments by ORMI in Investment Entities will not exceed 15      
percent of the Partnership's gross income for that taxable year, and (b) the    
Partnership will not use in the Investor Portfolio Management Business directly 
(or indirectly through ORMI) more than 15 percent by value of its total assets. 

          3.       CONTINUED SATISFACTION OF THE "90/10 QUALIFYING
INCOME TEST" BY THE PARTNERSHIP.  From and after the first day of the first     
taxable year in which the Partnership is subject to the rules of Code Section   
7704, the Partnership will satisfy the requirements of Code Section 7704(c),    
assuming that the dividend income received by the Partnership from ORMI and any 
interest income received by the Partnership from either ORMI or ORM/LLC is      
properly treated as "qualifying income."  Rental income received by the         
Partnership from either ORMI or ORM/LLC will not be considered qualifying       
income for purposes of Code Section 7704(c) as a result of the Partnership's    
direct or indirect ownership interest in those entities.                        

          4.       LOANS TO AFFILIATES.  Any amounts loaned by the
Partnership to either ORMI or ORM/LLC will be bona fide loans, made on          
arm's-length terms with interest at a rate that equals or exceeds the           
applicable Federal rate under Code Section 1274.  No loans will be made by the  
Partnership to either ORMI or ORM/LLC in which the rate or amount of interest   
is contingent on the income or profits of the borrowing entity.  No loans will  
be made by the Partnership to either ORMI or ORM/LLC in the Partnership's       
taxable year ending December 31, 1997.                                          

             5.       INTERCOMPANY TRANSACTIONS.  It is anticipated that
ORMI and ORM/LLC will rent office space from the Partnership in the facility    
the Partnership currently uses in the conduct of its Historical Business.  The  
Partnership will charge a fair market rental to ORMI and ORM/LLC for any use by 
those entities of the Partnership's facilities, the amount of which will not be 
dependent upon the income or profits of either entity.  In addition, fair value 
will be charged for all goods and services provided by any of the Partnership,  
ORMI or ORM/LLC to one another.                                                 

    It is also possible that the Partnership, ORMI, and/or ORM/LLC may
share some of the same employees, who may be involved in management of the      
Historical Business as well as the Investor Portfolio Management Business.  The 
costs and expenses associated with the employment of shared employees will be   
allocated among the employing entities based upon the relative level of         
services performed by those employees on behalf of each of the employing        
entities.  If the employees of one entity provide services to another of the    

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Pope Resources, A Delaware Limited Partnership                                  
FEBRUARY 14, 1997                                                               
Page 5                                                                          

entities that is not properly the subject of such a shared employee             
arrangement, an arms'-length charge shall be made for the services provided by  
such employees.                                                                 

 The Partnership, ORMI and ORM/LLC will enter into arms'- length
written agreements concerning all aspects of shared facilities, goods, services 
and employees and will maintain separate financial records on which the results 
of their respective operations are reflected.                                   

            6.       BUSINESS PURPOSES FOR THE FORMATION OF ORMI.  The
Partnership is participating in the Investor Portfolio Management Business and  
the anticipated equity investments in the Investment Entities through ORMI in   
order to (a) accomplish the Partnership's business objectives of minimizing the 
Partnership's legal and economic exposure associated with its participation in  
the Investor Portfolio Management Business and equity investments in Investment 
Entities, and (b) create an identity separate and apart from the Partnership    
for the marketing and conduct of the Investor Portfolio Management Business.    

             7.  MANAGEMENT AND OPERATION OF ORMI.  ORMI will be managed
and maintained as an entity separate and apart from the Partnership.  It will   
maintain separate books and records, separately account for the results of its  
operations, pay its own expenses, and take all steps necessary to properly      
maintain its corporate existence.                                               

II.      OPINION OF COUNSEL.                                                    

      Based upon the assumed facts set forth in this letter, we are of the
opinion that the participation by the Partnership, through ORMI, in the         
Investor Portfolio Management Business and the equity investments in the        
Investment Entities will not jeopardize the status of the Partnership as a      
partnership for federal income tax purposes under applicable tax laws and       
regulations.                                                                    

   Our opinion is based upon the provisions of the Code, Regulations
promulgated under the Code, revenue rulings promulgated by the Internal Revenue 
Service ("IRS"), IRS private letter rulings, existing court decisions, and      
other authorities available as of the date of this letter, and the application  
of those authorities to the assumed facts described in Section I above.  Future 
legislative or administrative changes or court decisions, or any change in the  
assumed facts upon which our opinion is based, may significantly and adversely  
modify the opinion contained in this letter.  It should also be noted that no   
advance ruling has been sought by the Partnership from the IRS with respect to  
the issue upon which we have been asked to opine,                               

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Pope Resources, A Delaware Limited Partnership                                  
FEBRUARY 14, 1997                                                               
Page 6                                                                          

and the opinion of counsel set forth in this letter is not binding upon the IRS 
or any court.                                                                   

   This opinion letter may be relied upon by the Partnership and its
Partners in connection with the transactions described in this letter and may   
not be used or relied upon by the Partnership or its Partners for any other     
purpose or by any other person for any purpose whatsoever without, in each      
instance, our prior written consent.                                            

                       Very truly yours,

                                   /s/ DAVIS WRIGHT TREMAINE LLP
                                     -------------------------------
                               DAVIS WRIGHT TREMAINE LLP

DEFS14A
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PROXY                                                                           
                                                                           PROXY
POPE RESOURCES, A DELAWARE LIMITED PARTNERSHIP
 19245 10TH AVE. N.E., POULSBO, WA 98370

 THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF POPE MGP, INC., AS MANAGING GENERAL PARTNER

The undersigned hereby appoints Gary F. Tucker and Peter T. Pope, and each of   
them, with full power of substitution, the proxies of the undersigned to vote   
all units of Partnership interest ("Units") of Pope Resources, A Delaware       
Limited Partnership (the "Partnership") which the undersigned is entitled to    
vote at a meeting of the Partnership to be held at The Four Seasons Olympic     
Hotel, 411 University Street, Seattle, Washington on March 14, 1997, at 1:00    
p.m., and any adjournments or postponements thereof.                            

This proxy may be revoked at any time before it is exercised.                   

This proxy, when properly executed, will be voted in the manner directed herein 
by the undersigned. DISCRETIONARY AUTHORITY IS HEREBY GRANTED AS TO THE MATTERS 
SET FORTH BELOW. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED IN FAVOR OF  
PROPOSAL 1 AND PROPOSAL 2.                                                      

1. PROPOSAL TO AMEND THE PARTNERSHIP AGREEMENT to (i) permit the Partnership to 
engage in a new business enterprise involving the location, acquisition,        
management and/or development of land and related resources directly or through 
acquisition of land-holding entities, primarily or exclusively for the account  
of individuals and/or entities who are not otherwise Affiliates of the          
Partnership (the "Investor Portfolio Management Business"), provided that the   
IPMB Cumulative Commitment does not exceed the Maximum Commitment unless        
approved by a Majority Interest; and (ii) authorize an incremental,             
sliding-scale allocation of net income derived from the Investor Portfolio      
Management Business between the Partnership and the Managing General Partner.   

__ FOR      __ AGAINST   __ ABSTAIN                                 

2. PROPOSAL TO WAIVE THE APPLICATION OF MANDATORY RETIREMENT AGE set forth in   
the Shareholders Agreement of the Managing General Partner to permit Adolphus   
Andrews, Jr. to serve on the Board of Directors of the Managing General Partner 
for a period of two years after his 75th birthday.                              

__ FOR      __ AGAINST   __ ABSTAIN                                 

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Please sign exactly as name appears below. When Units are held by joint tenants,
both should sign. When signing as an attorney, executor, administrator, trustee 
or guardian, please give full title as such. If a corporation, partnership or   
other entity, please sign in full corporate name by authorized person.          

Dated:  _______________, 1997   

_____________________________   
Signature                       

_____________________________   
Signature (if held jointly)     

PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY
USING THE ENCLOSED ENVELOPE.

 2

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘DEFS14A’ Filing		Date		First		Last			Other Filings
		12/31/97		62					10-K405
For Period End:		3/14/97		2		65
Filed on:		2/14/97		5		64
		1/31/97		4		37			PRER14A
		12/31/96		27
		12/18/96		18		20
		12/16/96		57		58
		9/30/96		21		57			10-Q
		1/1/96		27
		12/31/95		21		57			10-K405
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