AGRICULTURAL CLOSINGS

In Agricultural (“Ag”) closings, you will deal with a variety of components, amongst which you may be dealing with orchards, vineyards, feedlots, dairies, timber ground, irrigated and non-irrigated real property, personal property, fixtures, corrals, fencing, wells, water delivery issues and more.

Your legal descriptions may be metes and bounds descriptions or Lots, and a variety of requirements prior to closing in relation to surveys, boundary

line adjustments, easements for access, ingress, egress, segregation and water rights (which we will discuss later) can also be involved.

Lets examine a typical Ag Land

Transaction

Please note the Purchase and Sale Agreement.

The attached PSA and Title Commitment are an example of a

Seller carry-back real estate transaction utilizing a Real

Estate Contract, Security Agreements, UCC Financing

Statement, UCC Fixture Filing, Bill of Sale, Use Tax Return,

Closing Statements, with deferred commission, a true

contract collection account for all payments with

Supplemental Instructions thereto, a segregation of a family

sepulcher (graveyard) and homesite prior to and post-

closing. This is by in large dryland farming, with domestic

water wells and planted crops in place at the time of closing.

Vacant Land Purchase and Sale

Agreement

Vacant Land Purchase and Sale

Agreement

Vacant Land Purchase and Sale

Agreement

Vacant Land Purchase and Sale

Agreement

Vacant Land Purchase and Sale

Agreement

Commitment for Title Insurance

Fom C911001 09oiOO)

Commitment for Title Insurance

@ CHICAGO TITLE INSURANCE COMPANY

838 N. Colorado Street, Kennewick, WA 99336 (509)735-1575 FAX (509)735-6297

COMMITMENT FOR TITLE INSURANCE NO. 311999-DK

INQUIRIES SHOULD BE MADE TO:

Title Offloef:Don Knoepfet Email: donald.knoepfel@ctt.com

Phone: Fax:

Escrow Officer:Bonnie Thompson Email:Bonnie.Thoffi9son@ctt_com

Phone: 509.735.1575 Fax: 509.735.0707

Escrow Assistant: Cheryl A. Barron Email. jodie.newton@ctt com

Customer Reference: SmithiOoe

Effective Date: January 10,2007 at 08:00AM

1. Policy or polldes to be issued:

SCHEDULE A

ALTA Owner's Policy 1D-17-92 Standard

Coverage: STANDARD Uab hty: S 3,000,000.00

Premium: $7,230.00 GENERAL RATE Tax: $ 600.09

Proposed Insured:

John Doe and Mary Doe,husband and wife

2. The estate or interest in the land described or referred to In this commitment and covered herein is: Fee Simple

3. Title to the property described herein is vested,on the date shown above, in:

Jack Smi th, as his separate estate

4. The land referred to in this Commitment is described as follows: SEE SCHEDULE A CONTINUED

Commitment for Title Insurance

Commitment No.311999-DK

LEGAL DESCRIPTION SCHEDULE A CONTINUED

The land referred to in this commitment is described as follows: PARCEL 1:

The Northwest quarter, the West half of the Northwest quarter of the Southwest quarter, the Northeast quarter of the Northwest quarter of the Southwest quarter, the West half or the Northwest quarter of the Northeast quarter and the Northeast quarter of the Northwest quarter of the Northeast quarter,all in Section 1, Township 13 North,Range 34 East,W.M.,Franklin County,Washington.

PARCEL2: Deleted PARCEL3: Deleted PARCEL4:

Allin Section 36,Township 14 North, Range 34 East,W.M., Franklin County, Washington;

EXCEPT all that portion thereof lying Northerly and Westerly of the Southerly right-of-way of the

Spokane,Portland and Seattle Railway Company;

EXCEPT the Southeast quarter of the Northeast quarter thereof; EXCEPT the East half of the Southeast quarter thereof;

EXCEPT the Southwest quarter of the Southeast quarter thereof;

EXCEPT that portion of the Southwest quarter of the Southwest quarter thereoflying Southeasterly of the right-of-way of the Spokane,Portland and Seattle Railway Company; AND

EXCEPT a tract of land situated In the Northwest quarter of the Southeast quarter of Section 36, Township 14 North, Range 34 East,W.M.,Franklin County,Washington,described as follows:

Beginning at the Northeast oorner of said Section 36;

thence South 29 40'40" West,a distance ol4,366.4 feet to the True Point of Beginning;

thence South 21•21'East to the Southerly line of said Northwest quarter of the Southeast quarter of said section;

thence West along said Souther1y line 450.feet;

thence North 21•21'West 110 feet;

thence North 41.59'East 468.5 feet;

thence South 21•21'East 257.2 feet to the True Point of Beginning.

ALSO,that part of the following described Parcel "A" lying Southeasterly of a line drawn parallel with and

75 feet Southeaster1y, when measured at right angles and/or radially,from the line Survey of SR 260, Kahlotus to Wacota:

Parcel "A"

A strip of land 30 feetIn width, being 15 feet on each side of the center line as surveyed over and across the Northeast quarter of the Southwest quarter and the Northwest quarter of the Southeast quarter of Section 36, Township 14 North,Range 34 East, W.M.,beginning at Highway Engineer Station 0+00 on the HaulRoad;

Commitment for Title Insurance

Commitment No.311999-DK

SCHEDULE A CONTINUED

(Continued)

thence South 44"20' East to Station 1+75.9; thence South 25"17' East to Station 3+41.4; thence South 46"50'East to Station 4+16.9; thence South 34"50'East to Station 5+17.1;

thence South59"41' to the Northwesterly line of said tract of land first above described,subject to the

right-of-way of the Oregon-Washington Railroad and Navigation Co.and the Spokane,Portland and

Seattle Railway Co. PARCEL 5:

The Northwest quarter of the Northeast quarter, the North half of the Northwest quarter, the Southwest

quarter of the Northwest quarter and the West half of the Southwest quarter, in Section 14, Township

13 North, Range 35 East,W.M.,FranklinCounty, Washington. PARCELS:

The South half of the South half,the Northeast quarter of the Southeast quarter and the Northeast

quarter of the Northeast quarter,of Section 15,Township 13 North,Range 35 East. W.M.,Franklin

County,Washington. PARCEL 7:

The South half of Section 17,Township 13North,Range 35 East.W.M. Frankln County,Wash ngton.

PARCEL 8:

The Northeast quarter and the North half of the Northwest quarter of Section 20,Township 13 North, Range 35 East,W.M.,Franklin County,Washington;EXCEPT that portion thereof condemned for the Lower MonumentalLock and Dam Project under Civil Cause No.2077, United States District Court for the Eastern District of Washington.

PARCEL9:

Allof Section 21,Township 13 North,Range 35 East,W.M.,FranklinCounty,Washington;EXCEPT that portion thereof condemned for the Lower MonumentalLock and Dam Project under CivilCause No.

2077, United States District Court for the EasternDistrict of Washington. PARCEL 10:

Allof Section 22, Township 13 North,Range 35 East,W.M.,Franklin County,Washington.

PARCEL 11:

Allof Sect on 23, Township 13 North,Range 35 East,W.M.,Franklin County,washington;EXCEPT that portion thereof condemned for the Lower MonumentalLock and Dam Project under CivilCause No.

2077, United States Distr ct Court for the Eastern District of Washington. PARCEL 12:

Commitment for Title Insurance

nUVnentNo

SCHEDULE B

Schedule B of the policy or policies to be issued wl are di sposed of to the satisfaction of the Company:

GENERAL EXCEPTIONS:

A. R•ghts or cla ms disclosed onty by possession,or claimed possession,of the premises.

B. Encroachments and questions of location,boundary and area d•sclosed only by lnspectlon of the premises or by survey.

C Easements, prescriptive rights,rights-ot-way,streets,roads,alleys or highways not d1sclosed by the pubhc reoords.

0. Ally lien,or right to a lien,for contr butions to employee benefit funds,or for state workers'compensation, or for services,l abor,or materialheretofore or hereafter furnished,all as Imposed by law,and not shown by the public records.

E. Taxes or specialassessments which are not yet payabfe or which are not shown as existingliens by the public records.

F. Ally service, installation,connection,maintenance, tap,capacity or conslructlon charges for sewer, water, electricity, naturalgas or other uti ities,or garbage collection and disposal.

G. Reservations and exceptions In United States Patents or InActs authorizlng theissuance thereof.

H. Indian tribal codes or regu ations, Indian treaty or aboriginal rights,Including easements or equitable servitudes.

I. Water rights,claims or Iitle to water.

J. Oefects,liens,encumbrances,adverse cla ms or other matters,if any,created, first appearing In the pubflc records or attaching subsequent to the effective date hereof but prior to the date the proposed Insured acquires of record for value the estate or interest or mortgage thereon covered by this commitment

SPECIAL EXCEPTIONS:

1. Rights.of-way for ditches,canals,laterals,telephone and transmission lines which may be required by the United States for the construction,operation and maintenance of irrigation works.as provided by Chapter 87,Section 5,Laws of 1905.

2. Exceptions and reservations contained In deed from the state of Washington,whereby the grantor excepts and reserves all oil,gases,coal,ores, minerals,fossils,etc.,and

the right of entry for opening,developing and working the same and providing that such

rights shallnot be exercised untilprovision has been made for full payment of all damages sustained by reason of such entry; recorded under recording number 15769.

Right of state of Washington or its successors,subject to payment of compensation therefor, to acquire rights of way for private railroads,skid roads,flumes, canals, water courses or other easements for transporting and moving timber,stone,minerals and other products from this and other property,as reserved in deed referred to above.

Affects: The South half of the Northwest quarter. the Southwest quarter of the Northeast quarter; the Northwest quarter of the Southeast quarter, and the Southeast quarter of the Southwest quarter of Section 36,Township 14 North,Range 34 East, being a portion of Parcel 4 and other property.

This commitment does not include the present ownership of or the encumbrances affecting said mineralestate.

Commitment for Title Insurance

Commllment No.311999·DK

SCHEDULES

(Continued)

3. Exceptions and reservations contained in deed from the State of Washington,whereby the grantor excepts and reserves all oil,gases, coal ores,minerals, fossils,etc.,and

the right of entry for opening, developing and working the same and providing that such

rights shall not be exercised until provision has been made for full payment of all damages sustained by reason of such entry;recorded under recording number 24832.

Right of State of Washington or its successors,subject to payment of compensation therefor, to acquire rights of way for private railroads, skid roads,flumes,canals, water courses or other easements for transporting and moving timber, stone, minerals and other products from this and other property,as reserved in deed referred to above.

Affects: The North half of the Northeast quarter, and the Northeast quarter of the Northwest quarter of Section 36, Township 14 North,Range 34 East, being a portion of Parcel 4 and other property.

This commitment does not include the present ownership of or the encumbrances affecting said mineralestate.

4. Exceptions and reservations contained in deed from the State of Washington,whereby the grantor excepts and reserves all oil,gases,coal ores,minerals, fossils, etc.,and

the right of entry for opening, developing and working the same and providing that such rights shall not be exercised until provision has been made for full payment of all damages sustained by reason of such entry; recorded under recording number 69360.

Right of State of Washington or its successors,subject to payment of compensation therefor, to acquire rights of way for private railroads,skid roads, flumes, canals, water courses or other easements for transporting and moving timber,stone, minerals and other products from this and other property,as reserved in deed referred to above.

Affects: The West half of the Southwest quarter of Section 14, Township 13 North, Range 35 East,being a portion of Parcel 5.

This commitment does not include the present ownership of or the encumbrances affecting said mineralestate.

5. Easement and the terms and conditions thereof:

Grantee: The Washington Water Power Company, a corporation,its successors and

assigns

Purpose:Erect,construct reconstruct and maintain an electricaltransmissionline and

telephone system attached to transmission line poles or structures consisting of 1 pole and no anchors

Area Affected:Northeast quarter of the Southeast quarter of Section 20 and the

Southeast quarter of the Northwest quarter of Section 21, all in Township 14 North, Range 35 East, being a portion of Parcels 15 and 16.

Recorded:09/27/1938

Recording Number: 83791

Comm11ment Sd>odule B

Commitment for Title Insurance

Commitment No. 311999-DK

SCHEDULE B

(Continued)

6. Easement and the terms and conditions thereof:

Grantee:The Washington Water Power Company, a corporation Purpose:Erect, construct, reconstruct and maintain an electricaldistribution line consisting of wires, poles and associated fixture

Area Affected:West half of the Southeast quarter, Northeast quarter of the Southwest

quarter and the Northwest quarter of Section 31, Township 14 North, Range 35 East; Northeast quarter of Section 36, Township 14 North, Range 34 East and other property, being a portion of Parcels 4 and 20

Recorded:07122/1948

Recording Number: 117316

7. Easement and the terms and conditions thereof: Grantee:Franklin County, Washington, a municipalcorporation Purpose:Public road

Area Affected: A strip of land 60 feet in width over a portion of Parcels 7, 8,9, 19 and 20

and other property

Recorded:04/18/1951

Recording Number: 136867

8. Easement and the terms and conditions thereof: Grantee:United States of America

Purpose: Flowage

Area Affected: All that portion of the existing 60 foot McLain Road right-of-way lying between the Project (Lower Monumental Lock and Dam) Boundary and the 540 foot contour elevation, mean sea level in section 20, Township 13 North, Range 35 East and other property, being a portion of Parcel8

Recorded: 05/07/1968

Recording Number:308266

9. Rights of the public or other entity to 6 acres of right-of-way as disclosed by Quit Claim

Deed,executed by Jack Smith, recorded April 7,1989 under Recording Number

463915.

10. The mobile home improvements, if any, located on the land described herein, are expressly excluded from this policy

11. Terms,covenants and conditions contained in Application for Current Use Classification,(including potential liability for future applicable taxes, penalties and interest upon breach of,or withdrawal from,said classification).

Classification: farm and agricultural

Affects: Parcels 4, 5,6, 7,9,10,11, 12, 13, 14, 15,16, 17, 18,19, 20, 22, 23,24, 25,

26, 27, 28, 29 and 30.

ComrMmenl- 8

Commitment for Title Insurance

Commtiment No. 311999-DK

SCHEDULE B

(Continued)

12. Waiver of Claim for Damages and Consent to Locate County Road as set out In instrument recorded February 14,1995,under Recording No.518182:

To: Franklin County

Affects:Parcels 17,18, 20, 21,24,26,27,28 and 29

13. Rights of the public to that portion of said land,if any,lying within the right-of-way for

Gill Road.

Affects:Parcels 16 and 17

14. Rights of the public to that portion of said land,if any,lying within the right-of-way for Fry

Road

Affects:Parcels 20,24 and 27

15. Mortgage and the terms and condit ons thereof: Amount: $96,500.00

Dated: 03/10/1978

Recorded:03/24/1978

Recording number:379323

Mortgagor:Jack Smith, as his separate estate

Mortgagee:The FederalLand Bank of Spokane,a corporation

Affects: Parcels 5, 21,28 and 29

Assignment of said Mortgage: Recorded: 07/15/1999

Recording number: 1568167

Assignee: Northwest Farm Credit Services, ACA

16. Mortgage and the terms and conditions thereof: Amount: $170,000.00

Dated:05/08/1978

Recorded:06/0211978

Recording number: 381545

Mortgagor:Jack Smith, as his separate estate

Mortgagee:The FederalLand Bank of Spokane, a corporat on

Affects: Parcels 1 and 4 through 21 and other property

Note: Said mortgage has been partially released as to a portion of Parcel 20 by instrument recorded September 3,1991under Recording No. 481413.

Assignment of said mortgage: Recorded: 07/15/1999

Recording number:1568166

Assignee: Northwest Farm Credit Services, ACA

Commitment for Title Insurance

Commitment No.311999-DK

SCHEDULE B

(Continued)

17. Financing statement and the terms and conditions thereof: Secured party:First NationalEquipment Financing,Inc. Debtor: Smith and Smith

Covers:Personal property and fixtures located on property herein described

Recorded:04/25/2001

Recording number:1589356

Affects: Parcel16

A continuation of said financing statement has been recorded under record ng number(s):1672286.

18. Financing statement and the terms and conditions thereof: Secured party:Bank of Whitman

Debtor:Henry Smith Farms

Covers:Personal property and fixtures located on property herein described

Recorded:02/21/2003

Recording number:1619598

Affects: Portion of Parcel20

19. Right, title andInterest of Smith and Smith by reason of the Financing Statement set forth as exception number 19 herein.

20. Right, title and Interest of Henry Smith Farms by reason of the Financing Statement set forth as exception number 17 herein.

21. Unrecorded leaseholds, if any,rights of vendors and holders of security Interests on personalpropertyinstalled upon said property and rights of tenants to remove trade fixtures at the expiration of the term.

22. Lien of realestate excise sales tax upon any sale of said premises,situated in the

County of Franklin, at Tax rate= 1.78% of the totalsale price,if unpaid.

23. GeneralProperty Taxes for the year 2007 not payable until February 15,2007,an amount not available from the Franklin County Treasurer's Office.

24. GeneralProperty Taxes under Current Use Exemption for the year 2007: First Half: $390.27 (Paid)

Second Half:$390.27 (will become delinquent on November 1)

Tax Account No.:101-450-039

Without Exemption: $1,215.76

Affects: Parcel15

25. General Property Taxes under Current Use Exemption for the year 2007: First Half: $1,396.15 (Paid)

Second Half: $1,396.15 (will become delinquent on November 1)

Tax Account No.: 101-460·019

Without Exempt on: $5,082.96

Affects: Parcel16

Commitment for Title Insurance

Commi menlNo. 311999-DK

SCHEDULE 8

(Continued)

26. General Property Taxes under Current Use Exemption for the year 2007: First Half: $353.83 (Paid)

Second Half: $353.83 (will become delinquent on November 1) Tax Account No.: 101-540-012

Without Exemption: $1,101.92

Affects: Parcel18

27. General Property Taxes under Current Use Exemption for the year 2007: First Half: $358.60 (Paid)

Second Half: $358.60 (will become delinquent on November 1) Tax Account No.: 101-560-018

Without Exemption: $964.50

Affects: Paroel20

28. General Property Taxes under Current Use Exemption for the year 2007: First Half: $339.66 (Paid)

Second Half: $339.66 (will become delinquent on November 1) Tax Account No.:101-150-023

Without Exemption: $1,097.98

Affects: Parcel22

29. General Property Taxes under Current Use Exemption for the year 2007: First Half: $119.46 (Paid)

Second Half: $119.46 (will become delinquent on November 1) Tax Account No.: 101-170-010

Without Exemption: $376.90

Affects: Parcel23

30. General Property Taxes under Current Use Exemption for the year 2007: First Half: $303.34 (Paid)

Second Half: $303.34 (will become delinquent on November 1) Tax Account No.: 101-160-012

Without Exemption: $985.44

Affects: Parcel25

31. General Property Taxes under Current Use Exemption for the year 2007: First Half: $623.13 (Paid)

Second Half: $623.13 (will become delinquent on November 1) Tax Account No.: 101-090-017

Without Exemption: $2,037.62

Affects: Parcel 26

Purchase Price:

Allocation: Parties will need to determine the allocation of their purchase price for many reasons. Please see example below:

Total Purchase Price* $3,000,000.00

Real Property, Improvements & Fixtures

(2,700,000.00)

Including Circles**

Personal Property *** (300,000.00) Excise Taxable Amount $ 2.7 Million Use Taxable Amount $300,000.00

• *The total Purchase Price is utilized for title insurance coverage, EXCEPTING the value of any Personal Property allocated thereon. Title insurance does not cover Personal Property which includes titled mobile homes. Should parties desire mobile homes and their values to be insured in the value of title insurance coverage, the titles thereto must be eliminated and become part of the real property.

• **All assets are excise taxable. Circles and appurtenances are considered personal property year round and owners pay personal property a year in arrears at all times, excepting only at the time of sale. At the moment of conveyance, Circles and appurtenances (motors and pumps) become real property and the moment after conveyance they revert back to personal property.

• ***All Personal Property (herein “PP”) sold is Use Taxable. Use tax must be paid to the Department of Revenue at the time of closing. You can go the Department of Revenue’s internet site and fill out the Use Tax Return and indicate where the personal property is located. You will then be directed to the location and code of the location of the PP and can compute the amount of taxes to be paid on the allocated amount of value, Use tax in Eastern Washington generally runs between 7.7% and 8.3%.

Current Use, Open Space Tax

Classification:

You will need to ascertain whether or not your real property being sold and purchased is in this tax classification. The Open Space Taxation Act, enacted in 1970, allows property owners to have their open space, farm and agricultural and timber lands valued at their current use rather than at their highest and best use. There are three types of land that qualify for current

use classification. They are Open Space Land, Farm and Agricultural Land and Timber land. If your Ag land transaction contains real property in Open Space or Farm & Ag classification, you will need to have the County in which the

Real Property resides, pre-approve the land for continuance prior to closing. In order to do so, most counties are in agreement that a 5-year farming plan (filled out and executed by the perspective Purchaser) and a proposed conveyance Deed and Excise Tax Affidavit must be presented for review and approval. However, there are some counties in Eastern Washington that will also require 3-5 years proof of income off of said real property to verify that the income criteria is being met, regardless of who was farming during said period.

Current Use, Open Space Tax

Classification:

If pre-approval cannot be obtained for whatever reason, the County has the legal right to go back (up to) 7 years and assess the taxes saved, together with interest and penalties and this amount must be paid at closing. Usually, unless the criteria cannot be met by purchaser to continue this tax classification due to perhaps developing the land for example, the Seller bears the burden to pay this penalty, as the Seller had the benefit thereof. On large Ag lands, this penalty can be extreme, depending upon the amount of time it has been in this classification and of course, the amount of acreage included.

Real Estate, Personal Property Taxes

and Irrigation Assessments:

Real Estate taxes and assessments for weed control and water district assessments are usually pro-rated at closing. Depending on the time of year an Ag land transaction is closed, depends on how pro-rations are completed.

Generally, a fiscal year is utilized for all real and personal property tax pro-rations at closing.

In dryland Ag transactions, there are no irrigation assessments to be pro-rated. In irrigated transactions, whether it be drip, rill, circle or handlines, the irrigation season generally runs from March 15 to October 15 each year and this is the season generally pro-rated for benefit and use.

Crops, Possession, Timing of Closing:

In most Ag closings, crops will be an intrinsic

factor of the entire transaction. Crops,

possession of crops, based upon harvesting,

watering, pruning (if orchards and vineyards)

and timing of closing will be critical components.

If extensions are required on closing dates all of

these factors will be collectively considered and

bargained for.

Special Liens:

You will recognize in many Ag land transactions special liens not usually found in commercial or residential closings.

One example of a special lien is a Line Extension Agreement for Electrical Power which will be of record and does in fact carry monetary burden to be assumed by a Purchaser. Big Bend Electrical Co-Op, a prominent Columbia Basin Electric Company has extended buried electrical lines to various farms and rather than assessing a large billing for supplying said line at one time initially, they have put into effect 33 year contracts, with owners, recorded the same and said Agreements (contracts) are paid off with amortized annual payments. You must learn to examine said Agreements to ensure your purchaser is fully advised of the annual monetary amount due,

remainder term and so forth. Post-Closing, purchaser is then responsible for completing documentation with the provider of said powerlines (in this example, Big Bend) to have said Agreement “transferred” to purchaser. This is not generally done with recordable documentation.

Leases and/or Contracts:

Leases and/or Contracts:

More often than not, Sellers and Purchasers enter into offers fully disclosing underlying Leases or Contracts, especially if there is a remainder term and they are unrecorded Leases for example. Often, a Subordination Agreement or other financing instruments of record may recite unrecorded Leases on Ag land and this could be the only reference you have that they are there, but not generally.

Always request information on any and all unrecorded Agreements (including Contracts and Leases) which may be in place prior to closing. If you are made aware of the fact that there are underlying Leases or Contracts, you must immediately obtain copies thereof and review the same for any and all obligations which may be present. You may encounter rights of first refusals, term extensions, options to purchase, residual affect language, notification requirements in the event of sales and the like. On Ag land, I often find unrecorded Grape Contracts, Contracts for Juice, Milk Contracts, CRP (Conservation Reserve Program) Contracts and you will either Assign them to Purchaser (while working with the entities that hold the Contracts) or Seller will be responsible for canceling them prior to closing.

Leases and/or Contracts:

Sometimes Seller or Purchaser will even buy out the remainder Contract or Lease tenant to move forward with no tenancy or obligations post-closing. Most often you as a Closing Agent will be responsible for pro-rating rents and other payments received by or owing to Seller at closing. CRP is a voluntary program for agricultural landowners. Through CRP you can receive annual rental payments and cost-share assistance to establish long-terms, resource conserving covers on eligible farmland. CRP Contract payments like Personal Property taxes are paid a year in arrears and this must be taken into consideration when pro-rating these payments at closing.

You may also easily deal with Hunting Right reserved in Leases, Leased equipment which has to be purchased at the time sale or continued depending upon the needs of the Purchaser. I see Propane Tanks leased by Sellers in orchards and for electric burners at times. You may encounter Leases for corrals or feed bins for cattle or leased milking equipment at times as well.

Underlying Encumbrances to be

Cleared by Seller:

In Ag transactions, more often than not, Sellers will have filed against them by secured creditors, UCC filings at both the County and State levels which need to be paid

and/or cleared at closing. All property filed County filings will be evidenced on your title commitment, however State filings will not be. I always order an instant UCC search at the State level and provide the results to my seller 2-3 weeks prior to closing. We examine the filings, usually finding that most filings no longer carry monetary burden, but simply need to be released to fully clear title against equipment, crops and other assets of Seller being sold.

Environmental Issues:

On most farmland, there are shops, chemicals, waste, etc. Quite often purchasers and their lenders will require Environmental testing, such as Phase 1 and Phase 2 reports, soil testing, well water testing and the like. Most agents will work with their clients to oversee these test and the results thereof, however, if no agents or

attorneys are involved, the Closing Agent may need to step in and oversee the completion, disbursing of results, etc. Generally if a lender is involved, the lender will step in and want their approved providers to do said testing. There are instances where remedy and cleanup are required and extensions put in place to continue closing until full performance of all clean-up.

Water Rights:

Water Rights:

I wanted to touch base on Water Rights briefly, but am certainly no expert thereon. On Ag land transactions in the Columbia Basin, when water rights are included, you will most certainly more often than not, be dealing with legal counselors and the Department of Ecology on the water rights.

Water Permits are not appurtenant to the land and as such are considered personal property. Permits can be assigned and applied for and you can change ownership thereof.

Water Certificates are appurtenant to specific parcels of real property and the name

on the Certificate prevails in said rights. Certificates run with the land, but only vested

owners of said real property can transfer Certificates.

Permits and Certificates are also transferred at times by Quit Claim Deeds. I believe the current charge with the Department of Ecology is $50.00 to apply for and assign Permits. You can access the Assignment form on DOE’s internet access site.

Please Note the Agreement Re: Grant of Easements, Access to and Use of Turnout, and Division of Irrigation Water attached as an example of how certain water rights between neighboring parties are handled.

AGREEMENT RE: GRANT OF EASEMENTS, ACCESS TO AND USE OF TURNOUT,

AND DIVISION OF IRRIGATION WATER

Panies

Abl>ro¥.L<pl Descrip ;

lllllllfl

aac.tii01IIUIIX3W.\IQ

@

AGREEMENT RE:GRANT OF EASEMEI'I'TS,

ACCESS TO AND USE OF TURNOUT, AND DIVI.SION OF I.RRIGATION WATER

.. i1:8h,LLC, 11..·,;,"'"Oiooll'ljjo.... ..b. . W?Ij'o. II&W 1N1

' I zzw: ilL.

Pins. orFU 30.39 & 40, BL II, Fnddin Cowlly,WA

Washington legally described on Exhibit "D" attached hereto and incorporated herein by this reference as though set forth fully herein. ("Parcel 4''); and

5. BJERKE is the owner of real property located in Franklin County, Wlshington

legally described on E:r.hibit "E"attached hereto and incorporated herein by this reference as though set forth fully herein. ("Parcel 5'');and

6. The location and configuration of the Parcell, Parcel2, Parcel3, Parcel4 and

Parcel 5 arc identified on the diagrams attached hereto collectively as Exhibit "F' and incorporated herein by this reference;and

7. RAVEN, BJERKE and PHF wish to establish easements upon portions of some of the Parcels and establish cer1ain rights, duties and obligations of the parties in relation thereto so

Asse.-'s Tu Puc.t Nos.;

12·0--5·3·0·-·02·3-··;1·2·0·-·5·3·()·.4·)·6·9·4·:·1-·2·0·-·lr·o·.·GII

that all of the parties wilt have the ability to obtain irrigation water and access to their respective

Parcel or Parcels;NOW, THEREFORE,

TWS AGREEMENT is made and entered into this 23 day of January,2006, by and between lOti £14 RIBS£ lbthCU:LCC; a Washington limited liability company( ,

and MOW C MER!&, Ell£13ti lb IIIII IiilE, husband and wife,.

fliiBiaflith arez naif 18;me.,a Washington corpantion, ('Jiftl'").

R ECITALS:

WITNESSETH:

For and in consideration of the above Recitals, the following terms, conditions,

covenants and agreements and other good and valuable consideration, the parties hereto mutually agree and covenant as follows:

l. PHF is lheowner of real property localed inFranklin County,WasbiDgton, legally I.

dc:acribed on Exblbit wA" attached hereto and incctpOralod herein by this refetenec, as though set forth fully herein ("Pareel I'');and

2. PHF is also the owner of real propeny loe&ted in Franklin County, Washington. lcsally descn'bed on Enlbit "8"attached hereto and iccorporated herein by this refc:mu:e, as though set forth fully hetein ("Parcel 2''); and

3. RAVEN is the ownet of real property located in Franklin County,Washingloo, legally dc:scn'bed on Exbibit "C" attached here«> and incorporated herein by this reference as though set forth fully herein. ("Parcel 3"); and

4. RAVEN is also lhe owne r of real property locaJed in Franklin Counly,

Grant of Easements.

1.1 RAVEN hereby grants, sets over and gives to BJERKE a perpetual, non-exclusive road easement 20 feet in width for the full right of access, including ingress and egress, to and from Parcel 5 running along the northern boundary of Parcel 4 ("the

Unit 30 Road'').

1.2 RAVEN hereby grants, sets over and gives to BJERKE, a perpetual, non­ exclusive easement for the full right of access, including ingress and egress, upon, across, over and under a 20 foot strip, the centerline of which commences at the weir ("the Unit 30 Weir") located at the northeast comer of Parcel 4, the location of which is illustrated on the map attached hereto as Exhibit "F" which is incorporated herein by this reference and thence runs west along the northern boundary of the Parcel 4, to the existing pump station and overflow pipe located

on the northern boundary of Parcel 4 ("the Unit 30 Pump Station'') the approximate location of which is identified on Exhibit "F', and thence continues along the nonh boundary of Parcel 4 to where the easement intersects the nonheast comer of Parcel 5, to use, operate, repair, replace and maintain the Unit

2.

AGREEMENT RE: GRANT OF EASEMENTS, ACCESS TO AND USE OF TURNOUT, AND DIVISION OF IRRIGATION WATER

QUO*CO TIT\.C UP.tlFtrilln C.O, Wit 111111111111111111111111111111

CHICACO TITLE AGR£[ 107.Q0 Fr•nldin Cc , WA

30 Weir, and the buried mainline which runs from the Unit 30 Weir to the Unit30

Pump Station and thence continues from the Unit 30 Pump Station to the northeast cornet of Paroel S ("the Unit 30 Mainline") which dcliv<=B irrigation watet from the Unit 30 Weir to Pazccl S and abo carries the irrigation water overflow from Pazccl 4 to Pm:el S.

1.3 If a conflict develops between RAVEN and BJERKE regarding the division or payment for irrigation wller dclivencd to Paroc:l 4 and Parcel S, and upon the re.:tlJCSt of either RAVEN or BJERKE, the wllcr delivery for Parcel 4 and Parcel S will be divided by the removal of the Unit 30 Weir and by the installation of a

double adjustable weir \the Unit 30 Double Weir") that will divide and mcasUIC

separately the imgation water delivered to Parecl4 and to Parcel S. The Unit 30

Double Wtilr will beb3scd upon a <h:sign approved by the South Columbia B35in

Irrigation District (''SCBID''). If the Unit 30 Double Weir is to be built, then RAVEN hereby grants, sets over and gives to BJERKE, a pclpC!ual, non­ exclusive casement for the full right ofaeeess,including ingress and egress, upon, across, over and under a 20 foot Slrip the centerline of which will commence at the Unit 30 Double Weir and will thence run west along the nonhcm boundary of Parcel 4 to the Unit 30 Pwnp Station and thence west along the northern boundary of Parcel 4 to where it intcnects the northeast comer of Parcel S to install,

construct, maintain, operate, repair, replace, locate and use the Unit 30 Double Weir and a buried pipeline (''the Bjetke Pipeline'') which will deliver irription water from the Unit 30 Double Weir through the Bjerke Pipeline to Parcel S. The

easements granted in this paragraph 1.3 shall take effect only in the event that tbc

Unit 30 Double Weir is to beconsbUCted in occondance with the provisions of this paragraph. In no event shJll the easements granted by this p.,.gnph 1.3 be

remised, tcrminllcd, waived or otherwise affected by passage of time.

1.4 BJERKE bcrcby grants, sets ovu and gives 10 RAYEN, a perpetual, non· exclusive easement for tbe full right of access, including ingress and egress to discharge the irrigation water overflow from Parcel 4 through the mainline ("the Bjerke Mainline") Joeatcd on Parcel S. RAVEN shall discharge all irrigation water overflow fiom Pm:el 4 into the overOow at the Unit 30 Pump Station, through the Unit 30 Mainline to Parcel S.

J.S RAYEN reserves the use of the Unit 30 we.r, and if applicable the Unit 30

Double Weir, and further reserves the ownership and use of the Unit 30 Rood, the

Unit 30 Mainline, and the Unit 30 Pump Station for access and to provide irrigation water to Parocl 4 PROVIDED, HOWEVER, thai RAVEN's use shall not in any way impede, limit or prevent BJERKE's access to Pazcel S or BJERKE's right to obtain irrigation water to ParcelS.

3.

1.6 RAVEN grants, sets over and gives to PHF, a perpetual, non-exclusive road easement ("the Unit 39 Road'') 20 feet in width for the full right of access, including ingress and egress which commences at Scootney Road immediately adjacent to the Unit 39 Pump Station (defined in paragraph 1.7 hereafter) approximatelyI000 feet south of the northeast comer of Unit 39 and thence runs west along the existing road which bi-sects the orchard located on Parcel 3 to where said easement area intersects the east boundary of Parcel 2. The location of the Unit 39 Road is shown on Exhibit "F'.

1.7 RAVEN grants, sets over and gives to PHF a perpetual, non-exclusive easement for the full right of access, including ingress and egress, upon, across, over and under a 20 foot strip the centerline of which commences at the pump station located adjacent to Scootney Road along the eastern boundary of Parcel 3 ("the Unit 39 Pump Station'') the location of which is identified on Exhibit "F" and thence runs west along the same path as the Unit 39 Road to where said easement area intersects the east boundary of Parcel 2 and from the Unit 39 Pump Station south to that portion of the northern boundary of Parcel 1which abuts the Unit 39

Pump Station to install, construct, maintain operate, repair, replace, locate and use the Unit 39 Pump Station, the overflow pipe located at the Unit 39 Pump Station, the buried mainline which is connected to the Unit 39 Pump Station and runs west to the east boundary of Parcel 2 ("the Unit 39 Mainline'') and a buried irrigation water mainline (''the PHF Unit 40 Mainline'') for the purpose of delivering irrigation water to Parcel 1and to Parcel-2.

1.8 If a conflict develops between RAVEN and PHF regarding the division or payment for irrigation water delivered to ParcelI,Parcel 2 and Parcel 3, and upon the request of either RAVEN or PHF, the water delivery for Parcel 1, Parcel 2 and Parcel 3 will be divided by removing the existing weir ("the Unit 39 Weir") and by installing a new double adjustable weir (''the Unit 39 Double Weir'') at the Unit 39 Pump Station which will divide and measure separately the amount of irrigation water delivered to Parcel 3 and the amount of irrigation water delivered to Parcel 1 and Parcel 2. The Unit 39 Double Weir will be based upon a design approved by the SCBID. In such event, PHF shall have the right to install its own pump station (''the PHF Unit 39 Pump Station'') immediately adjacent to the Uni t

39 Pump Station and install and connect to the PHF Unit 39 Pump Station and a new mainline ("the PHF Unit 39 Mainline") adjacent to the Unit 39 Mainline. If the PHF Unit 39 Pump Station is to be built, then RAVEN hereby grants, sets over and gives to PHF, a perpetual non-exclusive easement for the full right of access,including ingress and egress,upon, across, over and under a area 60 feet in circumference around the center of the Unit 39 Pump Station together with a 20 foot strip the centerline of which commences at the Unit 39 Pump Station and thence continues west along the same path as the Unit 39 Road to where said easement area intersects the east boundary of Parcel 2, and from the Unit 39

4.

AGREEMENT RE: GRANT OF EASEMENTS, ACCESS TO AND USE OF TURNOUT:

AND DIVISION OF IRRIGATION WATER

Pump Station south to that portion of the northern boundary of Parcel 1 which abuts the Unit 39 Pump Station. to install, construct, maintain, operate, repair, replace, locate and use the Unit 39 Double Weir, the PHF Unit 39 Pump Station, the PHF Unit 39 Mainline and the PHF Unit 40 Mainline for the pUJlXlse of delivering inigation water to Pare)
1.9 PHF grants, sets over and gives to RAVllN a perpetual non-exclusive easement for the full right of access, including ingress and egress to discharge RAVEN's overflow water into the overflow at the Unit 39 Pump Station through the buried pipeline ("the Overflow Pipe'') located on Parcel Iand into the open ditch that runs along the east boundary of Parcel Iand the east and southern boundaries of Parcel l. RAVEN shall discharge all of its waste water from Parcel 3 through the Overflow Pipe and into the open ditch on Parcel I.
I.IVEN reserves the use of the Uoit39 Weir, and the Unit 39 Double Weir, and
the ownership and use of the Unit 39 Road, Unit 39 Pump Station and Unit 39
Mainline for aoeess and to provide irrigation water to Parcel 3, PROVIDED,
HOWEVER, that RAVEN's usc shall not in any way impede, limit or prevent

PHF's access to Parcel 2 or prevent the delivery of inigation water from the Unit

39 Pump Station or if applicable the PHF Unit 39 Pump Sution to Parcel I or

Parccl2.

1.11 By an Agreement dated March 30, 1994 and recorded June 22, 1994 as Auditor's Instrument No. 511023, records of Franklin County, Washington, ("the Carsten Agreement") PHF was granted a perpetual, exclusive right of way and casement

I 0 feet of width the center of a lineof which commences at the weir known as the

27A 3 lateral located approximately on the northeast comer of Farm Unit 39 and
extends in the southemly diroction approximately 980 feet to install, construct,
operate,maintain, remove, repair, replace and usc the weir and a buried inigatioo pipeline for the purpose of conducting inigation water from the weir to Parcel I, Paroel 2 and Parcel 3. PHF grants, assigns, sets over and gives to RAYEN, an undivided interest in the easements cre31ed in the Carston Agreement for the benefit of Parcel 3and PHF reserves an undivided interest in the easement created in the Carston Agreement for the benefit of Parcel l and Parcel2. RAVEN and PHF will equally share the costs to install, repair, maintain and use the buried inigation pipeline that is the subject of the Carston Agreement.
1.12 The parties acknowledge that PHF's circle which is centered on Parcel I ("the Unit 40 Circle") is not currently connected to the Unit 39 Pump Sration. RAVEN grants to PHF the irrevocable rig)tt to connect the Unit 40 Circle to the Unit 39
Pump Station at any time.
2. Water for Food Plots. BJERJ<E maintains small food plats on Parcel 5 for

s.

wildlife habitat that consists of approximately 2 acres. Water for the food plots is supplied through a solid set system and is obtained from the Farm Unit 30 Pump Station. RAVEN will allow BJERKE to= the Farm Unit 30 Pump Station to furnish adequate water to the food plots at noeost or expense to BJERKE.
3. Maintenance Reoair and Replacement.
3.1 The costs to maintain and repair the Urut 30 Road shall be paid by RAVEN until such time has BJERKE withdraws Parcel 5 from the Conservation Reserve Program and plants crops and commences inigating Parcel 5 at which time the costs to mainlain and repair the Unit 30 Road shall be paid one-half by RAYEN and one-half by BJERKE.
3.2 1bc costs to maintain, repair or replace the Unit 30 Mainline shall be paid by RAYEN until such time has BJERKE withdraws Parcel 5 from the Conservation Reserve Program and plants crops and commences inigating Parcel 5 at which point the costs to maintain, repair or replace the Urut 30 Mainline shall be paid one-half by RAYEN and one-half by BJERKE. The provision set fonh notwithstanding, in the event that the Unit 30 Double Wcir and Bjetke Pipeline are installed pursuant to provisions of paragraph 1.3 above, then in such event the costs to remove the Unit30 Weir, to purchase and install the Unit 30 Double Weir and the Bjerke Pipeline shall be paid one-half by RAYEN and one-half by BJERKE. Thereafter BJERKE shall pay for the costs to maintain, repair or replace the Bjerke Pipeline and RAYEN shall pay for all costs to maintain, repair or replace the Urut 30 Mainline.
3.3 The costs to maintain, repair or replace Unit 30 Pump Station shall be paid by
RAVEN.
3.4 The cost to maintain, repair or replace the Bjerke Mainline on Parcel 5 shall be paid one-half by BJERKE and one-half by RAYEN.
3.5 The costs to maintain the Unit 39 Road shall be paid one-half by RAVEN and one-half by PHF.
3.6 Except as otherwise as set forth in this paragraph, the costs to install, maintain, repair and replace the Unit 39 Pump Station and the Unit 39 Mainline shall be paid one-half by PHF and one-half by RAVEN. The provisions set forth in this paragraph above notwithstanding, in the event fuat the Unit 39 Double Weir and PHF Unit39 Pump Station and PHF Unit 39 Mainline are installed pursuant to the provisions of paragraph 1.8 above, then in such even! the costs to remove the Unit
39 Weir, to purchase and install the Unit 39 Double Weir, the PHF Unit 39 Pump Station and the PHF Unit 39 Mainline shall be paid one-half by RAYEN and one­ half by PHF. Thereafter, Plif shall own the PHF Unit 39 Pump Station and the
6.

AGREEMENT RE: GRANT OF EASEMENTS, ACCESS TO AND USE OF TURNOUT: AND DIVISION OF IRRIGATION WATER

OUCAGO t£"11.£ At:! ££ 137.eG FrWlln Cc , WA

PHF Unit 39 Mainline. Following installation, PHF shall pay for the costs to maintain, repair or replace the PHF Unit 39 Pump Station and the PHF Unit 39
Mainline and RAVEN shall pay for the cosls to maintain, repair and replace the
Unit 39 Pump Station and the Unit 39 Mainline.
3.7 PHF shall pay for the coSis 10 maintain, repair or replace the PHF Unit 40

Mainline.

3.8 The cosls to maintain,repair or replace the Overflow Pipe shall be paid one·half by RAVEN andone-halfbyPHF.
3.9 In the event that the costs of maintenance, repair or repla<:cment are caused by the acts or omissions of any party, then in such event and the provisions set forth in the panographs above notwithstanding, the party causing ouch damage shall be responsible to pay for the cosls of maintenance, repair or replacement caused by such act or omission and all damages including, without limitation. crop damages.
4. Udlltv Charges,
4. I RAVEN shall pay for all utility charges relating to the Unit 30 Pump Station.
4.2 Except as otherwise set forth in this paragraph, so long as lbe Unit 39 Pump Station is delivering irrigation water 10 Parcel 1 and Parcel 2, the utility charges for the Unit 39 Pump Station shall be based upon lhe number of irrigable acres that the Unit 39 Pump Station delivers water to in Parcel 3 as compared to Parcel I and Parcel 2. For example, if the number of irrigable acres in Parcel 3 is equal to the number of irrigable acres in Parcel I and Parcel 2, then RAYEN would pay one·halfandPHFwould payon halfofthe
Pump Station. The provisions set forth in !fie this paragraph 4.2 above notwithstanding, in the event that the PHF Unit 39 Pump Station is installed, then RAVEN shaH thereafter pay for all utility charges incurred at the Unit 39 Pump
Station and PHF shall pay for all utility charges incurred at the PHF Unit 39
Plllllp Station.
S. Failure to Pay. In the event any party fails to pay his share of the costs as set forth in this Agreement {"Non·payin!; Party''), within thirty (30) days of the date the coSis were incurred, the paying parties (the "Paying Parties''} shall have the right, but not the obligation, to pay the Non-payil\g Party's share. lnsuch event, the Non-paying Party shall pay to the Paying Parties, their share of the costs, together with interest thereon at the rate of twelve percent (12%) per annum from thedate the cost was incurred until paid.
7.
6. Irrigation Water Division. The owner of Parcel 4 shall be designated as water master for Unit 30 and the owner of Parcel 3 shall be designated as water master for Unit 39 and 40. If the owner of the Unit 40 Circle elects to connect to the Unit
39 Pump Station, the owner of Parcel 3 sbaiJ continue to act as water master for Parcels 1.2 and 3. The watcr master shall be the only person authorized to place orders for inigation water deliveries to Parcel I , Parcel 2, Parcel 3, Parcel 4 and Parcel 5. Each Parcel shall cacb be entitled to receive irrigation water delivered by the South Columbia Irrigation District f'the District") according to the base allotment of irrigable acres contained in each Parcel. The parties agree that they shall pay before delinquency all assessments for the delivery of irrigation water to their respective Parc.cls assessed against or imposed upon tllem by the District or its successors. The water master shall keep a dairy accurately setting forth water that is ordered to Parcel I , Parcel 2, Parcel 3, Parcel 4 and Parcel 5. Supplemental and excess water charges for each unit sbaU be charged to RAYEN unless the water master can demonstrate that the base allotment was exceeded on Parcel I, Parcel 2 or Parcel 5. No party shall prevent any other party from receiving their share of the irrigation water provided by the District. Bach party will work with the other to insure that water is delivered to each Parcel timely and in adequate amounts to meet the irrigation needs of each party.
6.1 In the event the District rations water below the base quantity for each parcel set forth above, the parties agree that any imposed restrictions will be equally shared by them to ensure that each continues to receive their proportionate share of irrigation water.
7. Default. Any party shall be in default under the terms of this Agreement, if that Party shall fail to fully and timely perform any term, covenant or condition required of tllat party under the terms of this Agreement. ln the event of default, the non efaulting
Agreement, and all rights and remedies at law or in equity including without limitation the right to specifically enforce this Agreement, all without suffering an election of remedies.
8. Binding AgreemenL The panics agree that this agreement, all terms, conditions, agreements herein contained and all casements granted herein shall be binding on their heirs, devisees, successors and assigns and thaf all terms, conditions, and agreements berein and all easements granted herein are covenants that shall run witb, bind and be appurtenant to the subject lands which are described above. This agreement, all terms, conditions and agreements herein and all casements granted herein shall become effective on the day and year first above written and shall be perpetual.
9. CollstrnctionNenue. This agreement shall be construed in accordance with the

8.

AGREEMENT RE: GRANT OF EASEMENTS, ACCESS TO AND USE OF TURNOUT,

AND DIVISION OF IRRIGATION WATER

IliN11111111 11 IIIII

Illt ;I;

CHICAGO TITLE GREE 107.80 Franklin Co, WA

laws of the State of Washington. Venue of any court proceedings or action arising out of or relating to this agreement shall be in Franklin County, Washington.

I 0. Attol'!leya Fees BDd Cost.. In any proceedings to enforce or construe this agreement, the prevailing party shall be entitled to recover from the other party a reasonable attorney's fee and all of said prevailing party's costs and expenses.

11. Ameadmenb. This agreement shall not be modified or amended orally. Any amendments to or modifications of this agreement shall be in writing and shall be signed by all parties and attached to the original agreement.

IN WITNESS WHEREOF, the parties have hereunder set their hands and seals on the day and year ftrSt above written.

STATE OF WASHINGTON

,County of Franklin

I certify thatI know or have satisfactory evidenthat II II IIlliI!!IIis the person who appeared before me, and said penon acknowledged that he signed thisinstrument, on oath stated that be was authorized to execute the instrument and acknowledged it as the

9.

Water Rights:

Domestic and Irrigation Wells will be found on most

farms and will be transferred at closing as they are part of

the real property. You will also note many Well and

Water Right Agreements of record which “share” well

water and burdens (costs) and the like for maintaining

wells, easements thereto. Many Agreements of this

nature “run with the land” and inure to successors and

assigns of real property, however, there are exceptions to

this and in those instances, provisions must be provided

for on the use of all parties hooked up to and utilizing the

well water for their homes and sometimes their yards.

Leasehold Improvements on Real

Property:

Leasehold Improvements on Real

Property:

Let’s touch base on Leasehold Improvements which are insurable but where seller does not own the real property upon which the improvements reside. For example,

Seller has a 50 year lease with the owner of real property, and builds a large potato storage facility thereon. Seller sells the facility to Purchaser and wants the Lease assigned. Once permission is granted, if necessary, by land owner, the Lease can be assigned (of record) and a Special Warranty Deed can be utilized to record the improvement (only) conveyance. Up until a few years

ago, in Eastern Washington, a Bill of Sale or Quit Claim Deed may have been utilized but not recorded. That lends no notice of record of ownership.

1031 Tax Deferred Exchange in Ag

Land Transactions:

Generally, 1031 Exchanges are going to be streamlined as in any other land transaction, however, equipment, animals and other Ag related particulars can bring new dimensions to

1031 exchanges. Always consult with a well versed 1031 Facilitator prior to closing Ag land transactions.

Conveyance Documentation:

Provided your Purchaser is paying all cash for said Real and Personal Property, your conveyance documentation is fairly simple. Generally it is bargained (if Seller has been in constant possession) that a Statutory Warranty Deed will be granted upon which I include all improvements, barns, pole buildings, sheds, homes, mobile homes, circles and appurtenances incident thereto. Personal Property is conveyed by a Bill of

Sale with value thereon recited. The Use Tax Return also evidences the same list as is on the Bill of Sale AND the same list that is attached to the Excise Tax Affidavit as being exempt from excise tax. You must indicate on the Excise Tax Affidavit that Use Tax is being paid to the Department of Revenue and attach the list verifying the value of each individual item of Personal Property.

Conveyance Documentation:

If your Seller is carrying a Contract (as provided for in the example transaction) on the balance of the purchase price, generally a Real Estate Contract or Mortgage will be utilized and the documentation can be much more extensive. If you need to secure personal property, you may need to prepare and have filed, a UCC-1 Financing Statement, a UCC-2

Fixture Filing, Security Agreements, Contracts, True Contract Collection accounts to collect, make payments and do all accounting on all contract payments during the term of the Contract between Seller and Purchaser.

Real Estate Commissions:

There are numerous instances where R. E. Commissions are deferred on Seller carry-back transactions. In essence, the Realtor is paid as the Seller is paid.

Please Note the information in your handout entitled Promissory Note and Supplemental Escrow Instructions on a Deferred Commission structure, so as not to encumber Seller’s title further nor place further security documentation of record

PrornJssory Note

Promissory Note

$165,000.00 January 31. 2007 Kennewi ck, WA.

LATE CHARGE: If Holder received any installment payment more than

,days (15 days if not filled in) afler its due date, then a late payment

charge of S , or percent ( %) of the installment payment

' rlnc:lpal Amount due

Date

(%%of the installment payment if neither is filled in) shall be added to the scheduled

payment.

Commission due from the Purchase Sale ofthetllllilllltl•••••••!lll••

Sale Price $3,000,000. 5 \1,% commission for a total of$165,000.00. No interest is

due or accruing on this note, (0% I nterest) unless in Default.

"Maker"·

Hereinnfler "Holder".

DUE OF SALE: (OPTIONAL-Not applicable unless initialed by Holder and Maker to this Note) If this Note is secured by a Deed of Trust or any other instruments securing repayment of t his Note, the property described in such security instruments may not be sold or transferred without the Holder's consent. Upon breach of this provision, Holder may declare all sums due under this Note immediately due and payable, unless prohibited by applicable law.

INSTALLMENT PAYMENTS:

I. $75,000.00 first payment due at closing on 2 -tr-r -0'1- Maker (initials) Holder (initials)

2. $45,000.00 2nd payment due I"of August 2007 when the first payment is due from the Andrewjeski's

3. $45,000.00 3"' and final payment due I"of February 2008 when the second payment is due from the Andrewjeski' s

The above described installments # 2 & II 3 are due and payable to Clark JeMings & Associates, Inc. when payments hove been received by Maker. The REAL ESTATE CONTRACT. which has been placed in escrow at AMERJTJTLE COLLECTION ESCROW DEPARTMENT PO BOX 617 ELLENSBURG, WA. 98926 (509)-925·

1477 . Escrow agent is instntctcd to make said installments to Clark Jennings &

Associates, Inc. immediately upon receipt of payments from buyers · Escrow instructions provide for this payment.

DUE DATE: ·nte entire balance of this Note together with any and interest accmed

ACCELERATION: If Maker fails to make any payment owed under this Note, or if Maker defaults under any Deed of Trust or any other instruments securing repayment of the Note, and such default is note cured within days (30 days if not filled in) afler written notice of such default, then Holder may, at its option, declare all outstonding sums owed on this Note to be immediatelydue and payable, in add ition to any other rights or remedies that Holder may have under the Deed of Trust or other instruments securing repayment of this Note.

ATTORNEY'S FEES AND COSTS: Maker shall pay all costs incurred by Hold er in collecting sums due und er this Note after a default, including reasonable anomeys' fees, whether or not suit is brought. J f Maker or Holder sues to enforce this Note or obtatn a declaration of its rights hereunder, the prevail i ng party in any such proceeding shall be entitled to recover its reasonable attorneys' fees and costs incurred in the proceeding (including those incurred in any bankruptcy proceeding or appeal) from the non· prevailing party.

thereon shall be due and payable in full on I " February 2008. No interest to accrue WAIVER OR PRESENTMENTS: Maker waives presentment for payment, notice of dishonor, protest and notice of protest.

DEFAULT INTEREST: After maturity, or failure to make any payment, any unpaid principal shall accrue interest at the rate of !lpercent ( 12 %) per annum (18% if not filled in) OR the maximum rate allowed by law, whichever is less, during such period

of Maker's default under this Note.

ALLOCATION OF PAYMENTS: Each payment shall be credited first to any late charge due, second to interest, and the remainder to principal

PREPAYMENT: Maker may prepay all or pan of the balance owed under this Note at any time without penalty.

CURRENCY: All principal and interest payments shall be made in lawful money of the

NON-WAIVER: No foilurc or delay by Holder in exercising Holdcr"s rights under this

Note shall be a waiver of such rights.

SEVERABI LITY: If any clause or any oUter portion of this Note shall be determined to be void or unenforceable for any reason,such determination shall not affect the validity or enforceability of any other clause or portion of this Note,all of which shall remain in full force and effect

INTEGRATION: There are no verbal or other agreements, which modify or affect the terms of this Note. This Note may not be modified or amended except by written agreement signed by Maker and Holder.

Uni ted States. CONFLJCTfNG TERMS: In the event of any conflict between the terms of this Note and the terms of any Deed of Trust or other instruments securing payment of this Note. the terms of this Note shall prevail.

EXECUTION: Each Maker executes this Note as a principal and not as a surety. If there is more than one Maker, each such Maker shall be jointly and severally liable under this Note.

Promissory Note

COMMERCIAl,PROPERTY: (OPITIONAL-Not applicable unless initialed by Holder and Maker to this Note) Maker represents and warrants to Holder that the sums represented by this Note are being used for business, investment or commercial purposes, and not for personal. family or household purposes.

Maker (initials) Hl

.• .

ORAL AGREEMENTS: ORAL AGREEMENTS OR ORAL COMMITMENTS TO

LOAN MONC:Y, TO EX'f.END CREDIT. OR TO FOREBEAR FROM ENPORClNG REPAYMENT OF A DEDT ARE NOT ENFORCEABLE UNDER WASHINCTOK LAW.

DBFINI'fiONS: The word Maker shall be construed interchangeably with the words Borrower or Payer and the word Holder shall be construed interchangeably with the words Lender or Payee. In this Note, singular and plural words shall be construed interchangeably as may be appropriated in the context and circumstances to which such words apply.

ADDITIONAL TERMS AND CONDITIONS: (check one)

a. () NONE OR

b. ( )As set forth on the attached "Exhibit A" which is incorporated by this reference.

(Note: If neither a orb is checked, then option "a" applies)

THIS NOTE IS SECURED BY ( ) DEED OF TRUST, ( ) MORTGAGE, (

OF EVEN DATE.

MAKER (signatures)

SEE ATTACHED 1\S I':XIliUlT "A"

MAKER'S Address for illl notices given by Holder under this Note:

Adtln:u: City, Stare Zip Codt

DO NOT DESTROY THIS NOTE

WHEN PAID THIS ORJGINAL NOTE TOGETHER \'VlTH THE DEED OF

TRUST SECURI NG TI-lE SAME, MUST BE SURRENDERED TO THE TRUSTEE FOR CANCELLATION AND RETENTION BEFORE ANY

RECONVEYANCE CAN BE PROCESSED.

Supplemental Escrow Instructions

SUPPLEMENTAL ESCROW INSTRUCTIONS

SELLERS:

Thereafter, please remit all payments made hereunder to the Sellers In their respective percentages above listed, until Purchaser has performed in full, which shall be on or before the day of 2012, on which date the entire principal and all accrued interest tbeo·eon shall be due and payable.

PURCHASERS: When Purchaser bas performed fully hereunder, you shall deliver to Purchaser, the

original Real Estate Contract, Warranty Fulfillment Deed, both Bills of Sale and shall terminate this Escrow.

LEGAL DESCRIPTION: Dated this day of _,2007.

See Attached hereto as Exhibit"A" and incorporated herein by this

reference. SIGNATURE LINES

TERMS OF PAYME T UNDER REAL ESTATE CONTRACT:

See "Price" paragra ph from Real Estate Contract dated February ,

2007, attached hereto as Exhibit "8" and incorporated herein by this

reference, including the 5 year balloon payment.

PROMJSSORY NOTE

EXECUTED BY SELLERS TO PAY DEFERRED

COMMISSIONS THROUGH ESCROW

See copy of Original Promissory Note dated February

, 2007,

attached hereto as Exhibit "C" (the original being held by Clark

Jennings and Associates, Inc., Address:·- ------- --'

You arc hereby Instructed that from all Contract payments received on the dates indicated they are due in the Real Estate Contract, you arc to FIRST pay the Commission due Clark Jennings & Associates, Inc. at the address indicated above, and then pay the balance of each payment received to the Sellers above Indicated in their respedive ownership Interest, until the Commission due has been paid in full, at which time Clark Jennings & Associates, Inc.will ma rk their Promissory Note "Paid in Full" a nd forward a copy thereof to each Seller.

If you have any questions in the future,

you can reach me at:

Bonnie Thompson Commercial/Ag Escrow Manager, LPO Chicago Title Insurance Co.

8102 W Grandridge Blvd., Suite B PO Box 6740

Kennewick, WA 99336 (509) 735-1575, Ext. 310

Cell (509) 591-5794

Fax (509) 735-0707