10-Q

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10–Q

/x/
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2001

or

/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                to               

Commission file number 1-8885

THE NEWHALL LAND AND FARMING COMPANY
(a California Limited Partnership)
(Exact name of Registrant as specified in its charter)

California (State or other jurisdiction of incorporation or organization)	95-3931727 (I.R.S. Employer Identification No.)
23823 Valencia Boulevard, Valencia, CA (Address of principal executive offices)	91355 (Zip Code)

(661) 255-4000
(Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /x/  No / /

At March 31, 2001, 26,253,833 partnership units were outstanding.

PART 1.  FINANCIAL INFORMATION
Item 1.  Financial Statements

Consolidated Statements of Income

			Three Months Ended March 31,
In thousands, except per unit
			2001			2000
Revenues
Real estate
	Residential home and land sales		$	106		$	8,388
	Industrial and commercial sales			8,375			2,585
	Commercial operations
		Income-producing properties		10,889			14,327
		Valencia Water Company		2,456			2,411
				21,826			27,711
Agriculture operations				708			653
	Total revenues		$	22,534		$	28,364
Contribution to income
Real estate
	Residential home and land sales		$	(731	)	$	2,778
	Industrial and commercial sales			2,123			199
	Community development			(1,606	)		(2,020	)
	Commercial operations
		Income-producing properties		4,251			6,897
		Valencia Water Company		484			599
				4,521			8,453
Agriculture operations				394			407
Operating income				4,915			8,860
General and administrative expense				(2,185	)		(2,243	)
Interest and other, net				(1,691	)		(3,420	)
Net income			$	1,039		$	3,197
Net income per unit			$	0.04		$	0.11
Net income per unit — diluted			$	0.04		$	0.11
Number of units used in computing per unit amounts:
	Net income per unit			26,397			28,944
	Net income per unit — diluted			26,664			29,313
Cash distributions per unit:
	Regular		$	0.10		$	0.10
	Special			0.10			0.35

2

Consolidated Balance Sheets

In thousands		March 31, 2001		December 31, 2000
ASSETS
Cash and cash equivalents		$	4,211	$	3,717
Accounts and notes receivable			8,889		17,154
Land under development			64,836		63,155
Land held for future development			22,419		22,419
Income-producing properties held for sale, net			15,042		12,720
Income-producing properties, net			144,373		147,785
Property and equipment, net			69,360		67,631
Investment in joint venture			547		591
Other assets and deferred charges			16,932		16,536
		$	346,609	$	351,708
LIABILITIES AND PARTNERS' CAPITAL
Accounts payable		$	24,669	$	28,267
Accrued expenses			53,366		68,932
Deferred revenues			4,111		3,137
Mortgage and other debt			99,861		74,557
Advances and contributions from developers for utility construction			32,979		32,166
Other liabilities			25,439		25,445
	Total liabilities		240,425		232,504
Partners' capital
26,254 units outstanding, excluding 10,518 units in treasury (cost-$250,868), at March 31, 2001 and 26,590 units outstanding, excluding 10,182 units in treasury (cost-$242,098), at December 31, 2000			106,184		119,204
		$	346,609	$	351,708

3

Consolidated Statements of Cash Flows

			Three Months Ended March 31,
In thousands
			2001			2000
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	1,039		$	3,197
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		2,782			2,510
		Increase in land under development		(15,211	)		(16,121	)
		Cost of sales and other inventory changes		4,363			6,441
		Decrease in accounts and notes receivable		8,265			10,574
		Decrease in accounts payable, accrued expenses and deferred revenues		(9,023	)		(4,631	)
		Cost of property sold		169			55
		Other adjustments, net		(26	)		5
	Net cash (used in) provided by operating activities			(7,642	)		2,030
CASH FLOWS FROM INVESTING ACTIVITIES:
	Development of income-producing properties			(1,322	)		(6,159	)
	Purchase of property and equipment			(2,644	)		(2,043	)
	Distribution from (investment in) joint venture			44			(195	)
	Net cash used in investing activities			(3,922	)		(8,397	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions paid			(5,289	)		(13,046	)
	Increase in mortgage and other debt			25,304			58,168
	Increase in advances and contributions from developers for utility construction			813			2,921
	Purchase of partnership units			(10,014	)		(39,305	)
	Issuance of partnership units			1,244			1,048
	Net cash provided by financing activities			12,058			9,786
Net increase in cash and cash equivalents				494			3,419
Cash and cash equivalents, beginning of period				3,717			1,624
Cash and cash equivalents, end of period			$	4,211		$	5,043

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.  Accounting Policies

The consolidated financial statements include the accounts of The Newhall Land and Farming Company and its subsidiaries, all of which are wholly-owned (collectively, "the Company"). All significant intercompany balances and transactions are eliminated.

The Company's unaudited interim financial statements have been prepared in conformity with generally accepted accounting principles used in the preparation of the Company's annual financial statements. In the opinion of the Company, all adjustments necessary for a fair presentation of the results of operations for the three months ended March 31, 2001 and 2000 have been made. The interim statements are condensed and do not include some of the information necessary for a more complete understanding of the financial data. Accordingly, your attention is directed to the footnote disclosures found on pages 26 through 38 of the December 31, 2000 Annual Report on Form 10-K and particularly to Note 2 therein which includes a summary of significant accounting policies. Certain reclassifications have been made to prior period's amounts to conform to the current period presentation.

Interim financial information for the Company has substantial limitations as an indicator for the calendar year because:

•

Land sales occur irregularly and are recognized at the close of escrow or on the percentage of completion basis if the Company has an obligation to complete certain future improvements and provided profit recognition criteria are met.



•

Sales of income properties and non-developable farmland occur irregularly and are recognized upon close of escrow provided profit recognition criteria are met.



•

Agricultural crops are on an annual cycle and income is recognized upon harvest. Most major crops are harvested during the fall and winter.

Note 2.  Details of Land Under Development

(In $000)		March 31, 2001		December 31, 2000
Residential development		$	33,138	$	25,154
Industrial and commercial land development			30,949		37,689
Agriculture			749		312
	Total land under development	$	64,836	$	63,155

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Note 3.  Details for Earnings per Unit Calculation

(in 000's except per unit)		Income (numerator)		Units (denominator)	Per Unit
For three months ended March 31, 2001
Net income per unit
	Net income available to unitholders	$	1,039	26,397	$	0.04
Effect of dilutive securities
	Unit options		—	267		—
Net income per unit—diluted		$	1,039	26,664	$	0.04
For three months ended March 31, 2000
Net income per unit
	Net income available to unitholders	$	3,197	28,944	$	0.11
Effect of dilutive securities
	Unit options		—	369		—
Net income per unit—diluted		$	3,197	29,313	$	0.11

Note 4.  Details of Income-Producing Properties, Income Producing Properties Held for Sale and Property and Equipment

(In $000)		March 31, 2001			December 31, 2000
Income-producing properties
	Land	$	36,593		$	34,822
	Buildings		131,963			106,916
	Other		3,240			10,468
	Properties under development		4,164			25,780
			175,960			177,986
Accumulated depreciation			(31,587	)		(30,201	)
		$	144,373		$	147,785
Income-Producing Properties Held for Sale
	Office	$	11,223		$	8,503
	Other		7,311			7,311
			18,534			15,814
	Accumulated Depreciation		(3,492	)		(3,094	)
		$	15,042		$	12,720
Property and equipment
	Land	$	3,759		$	3,759
	Buildings		5,974			5,974
	Equipment		9,527			9,470
	Water supply systems, orchards and other		83,778			81,620
	Construction in progress		5,514			5,545
			108,552			106,368
	Accumulated depreciation		(39,192	)		(38,737	)
		$	69,360		$	67,631

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Note 5.  Business Segment Reporting

    The following table provides financial information regarding revenues from external customers, income and total assets for the Company's business segments and also provides a reconciliation to the Company's consolidated totals:

		Three months ended March 31, 2001
(In $000's)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	106	$	(726	)	$	18,665
	Industrial and commercial		8,375		2,136			41,082
	Community development		—		(1,593	)		28,033
	Income-producing properties		10,889		4,253			171,703
	Valencia Water Company		2,456		487			68,166
Agriculture			708		396			8,131
Central administration			—		(2,148	)		10,829
			22,534		2,805			346,609
Interest and other, net			—		(1,691	)		—
Other			—		(75	)		—
		$	22,534	$	1,039		$	346,609
Real Estate
	Residential	$	8,388	$	2,796		$	32,241
	Industrial and commercial		2,585		231			123,784
	Community development		—		(1,994	)		21,413
	Income-producing properties		14,327		6,903			252,516
	Valencia Water Company		2,411		607			61,459
Agriculture			653		411			8,904
Central administration			—		(2,137	)		13,430
			28,364		6,817			513,747
Interest and other, net			—		(3,420	)		—
Other			—		(200	)		—
		$	28,364	$	3,197		$	513,747

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Item 2.  Management's Discussion and Analysis of Financial Condition and Results of Operations

Results of Operations

Comparison of First Quarter of 2001 to First Quarter of 2000
Unaudited

The amounts of increase or decrease in revenues and income from the prior year first quarter are as follows (in 000s, except per unit):

				Three months
				Increase (Decrease)
				Amount			%
Revenues
	Real Estate
		Residential home and land sales		$	(8,282	)	-99	%
		Industrial and commercial sales			5,790		224	%
		Commercial operations
			Income-producing properties		(3,438	)	-24	%
			Valencia Water Company		45		2	%
					(5,885	)	-21	%
	Agriculture operations				55		8	%
Total revenues				$	(5,830	)	-21	%
Contribution to Income
	Real Estate
		Residential home and land sales		$	(3,509	)	-126	%
		Industrial and commercial sales			1,924		967	%
		Community development			414		20	%
		Commercial operations
			Income-producing properties		(2,646	)	-38	%
			Valencia Water Company		(115	)	-19	%
					(3,932	)	-47	%
Agriculture operations					(13	)	-3	%
Operating income					(3,945	)	- -45	%
General and administrative expense					58		3	%
Interest and other, net					1,729		51	%
Net income				$	(2,158	)	-68	%
Net income per unit				$	(0.07	)	- -64	%
Net income per unit — diluted				$	(0.07	)	-64	%
Number of units used in computing per unit amounts:
Net income per unit					(2,547	)	-9	%
Net income per unit — diluted					(2,649	)	-9	%

8

For the three months ended March 31, 2001, revenues totaled $22.5 million and net income totaled $1.0 million compared with revenues of $28.4 million and net income of $3.2 million for the first quarter of 2000. The primary contributors to 2001 first quarter revenues and income were the Company's commercial operations, comprised of the Company's portfolio of income-producing properties and Valencia Water Company, along with the sale of 14 acres of industrial and commercial land. The decrease in first quarter results compared to the same period in 2000 is mainly attributed to the absence of residential lot sales, lower rental income due to the prior year sale of income-producing properties and suspension of depreciation during 2000 on assets being held for sale as part of the Company's business plan to sell approximately one-half of its income portfolio. In the 2000 first quarter, 130 residential lots in Bridgeport were sold, contributing $4.2 million to revenues and $1.9 million to income.

The Company's business plan for the year anticipates revenues being generated from residential, commercial and industrial land sales; the portfolio of income-producing properties; sale of the Company's option on the Broomfield, Colorado property, which closed escrow on May 1, 2001 for $13 million and will contribute about $12.7 million to 2001 second quarter net income; and the sale of three income properties, including the remaining two properties identified in last year's asset sale program that did not close escrow. About 950 residential lots are expected to be sold, along with approximately 80 acres of commercial and industrial land. In addition, the Company is negotiating the sale of additional apartment land. The ability to complete these sales in 2001 will be dependent upon a variety of factors including, but not limited to, identification of suitable buyers, agreement with the buyer on definitive terms, availability of financing to the buyer, and market conditions.

Residential Home and Land Sales

No residential lots were sold in the first quarter of 2001 and no residential lots were in escrow at the end of the quarter. Lot sales in Valencia are being impacted by the Public Utilities Commission's (PUC) decision to combine its review of Valencia Water Company's request to expand its service area together with the water company's water management plan. The PUC requested environmental studies be submitted on water availability for the projects included in the service area expansion. The water company has provided the necessary information to the PUC and expects a decision in the 2001 third quarter. A total of 4,195 residential lots and apartment units is affected. The total includes 1,650 lots and apartments that the City of Santa Clarita annexed in December 2000 and 2,545 lots and apartments in the Company's West Creek community.

The Los Angeles County Board of Supervisors approved the West Creek community in January 2001. Opponents to the community have filed a California Environmental Quality Act (CEQA) lawsuit challenging the Board of Supervisors' approval. As with prior CEQA lawsuits, the results of these types of legal challenges are difficult to predict. An adverse decision will likely delay the development of the community beyond the delay created by the PUC process previously mentioned.

Land development work continues on Valencia Westridge, which will feature 1,700 homes surrounding a Tournament Players Club (TPC) golf course, a joint venture with PGA TOUR Golf Course Properties. During the 2001 first quarter, an appellate court dismissed the appeal of the Los Angeles County Superior Court dismissal of a CEQA lawsuit. The Company plans to sell approximately 650 improved lots in this community in the second half of 2001. In addition, 300 lots on 40 net acres in Altavista may be sold in 2001 depending on results and timing of the PUC decision.

During the first quarter of 2001, demand for new homes in Valencia set a first quarter sales record with merchant builders selling 217 new homes, compared to 86 homes sold in the same period last year. At March 31, 2001, merchant builders had 313 homes in escrow, compared to 112 homes at the end of the 2000 first quarter. While the Company does not participate directly in profits generated from escrow closings by merchant builders, these merchant builder sales are key to Company's future success in selling additional lots.

9

In the 2000 first quarter, 130 lots for attached homes closed escrow in Bridgeport. The sale added $4.2 million to revenues and $1.9 million to income. In addition, $4.1 million in revenues and $1.9 million in income were recognized from previous lot sales in Bridgeport under percentage of completion accounting. At March 31, 2000, the remaining 76 residential lots for detached homes in Bridgeport were in escrow for $7.8 million and subsequently closed escrow early in the 2000 second quarter.

Industrial and Commercial Sales

Industrial Land Sales

In the 2001 first quarter, one industrial parcel, totaling 9.5 acres, closed escrow for $4.7 million contributing $1.3 million to income. At March 31, 2001, a 15.0-acre industrial parcel was in escrow for approximately $8.4 million. All escrow closings are subject to market and other conditions beyond the control of the Company. During the first three months of 2000, no industrial land sales closed escrow and, at March 31, 2000, four industrial parcels totaling 8.4 acres were in escrow for $5.3 million.

The Company has approximately 380 net entitled acres of industrial land remaining in Valencia. With few large industrial land parcels available for development in Los Angeles County, the Company is targeting sales in the range of 50 to 75 industrial acres per year through completion of Valencia industrial land buildout.

Commercial Land Sales

Three commercial parcels, totaling 4.1 acres, closed escrow in the first quarter of 2001, contributing $2.9 million to revenues and $2.2 million to income. Two of the sales were recognized under percentage of completion accounting. At March 31, 2001, eight commercial parcels totaling 38 acres were in escrow for approximately $25 million. All escrow closings are subject to market and other conditions beyond the control of the Company.

No commercial land sales closed escrow in the 2000 first quarter and six commercial parcels, totaling 42.8 acres, were in escrow for approximately $26 million at March 31, 2000. Results for the 2000 first quarter included revenues of $2.6 million and income of $1.5 million recognized under percentage of completion accounting from the 1999 sale of land for an apartment site.

Income Property Sales

No income property sales were completed in the first quarter of 2001 or 2000. At March 31, 2001, the Company had two properties remaining to be sold from its asset sales program announced last year, the Bank of America and Spectrum Club buildings. In addition, a 35,310-square-foot building in Valencia Commerce Center has been added to the program. These three buildings are expected to be sold later this year for a total of approximately $17 million.

The ability to complete income property and other sales in 2001 will be dependent upon a variety of factors including, but not limited to, identification of a suitable buyer, availability of financing to the buyer, market conditions, agreement with the buyer on definitive terms and successful completion of the buyer's due diligence.

Community Development

Community development expenses for the first quarter of 2001 decreased 20% from the comparative prior year first quarter primarily due to expenses in 2000 relating to the Company's option on 1,800 acres in Broomfield, Colorado and marketing expenses including updating of Valencia's website. Community development expenses for 2001 are expected to increase about 20% from the 2000 level with the continued focus on entitlements, planning and community marketing to complete the projected

10

sellout of Valencia residential land by 2005 and begin the development of Newhall Ranch. The Company's option on the Broomfield, Colorado property was sold on May 1, 2001.

On April 19, 2001, the Company and Los Angeles County released the Company's research and summary of findings, along with proposed actions to be taken, for public review on the six issues in the Newhall Ranch project's Environmental Impact Report that were identified in June 2000 by a Kern County Superior Court as requiring further environmental studies. The areas studied, and the findings include:

1.

Water Supply Adequacy and Reliability

The studies conclude that in dry and average/normal years alike, Newhall Land has identified a surplus of water sources to meet Newhall Ranch's demand at build-out, and that the water can be provided without significant environmental impacts. It will take 25 to 30 years to build out Newhall Ranch, and water demand will increase gradually over that time. Each new subdivision within the project will require approvals, which will involve confirming water availability.

Potable water demand will be met through newly purchased water rights, existing agricultural water rights, tapping Castaic Creek flood flows and storing it for future use, and two innovative water banking programs. Under one water banking program, surplus wet season water will be purchased and stored in a groundwater bank located in central California for future use in dry years. Similarly, wet season surplus water will be stored in the local Saugus aquifer. The feasibility of using the Saugus aquifer for water banking and retrieval was thoroughly studied and tested. Millions of gallons of water were injected into the Saugus aquifer and subsequently retrieved without environmental impact.

The non-potable water to be used for irrigation by Newhall Ranch will be reclaimed water, making the community a world leader in water conservation. A combination of highly treated reclaimed water from the planned Newhall Ranch Water Reclamation Plant and also reclaimed water through Castaic Lake Water Agency will be used to meet the demand for irrigation water.

2.

Water Reclamation Plant Alternative Site Analysis

Further study of the proposed site of the Newhall Ranch Water Reclamation Plant was required because of its impacts to river vegetation. The benefits of an off-river location for the plant were compared to those of other alternative sites. As a result of these studies, an environmentally superior alternative has been proposed. The new proposal places the plant near the river but reduces its area in order to avoid permanent impacts to 5.5 acres of sensitive habitat.

3.

Ventura County Traffic Impacts

The additional traffic studies conducted using Ventura County's new traffic model showed that all of the arterial roads that intersect State Routes 23 and 126 would receive less than a one percent impact from Newhall Ranch. The California Environmental Quality Act defines an impact of greater than one percent as "significant." Therefore, the studies showed Newhall Ranch will have an insignificant impact on these arterial roads.

4.

Salt Creek Wildlife Corridor Impacts

The Salt Creek watershed drains portions of Newhall Ranch and crosses the Ventura County line just before it flows into the Santa Clara River. Supplemental studies were undertaken to determine if the Newhall Ranch development would impact wildlife movement through the part of the Salt Creek watershed in Ventura County. Studies show that 96% of the habitat in

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the Salt Creek watershed would not be impacted by development, and that animals would adjust because impacts would be gradual over the 25- to 30-year course of development.

More than 20 separate field studies of bird, large and small mammal movement were carried out as part of the supplemental studies, and vegetation in the Ventura County portion of the watershed was mapped. The studies found that wildlife population and movement patterns would remain unchanged in both counties.

Most significantly, as a result of the original Environmental Impact Report (EIR) process and specific action by the Los Angeles County Board of Supervisors, the boundaries of Newhall Ranch's development area were pulled back one-half mile from the Ventura County line resulting in a reduction of 210 acres of proposed development. This will create an effective buffer around the portion of Salt Creek in Ventura County.

5.

Santa Clara River Corridor Biological Impacts

Possible environmental impacts due to development-caused changes in the river's depth or water velocity were studied. The study verified that there will be little impact, and that in some cases development will be beneficial. The study also showed that bridges will be designed so they will not narrow the channel, which could increase velocities and erosion, and that 75% of the bank stabilization required will be buried, protecting sensitive river habitats.

6.

General Plan Consistency in Significant Ecological Areas

Additional studies on the impacts development would have on sensitive river habitats, which are designated as Significant Ecological Areas, also were performed. The studies determined through improved mapping and analysis that only 28 acres of sensitive habitat in the river corridor will be removed due to development, not 103 acres as originally stated in the EIR. For each of these 28 acres, at least one acre will be revegetated. There also will be an additional 14 acres added so that there will now be a total of 42 acres replacing the 28 acres, resulting in a net gain of sensitive habitat area in the river.

The Court ruled in the Company's favor on all other issues raised by opponents. The "affordable housing" opponent has appealed the Superior Court's decision.

Public hearings before the Los Angeles County Planning Commission are scheduled to begin on June 20, 2001. Once approved by the Commission, the six issues would go before the Board of Supervisors, which is expected to occur this fall. The Company's goal is to have these six issues back before the judge by year-end. However, the length of time that the public hearings and judicial process will take is difficult to predict, and circumstances beyond the Company's control could further delay resolution of the issues. An adverse decision by the County or Court and/or additional legal action will likely delay the start of the development of the community beyond 2003. If the judge rules in the Company's favor, the Company can begin processing the necessary documentation for tentative maps on the first two villages in Newhall Ranch—River Village and Mesas East.

Income-Producing Properties

For the first three months of 2001, revenues and income were down 24% and 38%, respectively, over the first three months of 2000 due to properties sold in 2000 as part of the Company's plan to sell approximately one-half of its income portfolio to finance its unit repurchase program. The sold properties included Castaic Shopping Center, Plaza del Rancho, a 3-story office building, three office buildings for Princess Cruises and four apartment complexes.

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Results for the current and prior year first quarters include the effects of the cessation of depreciation on Properties Held for Sale and Sold Properties of $155,000 and $1,654,000, respectively. The 2000 amount includes depreciation expense suspended on Valencia Town Center regional mall and entertainment center as they were held for sale at March 31, 2000. Subsequently, in the fourth quarter of 2000, the regional mall and entertainment center were re-classified as held for investment and depreciation expense was recorded covering the entire period they were held for sale.

Edwards Theaters Circuit, Inc., which filed for Chapter 11 bankruptcy last year, is expected to affirm its current lease during the 2001 second quarter for the IMAX 3D theater and 11 screens in Valencia Entertainment Center that opened in the summer of 1999. The terms of the lease for the original 10-screen Edwards Theater, located in the Valencia Town Center regional mall that was recently remodeled to include stadium seating and other up-to-date improvements, are under discussion. Edwards has paid rent when due for the two complexes.

A few other, smaller retail tenants in the Company's income properties are also operating while in bankruptcy proceedings. However, overall retail operations are performing well. At March 31, 2001, NorthPark Village Square neighborhood shopping center, River Oaks Shopping Center and Town Center Plaza, a 25,193-square-foot mixed-use building located adjacent to the Hyatt Valencia Hotel, were 100% leased. Valencia Town Center regional mall was 99% leased at the end of the 2001 first quarter.

The Company's 244-room Hyatt Valencia Hotel and 152-room Hilton Garden Inn continued to post improved performance both in occupancy rates and average daily rates in the first quarter of 2001 compared to the same period last year.

Valencia Water Company

Valencia Water Company is a regulated public water utility and a wholly-owned subsidiary of the Company serving over 22,000 metered connections. Revenues for the three months ended March 31, 2001 were about the same as the 2000 first quarter while income declined 19% primarily due to an increase in administrative expense for various legal proceedings in which Valencia Water Company is involved.

Agricultural Operations

For the first quarter of 2001, revenues and income, including the Company's energy operations, were about the same as the year earlier quarter. The major contributor to revenues and income was energy operations, where oil prices continued strong.

General and Administrative Expense

General and administrative expenses for the first quarter of 2001 were approximately the same as the comparable prior year period. For all of 2001, general and administrative expenses are expected to decrease about 30% from 2000 levels primarily due to lower compensation expense.

Interest and Other, net

A 51% net decrease from the comparable 2000 quarter is primarily due to the Company's strategy in 2000 of utilizing existing debt capacity to fund unit repurchases until the sale of income properties were completed later that year. Interest expense in 2001 for the total year is expected to be substantially lower than in the previous year due to lower anticipated borrowings outstanding compared to 2000.

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Financial Condition

Liquidity and Capital Resources

At March 31, 2001, the Company had cash and cash equivalents of $4.2 million and $135.7 million available under bank lines, net of $18.9 million in letters of credit. Borrowings outstanding totaled $7.4 million against unsecured lines of credit and $32 million against a revolving mortgage facility. In addition, the Company had fixed rate debt totaling $60.5 million. The Company believes it has adequate sources of cash from operations and debt capacity to finance future operations on both a short- and long-term basis and, combined with anticipated land and property sales, to fund its unit repurchases. The Company ended the 2001 first quarter with a conservative debt to income portfolio ratio of 31% which provides adequate debt capacity to fund operations and complete the current repurchase program. At March 31, 2001, there was no debt secured by raw land or land under development inventories in Valencia.

In September 1999, the Company announced its intention to repurchase up to 6,384,446 units (including 884,446 units under a previous authorization), equal to approximately 20% of the then outstanding units. From the time the repurchase plan was announced through March 31, 2001, 5,294,062 units, or 83% of the 6,384,446 units, were repurchased including 394,560 units purchased in the first quarter of 2001. At March 31, 2001, a total of 1,090,384 units remain to be repurchased under the current authorization. The Company repurchases partnership units from time to time in the open market and through block transactions. Numerous factors could affect the Company's ability to complete the repurchase program including, but not limited to, changing market conditions, rising interest rates, challenges to governmental approvals, and finding suitable buyers for certain properties. If the Company is on track to accomplish its current business plan and market conditions remain strong, another repurchase program may be announced for an additional 5 to 7% of the total outstanding units. The Company's ability to accelerate the pace at which it can deliver entitled product to market, close sales, and the price at which its units are trading are some of the factors that will determine the number of units it is able to repurchase.

At March 31, 2001, there were no material commitments for capital expenditures other than approximately $21 million for the completion of two office buildings that were sold in December 2000 and the expected landfill lease termination. In addition, over $40 million is expected to be invested in major roads and freeway improvements in 2001 to enable the Company to continue its land sales program for Valencia.

The following discussion relates to principal items in the Consolidated Statements of Cash Flow:

Operating Activities

Net cash used by operating activities totaled $7.6 million for the 2001 first quarter. Cash generated from operating activities included the sale of 14 industrial/commercial acres, the income property portfolio and the collection of a $9.4 million land sale note, which generated a total of $24.5 million. Cash used by operating activities included primarily $15.2 million of expenditures for land under development inventories mostly related to land preparation and infrastructure improvements to ready land for development or sale. Additional uses of cash included the Company's general & administrative expenses and interest expense.

Investing Activities

Expenditures for development of income-producing properties totaled $1.3 million and were primarily for two office buildings that were sold in December 2000. Purchase of property and equipment was primarily for water utility construction.

14

Financing Activities

A quarterly distribution totaling $5.3 million was paid in the 2001 first quarter which consisted of a $.10 per unit quarterly distribution and a $.10 per unit special distribution. Borrowings against lines of credit increased by $25.4 million during the quarter. Units repurchased during the quarter totaled 394,560 for $10.0 million or an average price of $25.38 per unit. The Company's policy is to provide sufficient distributions, including special distributions, to pay the taxes associated with Company earnings. The declaration of distributions, and the amount declared, are determined by the Board of Directors on a quarterly basis taking into account the Company's earnings, financial condition and prospects.

Inflation, Risks And Related Factors Affecting Forward-Looking Information

Except for historical matters, the matters discussed in this report are forward-looking statements that involve risks and uncertainties. We have tried, wherever practical, to identify these forward-looking statements by using words like "anticipate," believe," "estimate," "project," "expect," and similar expressions. Forward-looking statements include, but are not limited to, statements about plans; opportunities; negotiations; market and economic conditions; development, construction, and sales activities; and availability of financing.

We caution you not to place undue reliance on these forward-looking statements, which reflect our current beliefs and are based on information currently available to us. We do not undertake any obligation to publicly revise these forward-looking statements to reflect future events or changes in circumstances.

These forward-looking statements are subject to risks and uncertainties that could cause our actual results, performance, or achievements to differ from those expressed in or implied by these statements. In particular, among the factors that could cause actual results to differ materially are:

Sales of Real Estate:  The majority of the Company's revenues is generated by its real estate operations. The ability of the Company to consummate sales of real estate is dependent on various factors including, but not limited to, availability of financing to the buyer, agreement with buyers on definitive terms regulatory and legal issues and successful completion of the buyer's due diligence. The fact that a real estate transaction has entered escrow does not necessarily mean that the transaction ultimately will close. Therefore, the timing of sales may differ from that anticipated by the Company. The inability to close sales as anticipated could adversely impact the recognition of revenue in any specific period.

Economic Conditions:  Real estate development is significantly impacted by general and local economic conditions, which are beyond the control of the Company. The Company's real estate operations are concentrated in Southern California. The regional economy is profoundly affected by the entertainment, technology, defense and certain other segments. Consequently, all sectors of real estate development for the Company tend to be cyclical. While the economy of Southern California continues to be strong, there can be no assurances that present trends will continue.

Inflation:  The Company believes it is well positioned against the effects of inflation. Historically, during periods of inflation, the Company has been able to increase selling prices of properties to offset rising costs of land development and construction. Recently, land values have been increasing at a faster rate than costs. However, there are no assurances that this trend will continue. A portion of the commercial income portfolio is protected from inflation since percentage rent clauses and Consumer Price Index increases in the Company's leases tend to adjust rental receipts for inflation, while the underlying value of commercial properties has tended to rise over the long term.

Interest Rates and Financing:  Fluctuations in interest rates and the availability of financing have an important impact on the Company's performance. Sales of the Company's properties could be adversely

15

impacted by the inability of buyers to obtain adequate financing. Further, the Company's real estate development activities are dependent on the availability of adequate sources of capital. Certain of the Company's credit facilities bear interest at variable rates and would be negatively impacted by increasing interest rates.

Competition:  The sale and leasing of residential, industrial and commercial real estate is highly competitive, with competition coming from numerous and varied sources. The degree of competition is affected by such factors as the supply of real estate available which is comparable to that sold and leased by the Company and the level of demand for such real estate. Valencia experienced a slight decrease in its new home sale market share at both the local and the county level in 2000, due to the temporary decline in new home inventory. There is no assurance that this new home sales decline will reverse in the future even with an increasing supply of new homes in Valencia given competing projects in the region. This could impact the Company's ability to sell residential land.

Geographic Concentration:  The Company's real estate development activities are focused on the 19,400 acres that it owns in Los Angeles County. The Company's entire commercial income portfolio is located in the Valencia area. Therefore, any factors affecting that concentrated area, such as changes in the housing market, economic conditions and environmental factors, which cannot be predicted with certainty, could affect future results.

Exposure to Natural Occurrences:  The Company's real estate development and sales activities may be affected by natural occurrences such as earthquakes and weather conditions that may impact progress of infrastructure construction and land development, and the pace of sales.

Government Regulation and Entitlement Risks:  In developing its projects, the Company must obtain the approval of numerous governmental authorities regulating such matters as permitted land uses, density and traffic, and the provision of utility services such as electricity, water and waste disposal. In addition, the Company is subject to a variety of federal, state and local laws and regulations concerning protection of health and the environment. This government regulation affects the types of projects which can be pursued by the Company and increases the cost of development and ownership. The Company devotes substantial financial and managerial resources to comply with these requirements. To varying degrees, certain permits and approvals will be required to complete the developments currently being undertaken or planned by the Company. Furthermore, the timing, cost and scope of planned projects may be subject to legal challenges, particularly large projects with regional impacts. (See following "Litigation" discussion.) In addition, the continued effectiveness of permits already granted is subject to factors such as changes in policies, rules and regulations and their interpretation and application. The ability to obtain necessary approvals and permits for its projects can be beyond the Company's control and could restrict or prevent development of otherwise desirable new properties. The Company's results of operations in any period will be affected by the amount of entitled properties the Company has in inventory.

Litigation:  The land use approval processes the Company must follow to ultimately develop its projects have become increasingly complex. Moreover, the statutes, regulations and ordinances governing the approval processes provide third parties the opportunity to challenge the proposed plans and approvals. As a result, the prospect of, and actual, third-party challenges to planned real estate developments have provided additional uncertainties in real estate development planning and entitlements. Third-party challenges in the form of litigation will, by its nature, adversely affect the length of time required to obtain the necessary approvals. In addition, adverse decisions arising from any litigation increase the costs and may adversely affect the design, scope, plans and profitability of a project.

16

Item 3. Quantitative and Qualitative Disclosures About Market Risk

    The Company is exposed to market risk primarily due to fluctuations in interest rates. The Company utilizes both fixed rate and variable rate debt. At March 31, 2001, the Company had $39.4 million of variable debt outstanding with interest rates ranging from 6.32% to 6.90% and $60.5 million of fixed rate debt with interest rates ranging from 7.33% to 8.45%.

The table below presents principal cash flows and related weighted average interest rates of the Company's long-term fixed rate and variable rate debt at March 31, 2001 by expected maturity dates:

Dollars in thousands		2001		2002		2003		2004		2005		Thereafter		Total		Fair Value
Mortgage and Other Debt
	Fixed Rate Debt	$	1,264	$	1,479	$	10,968	$	1,512	$	1,655	$	43,583	$	60,461	$	60,461
	Weighted Average Interest Rate		7.58		7.55		8.32		7.35		7.37		7.55		7.68
	Variable Rate Debt (1)	$	32,000	$	7,400									$	39,400	$	39,400
	Weighted Average Interest Rate		6.32		6.90										6.43

(1)

The Company has a $50 million revolving mortgage facility which bears interest at LIBOR plus 1.25% against which $32 million was outstanding at March 31, 2001. The Company also has unsecured lines of credit consisting of a $130 million line and a $10 million line on which the interest rate is LIBOR plus 1.25%—1.45% and a $2 million line on which the rate is LIBOR plus 1.35%, against which borrowings of $5.4 million, 0 and $2 million were outstanding, respectively, at March 31, 2001. The amounts set forth in the table above assume that the outstanding amounts under the variable rate credit facilities will be repaid at the facilities' respective maturity dates. Management believes that these lines will be renewed at maturity.

There is inherent rollover risk for borrowings as they mature and are renewed at current market rates. The extent of this risk is not quantifiable or predictable because of the variability of future interest rates and the Company's future financing requirements. The Company manages its interest rate risk by maintaining a conservative ratio of fixed rate, long-term debt to total debt in order to maintain variable rate exposure at an acceptable level and by taking advantage of favorable market conditions for long-term debt. In addition, the Company's guideline for total debt is not to exceed 60% of the appraised value of the income portfolio.

PART II.  OTHER INFORMATION
Item 1.  Legal Proceedings.

Please refer to "Community Development" and "Litigation" under Part I, Item 2. — "Management's Discussion and Analysis of Financial Condition and Results of Operations".

Item 6.  Exhibits and Reports on Form 8-K

(a)

Exhibits (listed by numbers corresponding to the Exhibit Table of Item 601 in Regulation S-K):

10

Severance and Consulting Agreement

99

Amended and Restated Partnership Agreement of Newhall General Partnership

(b)

The following report on Form 8-K was filed in the first quarter ended March 31, 2001:

Items Reported	Date of Report
Change in the Company's certifying accountant from KPMG LLP to Deloitte & Touche LLP and the retirement of Thomas L. Lee as Chief Executive Officer effective March 21, 2001 and Chairman of the Board effective March 31, 2001.	March 21, 2001

17

SIGNATURES

    Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership) Registrant
By:	Newhall Management Limited Partnership, Managing General Partner
By:	Newhall Management Corporation, Managing General Partner

Date: May 4, 2001	By:	/s/ GARY M. CUSUMANO Gary M. Cusumano President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer)
Date: May 4, 2001	By:	/s/ STUART R. MORK Stuart R. Mork Senior Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer)
Date: May 4, 2001	By:	/s/ DONALD L. KIMBALL Donald L. Kimball Vice President—Finance and Controller of Newhall Management Corporation (Principal Accounting Officer)

18

EX-10

EXHIBIT 10

SEVERANCE AND CONSULTING AGREEMENT

    This Severance and Consulting Agreement ("Agreement") is entered into and effective as of March 21, 2001, between The Newhall Land and Farming Company (a California Limited Partnership) ("NLF") and Thomas L. Lee ("Lee"). NLF's ultimate managing general partner is Newhall Management Corporation ("NMC") and where appropriate will be referred together with NLF as the "Company." The Company and Lee are referred to in this Agreement as the "Parties."

RECITALS

WHEREAS, Lee is currently employed as the Company's and NMC's Chief Executive Officer and Chairman of the Board of Directors ("Board");

WHEREAS, Lee has decided to retire and to voluntarily resign his employment with the Company as well as all of the positions he holds with the Company, including those specifically mentioned above;

WHEREAS, the Company has agreed to accept Lee's resignation and wishes to retain his services thereafter on a consulting basis;

WHEREAS, Lee has agreed to perform services for NLF on a consulting basis; and

WHEREAS, the Parties wish to set forth in this Agreement all of the terms and conditions of Lee's severance, his subsequent retention as a Consultant and all other matters of every nature whatsoever between them;

NOW, THEREFORE, the Parties, in consideration of the mutual covenants contained herein, and for other valuable consideration received, hereby agree as follows:

1)

Resignation and Execution of Addendums A, B and C:

a)

Lee hereby resigns his employment with the Company along with all of the positions that he holds or will hold with the Company or any of its affiliated entities, partnerships or divisions, including specifically: Chief Executive Officer of NLF and NMC, Chairman and Member of the Board of NMC, Member of the Company's Management Committee, Director in the Valencia Town Center Hotel Company and Director in the TP Golf Company. In addition, Lee will sell or exchange his partnership and membership interests, as the case may be, in NMC and its affiliated entities, including but not limited to Valencia Town Center Hotel Company, TP Golf Company, Newhall General Partnership, and Newhall Management Limited Partnership, under the terms of the respective shareholder agreements, partnership agreements or other governing documents. Lee agrees to execute whatever documents are necessary to effect his resignation from all of those positions as well as any other positions that he holds with the Company or any affiliated entities, partnerships, or divisions. Lee's letter of resignation, which is attached hereto as Addendum A and by this reference incorporated herein, is accepted by the Company with respect to the positions listed

1

hereinafter to be effective at the close of business on the date listed next to the applicable position or positions:

Resigned Positions	Effective Date of Resignation
(1) Chief Executive Officer	March 21, 2001
(2) Employee, Chairman of the Board, Member of the Company's Management Committee, Director in the Valencia Town Center Hotel Company, Director in the TP Golf Company as well as any and all other positions held	March 31, 2001
(3) Member of the Board	July 18, 2001

Until those dates and times, Lee will continue to perform the duties called for by the positions he holds and will continue to receive his current salary and benefits, except as otherwise provided in the Agreement. On the last day of his employment as an employee of the Company, Lee shall be paid any and all accrued unused vacation time as reflected on the Company's records. Lee shall receive no compensation for his continued service as Member of the Board for the period commencing on April 1, 2001 through July 18, 2001.

b)

In further consideration for the compensation provided for in Paragraph 3(a) of this Agreement and as a condition precedent to receipt of the Lump Sum Payment provided for therein, Lee agrees to execute a document that conforms exactly to Addendum B which is attached hereto and by this reference incorporated herein ("Mutual General Releases"). If Lee fails to execute the Mutual General Releases on March 31, 2001, or any other subsequent date mutually agreed to by the Parties, then this Agreement and the Consulting Agreement shall become null and void and non-enforceable and Lee shall not be entitled to nor shall he be paid any of the benefits provided for in this Agreement, including specifically, the Lump Sum Payment provided in Paragraph 3(a) of this Agreement.



c)

At the time Lee executes the Agreement, he will execute a document that conforms exactly to the terms set forth in Addendum C, which is attached hereto and by this reference and incorporated herein ("Consulting Agreement"). The Agreement shall not become effective until the Parties also have fully executed the Consulting Agreement.

2)

Consulting Agreement: Lee will commence his duties as a consultant in accordance with the terms provided in the Consulting Agreement on April 1, 2001, or any subsequent date mutually agreed to by the Parties in writing. The Lump Sum Payment provided in Paragraph 3(a) of this Agreement, shall constitute all of the compensation, of whatever nature whatsoever, to be paid to Lee for all of his services as a consultant, except as otherwise provided in the Consulting Agreement.

3)

Severance Compensation: Upon execution of this Agreement and Addendums A, B and C as provided hereinabove, Lee shall be entitled to receive the following severance benefits commencing on or after April 1, 2001 unless otherwise provided hereinafter in this Paragraph 3:

a)

Lump Sum Payment. Within five (5) business days of the lapse of the seven (7) day revocation period provided in Paragraph 11 of the Mutual General Releases, the Company shall pay Lee a lump sum payment equal to three times: (i) Lee's current yearly base salary; plus (ii) an amount equal to the average of the bonuses paid to Lee pursuant to the NLF Executive Incentive Compensation Plan for the fiscal years ending 1998, 1999 and 2000, less applicable withholding taxes ("Lump Sum Payment"). The Lump Sum Payments shall be deemed to have been made under this Paragraph 3 on the date the payment is tendered to Lee. The Company and Lee shall mutually agree on the method and timing of the Lump Sum Payment delivery to Lee.

2

b)

Bonus: The Company paid to Lee a bonus, less applicable withholding taxes, for the Company's fiscal year ending December 31, 2000, based on the applicable formula for the CEO category contained in NLF's Executive Incentive Compensation Plan ("Bonus"). The Bonus was calculated on the basis of the salary being paid to Lee during that year and was paid to Lee at the same time that bonuses are paid to other Company executives for the same fiscal year. In no event will any bonus, whatsoever, be earned or be payable to Lee for the first quarter of the Company's fiscal year ending December 31, 2001 (e.g., January through March 31, 2001).



c)

Unit Options and other Unit-Based Rights:



(i)

Lee will not be granted any additional Unit options or Unit-based rights beyond those granted through March 21, 2001. Any existing options or Unit-based rights, including any granted to Lee prior to March 21, 2001, will be exercisable or distributed as the case may be, in accordance with the respective Unit options or Unit-based rights agreements and the Company's 1995 Option/Award Plan, except as otherwise provided in (ii) of this Paragraph 3(c). Any Unit options or Unit-based rights granted to Lee prior to March 21, 2001 that are not 100% vested on March 31, 2001, shall become 100% vested upon the fifth day following the seven day revocation period in Paragraph 11 of the Mutual General Releases.



(ii)

The following option agreements were granted to Lee pursuant to the Newhall Land and Farming Company Option, Appreciation Rights and Restricted Plan, as amended: Option Agreement dated July 17, 1991; Option Agreement dated July 15, 1992; Option Agreement dated July 21, 1993; Option Agreement dated January 19, 1994; and Option Agreement dated July 20, 1994 ("Option Agreements"). The Parties agree that the exercise period for those options will be extended from one (1) year to three (3) years but in no event shall Lee's right to exercise those options extend beyond the expiration date provided in the Option Agreements.





d)

Retirement/Savings Plans: Any benefits or payments due Lee under the NLF Retirement Plan, the NLF Pension Restoration Plan ("Pension Restoration Plan"), the NFL Employee Savings Restoration Plan, the NLF Employee Savings Plan and any employee benefit plans qualified under Section 401(a) of the Internal Revenue Code will be paid in accordance with the provisions contained in each of those plans. As a means of funding the benefits under the Pension Restoration Plan, the Company purchased two life insurance policies on the life of Lee ("Policies"). Those Policies are subject to the terms of a Split-Dollar Insurance Agreement between Lee and the Company.



e)

Lease of Car: Lee will have the option to lease on a month-to-month basis from the Company his current Company car for a period not to exceed three months. If Lee does not exercise this option on or before March 31, 2001, or any other subsequent date agreed to by the Parties in writing, then it shall expire and Lee shall immediately return the car and the keys to the car to the Company. At the end of the short-term lease period, Lee shall return the car and the keys to the car to the Company.



f)

No Other Payments or Benefits: Except as otherwise provided in the Consulting Agreement or Paragraph 3 of the Agreement, Lee shall not earn or be entitled to receive any other wages and/or benefits whatsoever after March 31, 2001, including services rendered in Lee's capacity as Member of the Board. Benefits payable under this Paragraph 3 will terminate, supersede and be in lieu of any severance pay benefits, change of control benefits or any other wage and/or benefits provided for in any employment agreement, change of control agreement, severance policy or benefit agreement between Lee and the Company or any other policy, agreement, practice or plan of the Company.

3

(g)

Medical Benefits: As part of Company's early retirement benefits for which Lee is eligible on and after March 31, 2001, the Company's medical and dental HMO plans will be provided at no cost to Lee and his eligible dependents until Lee's sixty-fifth (65th) birthday. If Lee selects a medical plan other than the HMO plan, he and his eligible dependents will pay the difference between the amount of the premiums charged for the coverage selected and the premiums for the same coverage under the Company's HMO plan. Should Lee die before age 65, his surviving spouse and eligible dependents will continue to receive the medical benefits until the date Lee would have reached age sixty-five (65).

4)

Recitals: The Recital's stated above are incorporated herein by this reference as part of the Agreement.

5)

General Release: Lee, for himself and for his heirs, spouse, executors, administrators and assigns, acknowledges complete satisfaction of and unconditionally releases and forever discharges the Company and any and all of its respective affiliated companies, subsidiaries, divisions, affiliated entities, partnerships, successors and assigns, and any and all of its past, present and/or future officers, directors, members, shareholders, partners, unitholders, agents, employees, administrators and assigns (hereinafter collectively referred to as "Company Releasees"), from any and all claims, demands, causes of action, costs, charges, fees and liabilities of any kind whatsoever, whether known or unknown, unsuspected or latent, which Lee or any of his heirs, guardians, administrators, executors, successors in interest, and/or assigns have incurred or expect to incur, or now own or hold or have at any time heretofore owned or held, or may at any time own, hold or claim by reason of any matter or thing against Company Releasees, and each of them, arising from or by reason of any actual or alleged act, omission, transaction, practice, conduct or occurrence, or any other matter whatsoever on or prior to the date of Lee's execution of this Agreement. Without limiting the generality of the foregoing, Lee specifically waives and fully releases Company Releasees, and each of them, from any and all claims arising out of Lee's employment with the Company and/or the termination of his employment, any positions Lee held or services Lee rendered, as well as Lee's resignation of all positions held with Company, including but not limited to: (a) any claim under the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967 or the Older Workers Benefit Protection Act, the Employee Retirement Income Security Act of 1974; (b) any other claim of employment discrimination (whether based on federal, state or local, statutory or decisional law; (c) any claim arising out of the terms and conditions of Lee's employment and/or any of the events relating directly or indirectly to or surrounding the termination of his employment; (d) any claims for severance, pension, bonuses, profit sharing or severance/termination payments; (e) any claim regarding any claimed employment or benefit agreement or contract whether written or oral; (f) any claim for any alleged injuries incurred during Lee's employment with the Company including any claims for rehabilitation; and (g) any other matter or claim whatsoever between the Parties (jointly "Claims"). These releases do not include or release Company Releases or any of them, from providing the benefits or making the payments provided for in Paragraph 3 of this Agreement.

6)

Release of Unknown Claims: Lee intends and expressly agrees that this Agreement and the releases contained herein shall be a bar to the Claims and shall be effective as a full and complete accord and satisfaction and general release of and for all liabilities, disputes, claims and matters, known or unknown, suspected or unsuspected, arising from any cause whatsoever on or prior to the date of Lee's execution of this Agreement. In furtherance of that intent and agreement, Lee acknowledges that he is familiar with Section 1542 of the Civil Code of the State of California, which provides as follows:

"A general release does not extend to claims which creditor does not know or suspect to exist in this favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor."

4

Lee waives and relinquishes any right or benefit which he has or may have under Section 1542 of the Civil Code of the State of California or any other similar provision or non-statutory law of this or any other jurisdiction to the full extent that he may lawfully waive all such rights and benefits pertaining to the subject matter of this Agreement. In connection with such waiver and relinquishment, Lee acknowledges that he is aware that any legal counsel that he may retain hereafter may discover claims or facts in addition to or different from those which he now knows or believes to exist with respect to the subject matter of this Agreement, but that it is his intention hereby to fully and forever settle and release all the released matters, known or unknown, suspected or unsuspected, which now exist, may exist, or heretofore have existed, between the Parties.

7)

Indemnification Agreement: So as to avoid any doubt, the foregoing releases by Lee in Paragraphs 5 and 6, do not in any manner amend the terms of, or affect NLF's obligations, under that certain amended Indemnification Agreement dated November 14, 1990 between Lee and NLF.

8)

Attorney Consultation: Lee acknowledges that he has been advised to consult with an attorney before signing this Agreement, and that he has voluntarily and knowingly executed this Agreement after having had the opportunity to consult with an attorney. Lee further acknowledges that he has had an adequate opportunity to consult with an attorney and that he has had an adequate opportunity to make whatever investigation or inquiry he or his counsel may deem necessary or desirable in conjunction with the subject matter of this Agreement prior to signing it. Lee further acknowledges that he has been advised that he may consider the terms of this Agreement for twenty-one (21) days before signing it. This Agreement was provided to Lee on March 21, 2001. Accordingly, Lee has until April 11, 2001 to decide whether he will sign the Agreement. To the extent that Lee takes less than twenty-one (21) days to consider this Agreement prior to signing it, he acknowledges that he has had sufficient time to consult with an attorney and that he does not desire additional time.

9)

Revocation Period: This Agreement is revocable by Lee for a period of seven (7) days following execution and return of the Agreement to the Company. The revocation must be in writing, must specifically revoke this Agreement, and must be delivered to Gary Cusumano, President, at The Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, California, 91355, prior to the end of the seventh (7th) day following execution and delivery of this Agreement to Company. Upon expiration of the seven (7) day period, this Agreement becomes effective, enforceable and irrevocable. If he has not so delivered a written revocation of this Agreement to Company within that seven (7) day period, he shall receive the payments and other consideration described in Paragraph 3 above.

10)

Mediation/Arbitration:

a)

Lee and the Company agree that any Arbitrable Claims that arise between them will be submitted first to mediation and then to binding arbitration. Lee and the Company further agree that neither of them will commence any demand for arbitration without first submitting a formal written demand to the other Party for mediation of the dispute. When such a demand is made, the dispute will be submitted to mediation before a mutually agreeable mediator in the Los Angeles area. The cost of the mediation shall be borne equally by the parties.

b)

Any controversy, dispute or claim between the Parties which may arise from, out of, or relate to this Agreement, or its subject matter or the Addendums, including the validity, enforceability, construction or application of any of the terms, provisions, or conditions of this Agreement or the arbitrability of any such matter (collectively referred to herein as "Arbitrable Claims") shall be submitted: (i) first to Mediation under Paragraph 10(a), and if it is not resolved through Mediation, then (ii) to final and binding arbitration in Los Angeles,

5

California, or such other location as the Parties shall mutually agree in writing under the auspices of the American Arbitration Association ("AAA"). The Parties agree that neither of them may initiate in any way or prosecute any claim, charge, lien, demand, right of action or cause of action of any nature whatsoever arising out of or related to this Agreement before any court, tribunal, or administrative agency against the other Party, and that they each acknowledge that their agreement to the mediation/arbitration provisions under this Paragraph 10 shall constitute an effective waiver of any right to have any Arbitrable Claims determined by judge or jury. The Parties further agree to be bound by the Employment Dispute Resolution Rules of AAA ("Rules") and that all Arbitrable Claims will be heard by the AAA pursuant to those Rules. The Parties further agree that in the event this Agreement, or any part thereof is not enforceable, all other provisions shall remain in force.

c)

The arbitrator shall have jurisdiction to determine all Arbitrable Claims and may grant any relief authorized in law or equity for such claim. However, the arbitrator may not modify or change the terms of this Agreement or the Addendums. The Parties agree that the decision of the arbitrator shall not be appealable and that judgment upon an award rendered by the arbitrator may be entered for enforcement in any court of competent jurisdiction. All Arbitrable Claims must be submitted to mediation within thirty (30) days of the date such claim first arose to be arbitrable.



d)

Except as otherwise stated above, neither Party may initiate in any way or prosecute any claim, charge, lien, demand, right of action or cause of action of any nature whatsoever arising out of or related to this Agreement or the Addendums before any court, tribunal or administrative agency against the other Party. A Party who initiates litigation or asserts Arbitrable Claims in any court or before any tribunal or administrative body, shall pay all reasonable attorneys' fees and costs incurred by the opposing Party in defending such litigation and/or claims.

11)

Termination: This Agreement and Lee's employment shall be subject to termination on or before March 31, 2001 as follows:

a)

Death: This Agreement, including the severance compensation provided for in Paragraph 3, will terminate upon the death of Lee. In such event, the Company will pay to Lee's estate or other authorized representative, his salary for the month in which he dies, as well as any other Company benefits, including bonuses, retirement payments, medical benefits, and accrued but unused vacation due him or his spouse through the date of his death in accordance with the terms and conditions of applicable Company policies and/or plans. Thereafter, the Company will have no further obligation whatsoever to his estate or other authorized representative.

b)

Disability: This Agreement, including the severance compensation provided for in Paragraph 3, will terminate upon Lee's disability. Unless otherwise prohibited by any State or Federal law, this Agreement and Lee's employment hereunder will terminate on the date that he, is determined, as defined by reference to the Company's Long-Term Disability Plan ("LTD Plan"), then in effect, to be "disabled" from performing any material portion of his current duties, due to physical or mental illness or injury. In such event, Lee will be solely compensated in accordance with the LTD Plan and any other applicable Company policies and/or plans.

c)

Termination for Cause: This Agreement, including the severance compensation provided for in Paragraph 3, and Lee's employment may be terminated for cause in accordance with the Company's established policies and practices ("Termination for Cause"). If Termination for Cause occurs, then the Company will pay Lee his salary for the month in which termination occurs, any accrued but unused vacation and any other Company benefits that are due him

6

under applicable Company policies or plans through the end of the month of his termination. Thereafter, the Company will have no further obligations whatsoever to Lee.

12)

Confidential Information:

a)

Lee shall not (nor will Lee assist any other person to do so) during or after the termination of his employment with the Company as an employee or consultant, directly or indirectly reveal, report, publish or disclose Confidential Information to any person, firm or corporation not expressly authorized by the Company to receive such Confidential Information, or use (or assist any person to use) such Confidential Information except for the benefit of the Company. This provision shall not preclude disclosures required by law, nor shall it apply to information which has entered the public domain other than by reason of the action of Lee. The term "Confidential Information," as used herein, means all information or material not generally known by non-Company personnel which (i) gives the Company some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company; (ii) which is owned by the Company or in which the Company has an interest in; and (iii) which is either marked "Confidential Information," "Proprietary Information," or other similar marking, known by Lee to be considered confidential and proprietary by the Company or from all the relevant circumstances should reasonably be assumed by Lee to be confidential and proprietary to the Company. Confidential Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing): trade secrets, inventions, drawings, file data, documentation, diagrams, specifications, know how, processes, formulas, models, flow charts, software in various stages of development, source codes, object codes, research and development procedures, research or development and test results, marketing techniques and materials, marketing and development plans, price lists, pricing policies, business plans, information relating to customers and/or suppliers' identities, characteristics and agreements, financial information and projections, and employee files. Confidential Information also includes any information described above which the Company obtains from another party and which the Company treats as proprietary information or designates as Confidential Information, whether or not owned or developed by the Company. Notwithstanding the above, however, no information constitutes Confidential Information if it is generic information or general knowledge which Lee would have learned in the course of similar employment elsewhere in the trade or if it is otherwise publicly known and in the public domain.

b)

To the extent that Lee has not already done so, he shall on or before March 31, 2001 surrender to the Company all notes, data, sketches, drawings, manuals, documents, records, data bases, programs, blueprints, memoranda, specifications, customer lists, financial reports, equipment and all other physical forms of expression incorporating or containing any Confidential Information, it being distinctly understood that all such writings, physical forms of expression and other things are the exclusive property of the Company. Lee acknowledges that the unauthorized taking of any of the Company's trade secrets is a crime under California Penal Code Section 499(c) and is punishable by imprisonment. Lee further acknowledges that such unauthorized taking of the Company's trade secrets could also result in civil liability under California Civil Code Section 3426, and that willful misappropriation may result in an award against him for triple the amount of the Company's damages and the Company's attorneys fees in collecting such damages. The Parties agree that Lee shall have the right to retain and use the contact information contained on his Company Rolodex as well as Lee's contacts file maintained on the Company's software systems for personal purposes as long as those purposes are not inconsistent with Lee's obligations under this Paragraph 12, the Agreement or the Addendums.

7

c)

If Lee breaches, or threatens to commit a breach of, any of these non-disclosure provisions (collectively, the "Restrictive Covenants"), the Company shall have the following rights and remedies, each of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity: the right and remedy to have the Restrictive Covenants specifically enforced or to have any actual or threatened breach thereof enjoined by any court having equity jurisdiction, all without the need to prove any amount of actual damage or that monetary damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that monetary damages will not provide an adequate remedy to the Company; and the right and remedy to require Lee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by him or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants.



d)

Nothing in this Agreement or any other agreement between Lee and the Company shall prohibit or impede or be construed to prohibit or impede Lee from lawfully competing with the Company, lawfully working for any competitor of Company or otherwise lawfully pursuing his career in the residential and commercial development industry, so long as Lee complies with these non-disclosure provisions. The Parties agree that these non-disclosure provisions shall continue in effect after Lee's employment with the Company as an employee and/or consultant has terminated and notwithstanding any termination of this Agreement.

13)

Non-Solicitation of Employees or Customers: For a period of one (1) year following the last date of Lee's employment with the Company as an employee or consultant, Lee agrees not to solicit or induce any employee or supplier of the Company to terminate his/her employment or relationship with the Company or to, directly or indirectly, solicit the trade of or otherwise do business with any customer or supplier of the Company and/or any one of its affiliated entities so as to offer or sell any product or service which would be competitive with any product or service sold by the Company or its affiliates during that period.

14)

Employee Benefit Plans: Except as otherwise specifically provided in this Agreement to the contrary, all of the health and other employee benefit or compensation plans or programs referred to and contemplated by this Agreement (collectively referred to as "Plans') shall be governed solely by the terms of the underlying plan documents and by applicable law. Except as otherwise specifically provided in this Agreement to the contrary, nothing in this Agreement shall impair the Company's right to amend, modify, replace, and/or terminate any and all such Plans in its sole discretion or in accordance with the terms thereof. This Agreement is for the sole benefit of Lee and the Company, and is not intended to create a Plan, or, except as otherwise provided herein, to modify the terms of existing Plans. Also, any payments made pursuant to this Agreement shall not be taken into account (i.e., as "compensation") for purposes of determining the amount of benefits payable under any other Plans.

15)

Entire Agreement: This Agreement is the only agreement and understanding between the Parties pertaining to the subject matter hereof, and supercedes and nullifies all prior agreements, summaries of agreement, descriptions of compensation packages, discussions, negotiations, understandings, representations or warranties, whether verbal or written between the Parties pertaining to such subject matter. This Agreement is binding on Lee's heirs and shall not be assignable by Lee for any purpose. This Agreement will be binding on any successors and assigns of the Company.

16)

Severability: If any provision of this Agreement or any portion of such provision is held to be invalid or unenforceable, the remaining provisions or portions shall nevertheless be given effect. It is the intent of the Parties that all provisions shall be construed so as to be valid and enforceable, and if it should be determined that any provision is not valid and enforceable, a provision which

8

would effectuate the intent of the Parties and would be valid and enforceable shall be substituted for the invalid and unenforceable provision.

17)

Amendment and Waiver: This Agreement may be amended, modified or supplemented only by a writing executed by Lee and the President of the Company. Either Party may, in writing, waive any provision of this Agreement to the extent that such provision is for the benefit of the waiving Party. No waiver by either Party of a breach of any provision of this Agreement shall be construed as a waiver of any subsequent or different breach, and no forbearance by a Party to seek a remedy for non-compliance or breach by the other Party shall be construed as a waiver of any right or remedy with respect to such non-compliance and/or breach.

18)

Construction and Applicable Law: The language of this Agreement and the Addendums have been approved by the Parties after the opportunity to consult with legal counsel and the language of these documents shall be construed as a whole according to their fair meaning and not strictly for or against either Party. This Agreement and the Addendums shall in all respects be interpreted, enforced and governed by and under the laws of the State of California.

WHEREFORE, the Parties have executed this Agreement on the dates provided hereinafter.

DATED: March 22, 2001	EMPLOYEE:
	/s/ THOMAS L. LEE
	Thomas L. Lee
DATED: March 22, 2001	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:	Newhall Management Limited Partnership, its Managing General Partner
	By:	Newhall Management Corporation, its Managing General Partner
	By:	/s/ GARY M. CUSUMANO
		Gary M. Cusumano, President

9

[NEWHALL LAND LETTERHEAD]
ADDENDUM A

                , 2001

PERSONAL AND CONFIDENTIAL

Gary Cusumano
President
The Newhall Land and Farming Company
and Newhall Management Corporation
23823 Valencia Boulevard
Valencia, California 91355

    Re: Resignation

Dear Gary:

I hereby tender to you my resignation of employment along with my resignation of the following positions to be effective at the close of business on the date listed next to the applicable position or positions:

Resigned Positions	Effective Date of Resignation
(1) Chief Executive Officer	March 21, 2001
(2) Employee, Chairman of the Board, Member of the Company's Management Committee, Director in the Valencia Town Center Hotel Company, Director in the TP Golf Company as well as any and all other positions held	March 31, 2001
(3) Member of the Board	July 18, 2001

Your acceptance of this letter will confirm your acceptance of my resignation of those positions and my employment effective those dates.

Should you need me to sign any additional documents or paperwork to cause the foregoing to be completed, I will be happy to do so.

Very truly yours,
	Thomas L. Lee

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ADDENDUM B
MUTUAL GENERAL RELEASES

    This Addendum to the Severance and Consulting Agreement of Thomas L. Lee ("Agreement") is made and entered into this 31st day of March 2001 by and between Thomas L. Lee ("Lee"), and The Newhall Land and Farming Company (a California Limited Partnership) ("Company"). Lee and the Company are hereinafter sometimes referred to collectively as "the Parties." This agreement ("Mutual General Releases") is made for the purpose of settling and compromising all of the claims, disputes and controversies between the Parties arising from any cause whatsoever on or prior to the date of Lee's execution of the Mutual General Releases. So as to avoid any doubt, the mutual releases contained herein, do not in any manner amend the terms of, or affect the Company's obligations, under that certain amended Indemnification Agreement dated November 14, 1990 between Lee and the Company.

NOW, THEREFORE, the Parties hereto for the consideration set forth in the Agreement, which is by this reference incorporated herein, mutually agree as follows:

1.

Consideration. In consideration of the benefits provided for in the Agreement as well as the Mutual General Releases and, for other good and valuable consideration, the Parties give the releases, promises and commitments contained herein.

2.

Scope of Settlement. The compensation and benefits provided for in the Agreement are in full and complete settlement of all of Lee's Claims against Company Releasees and fully compensates Lee for any and all such Claims. Lee further acknowledges that he has received all wages and benefits due him through the last date of his employment with the Company, except as otherwise provided in Paragraph 3 of the Agreement.

3.

General Release of Company Releasees. Lee, for himself and for his heirs, spouse, executors, administrators and assigns, acknowledges complete satisfaction of and unconditionally releases and forever discharges the Company and any and all of its respective affiliated companies, subsidiaries, divisions, affiliated entities, shareholders, partnerships, successors and assigns, and any and all of its past, present and/or future officers, directors, members, partners, unitholders, agents, employees, administrators and assigns (hereinafter collectively referred to as "Company Releasees"), from any and all claims, demands, causes of action, costs, charges, fees and liabilities of any kind whatsoever, whether known or unknown, unsuspected or latent, which Lee or any of his heirs, guardians, administrators, executors, successors in interest, and/or assigns have incurred or expect to incur, or now own or hold or have at any time heretofore owned or held, or may at any time own, hold or claim by reason of any matter or thing against Company Releasees, and each of them, arising from or by reason of any actual or alleged act, omission, transaction, practice, conduct or occurrence, or any other matter whatsoever on or prior to the date of Lee's execution of the Mutual General Releases. Without limiting the generality of the foregoing, Lee specifically waives and fully releases Company Releasees, and each of them, from any and all claims arising out of Lee's employment with the Company and/or the termination of that employment, any positions Lee held or services Lee rendered as well as Lee's resignation of all positions held with the Company, including but not limited to: (a) any claim under the Americans with Disabilities Act, the California Fair Employment and Housing Act, the Civil Rights Act of 1964, as amended, the Age Discrimination in Employment Act of 1967 or the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; (b) any other claim of employment discrimination (whether based on federal, state or local, statutory or decisional law; (c) any claim arising out of the terms and conditions of Lee's employment and/or any of the events relating directly or indirectly to or surrounding the termination of his employment; (d) any claims for severance, pension, bonuses, profit sharing or severance/termination payments; (e) any claim regarding any claimed employment or benefit agreement or contract whether written or oral; (f) any claim for any alleged injuries incurred during Lee's employment with the Company

1

including any claims for rehabilitation; and (g) any other matter or claim whatsoever between the Parties (jointly "Claims"). These releases do not include or release Company Releases or any of them, from providing the benefits or making the payments provided for in Paragraph 3 of the Agreement.

4.

General Release of Lee's Releasees. The Company fully releases and discharges forever Lee and his spouse, children, agents, heirs and administrators and assigns ("Lee Releasees") from any and all liabilities, claims, causes of action, charges, complaints, obligations, costs, losses, damages, injuries and attorneys' fees, of any form whatsoever, whether known or unknown, unsuspected or latent, which the Company or any of its officers, employees, agents, administrators, successors in interest, and/or assigns have incurred or expect to incur, or now own or hold, or have at any time heretofore owned or held, or may at any time own, hold, or claim to hold by reason of any matter or thing, arising from any cause whatsoever on or prior to the date of Company's execution of the Mutual General Releases. Without limiting the generality of the foregoing, the Company fully releases and discharges each and all of Lee's Releasees from any and all claims, demands and causes of action in connection with any and all matters pertaining to Lee's employment by the Company, including, but not limited to, any and all damages of every kind whatsoever, express or implied duties or obligations, express or implied covenants, and promises on any and all of the above, any other matter between the Parties, and any claims relating to and arising out of Lee's performance of his duties as an officer of the Company or a member of the Company's Board of Directors.

5.

Non-Admission of Liability. This Agreement shall not in any way be construed as an admission by either Party of any liability whatsoever, or as an admission by either Party of any illegal or improper act or acts, of any kind or nature whatsoever, against the other Party.

6.

Releases Include Unknown Claims. It is the intention of the Parties in executing the Mutual General Releases and in paying and receiving the monetary and other consideration called for by the Agreement that the Mutual General Releases shall be effective as a full and final accord and satisfaction and general release of and from all liabilities, disputes, claims and matters, known or unknown, suspected or unsuspected arising from any cause whatsoever on or prior to the date of Lee's execution of the Mutual General Releases. In furtherance of this intention, the Parties, and each of them, acknowledge that they are familiar with Section 1542 of the Civil Code of the State of California, which provides as follows:

"A general release does not extend to claims which the creditor does now know or suspect to exist in his favor at the time of executing the release which if known by him must have materially affected his settlement with the debtor."

The Parties, and each of them, waive and relinquish any right or benefit which they have or may have under Section 1542 of the Civil Code of the State of California or any similar provision of statutory or non-statutory law of this or any other jurisdiction to the full extent that they may lawfully waive all such rights and benefits pertaining to the subject matter of the Agreement and the Mutual General Releases. In connection with such waiver and relinquishment, the Parties, and each of them, acknowledge that they are aware that any legal counsel that they may retain may hereafter discover claims or facts in addition to or different from those which they now know or believe to exist with respect to the subject matter of the Mutual General Releases, but that it is their intention hereby to fully, finally and forever settle and release all the released matters, disputes and differences, known and unknown, suspected or unsuspected, which now exist, may exist, or heretofore has existed, between them. In furtherance of this intention, the releases herein given shall be and remain in effect as full and complete general releases notwithstanding the discovery and existence of any such additional or different claims or facts.

2

7.

Successors and Assigns. This Agreement shall bind, and inure to the benefit of, the respective heirs, legal representatives, successors, and assigns of the Parties hereto.

8.

Covenant Not to Sue. The Parties, and each of them, represent and warrant that they have no action, claim, charge or lawsuit intended, filed, prepared or pending against the other Party or their respective released parties and that they will not individually or as a member of any class file any action, claim, charge or lawsuit against the other Party, or any of their respective released parties, concerning the subject matter of the Agreement, the Mutual General Releases and/or any of the claims released under the Mutual General Releases.

9.

Construction. The language of the Mutual General Releases has been approved by all Parties after the opportunity to consult with legal counsel and the language of the Mutual General Releases shall be construed as a whole according to its fair meaning and not strictly for or against either Party.

10.

Entire Agreement and Governing Law. The Mutual General Releases shall in all respects be interpreted, enforced, and governed by and under the laws of the State of California. The Mutual General Releases constitutes the entire agreement between the Parties and supercedes all prior agreements, whether verbal or written, between the Parties pertaining to the subject matter hereof.

11.

Legal Consultation and Revocability Periods. The Parties expressly intend, and Lee acknowledges and agrees, that as part of the potential claims released in Paragraphs 3 and 4 of the Mutual General Releases, Lee is herein releasing the Company Releasees from any claims that he has or may have under the Age Discrimination in Employment Act of 1967, 29 U.S § 621 et seq. Accordingly, Lee has been advised to review the Mutual General Releases and represents and agrees: (a) that he has been advised to consult with an attorney prior to executing the Mutual General Releases; (b) that he has had up to twenty-one (21) days to consider executing the Mutual General Releases and that he is knowingly and voluntarily entering into the Mutual General Releases; (c) that he received a copy of the Mutual General Releases on December, 2001; (d) that he has seven (7) days from the date of execution of the Mutual General Releases to rescind it by doing so in writing addressed to the President of the Company, Gary M. Cusumano, at its corporate headquarters located at The Newhall Land and Farming Company, 23823 Valencia Boulevard, Valencia, California 91355; and (e) that the Mutual General Releases will not be effective until the end of the seven (7) day revocation period.

DATED:            ,	EMPLOYEE:
	Thomas L. Lee
DATED:            ,	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:	Newhall Management Limited Partnership, its Managing General Partner
	By:	Newhall Management Corporation, its Managing General Partner
	By:
		Gary M. Cusumano, President

3

ADDENDUM C
CONSULTING AGREEMENT OF THOMAS L. LEE

    This Consulting Agreement is made and entered into on April 1, 2001 by and between Thomas L. Lee ("Consultant") and The Newhall Land and Farming Company (a California Limited Partnership) ("Company"). Consultant and the Company are hereinafter sometimes referred to collectively as "the Parties." This Consulting Agreement is being entered into as an addendum to the Severance and Consulting Agreement of Thomas L. Lee ("Agreement").

RECITALS

WHEREAS, Consultant was employed by the Company for many years and was its Chief Executive Officer and Chairman of the Board of Directors of The Newhall Management Corporation, its ultimate managing general partner;

WHEREAS, on or before March 31, 2001, Consultant resigned his employment and positions with the Company; and

WHEREAS, the Company desires to take advantage of Consultant's extensive experience and retain him as a consultant.

NOW, THEREFORE, in consideration of the foregoing, the terms and covenants set forth herein, and the benefits provided in the Agreement, the Company and Consultant hereby agree as follows:

1.

Retention of Consultant. The Company hereby retains Consultant and Consultant hereby agrees to render services to the Company as a Consultant for a period commencing April 1, 2001 through December 31, 2001 ("Consulting Period"). Consultant will hold himself available during the Consulting Period to render consultation and advice to the Company as requested by its President and/or Chief Executive Officer. Consultant will remain available for consultation and advice on all aspects of the Company's business, by telephone and correspondence or, if requested by the Company's President and/or Chief Executive Officer, in person at the Company's principal offices (or at other locations by mutual agreement) during reasonable business hours. During the Consulting Period, Consultant shall be entitled to engage in consulting work for other companies and entities as long as that work does not interfere with Consultant's obligations hereunder. Consultant, however, agrees that he will not during the Consulting Period perform any work on any basis for any person or entity (including any entity established by him) that is in competition with the Company or any of its subsidiaries, partnerships or divisions.

2.

Compensation.

(a)

Consultant's sole compensation for any consulting services rendered to the Company during the Consulting Period shall be the payment of the Lump Sum Payment provided for in Paragraph 3(a) of the Agreement. Consultant acknowledges that he has received payment of the Lump Sum Payment and further acknowledges that the amount of that payment includes compensation for all services to be rendered by Consultant hereunder. No other compensation, wages or benefits of any kind whatsoever shall be earned by or paid to Consultant by the Company under this Consulting Agreement, except as the Parties may otherwise agree in writing during the term of the Consulting Period.

(b)

The Company agrees to provide Consultant with secretarial support at the Company during the term of the Consulting Period. The Company further agrees to make an office available for your use along with your current telephone extension, your current e-mail address and the ability to access it within and without the Company as well as your currently assigned personal computer during the term of the Consulting Period.

3.

Independent Contractor. It is agreed that Consultant will be an independent contractor and not an employee in the performance of the Consulting Services rendered during the Consulting Period. To

1

the extent that Consultant receives any compensation from the Company as a result of any written agreement between the Parties executed as an exception under Paragraph 2 of this Consulting Agreement, then, no normal payroll withholding shall be deducted from any amounts due Consultant. Consultant represents and warrants that he will pay all taxes due with respect to any such payments received from the Company and will indemnify and hold the Company harmless from any and all claims, causes of action, expenses, lawsuits or any other costs incurred by the Company as a result of any failure of Consultant to do so.

4.

Confidential Information.

(a)

Lee shall not (nor will Lee assist any other person to do so) during or after the termination of his employment with the Company as an employee or consultant, directly or indirectly reveal, report, publish or disclose Confidential Information to any person, firm or corporation not expressly authorized by the Company to receive such Confidential Information, or use (or assist any person to use) such Confidential Information except for the benefit of the Company. This provision shall not preclude disclosures required by-law, nor shall it apply to information which has entered the public domain other than by reason of the action of Lee. The term "Confidential Information," as used herein, means all information or material not generally known by non-Company personnel which (a) gives the Company some competitive business advantage or the opportunity of obtaining such advantage or the disclosure of which could be detrimental to the interests of the Company; (b) which is owned by the Company or in which the Company has an interest in; and (c) which is either marked "Confidential Information," "Proprietary Information:" or other similar marking, known by Lee to be considered confidential and proprietary by the Company or from all the relevant circumstances should reasonably be assumed by Lee to be confidential and proprietary to the Company. Confidential Information includes, but is not limited to, the following types of information and other information of a similar nature (whether or not reduced to writing): trade secrets, inventions, drawings, file data, documentation, diagrams, specifications, know how, processes, formulas, models, flow charts, software in various stages of development, source codes, object codes, research and development procedures, research or development and test results, marketing techniques and materials, marketing and development plans, price lists, pricing policies, business plans, information relating to customers and/or suppliers' identities, characteristics and agreements, financial information and projections, and employee files. Confidential Information also includes any information described above which the Company obtains from another party and which the Company treats as proprietary information or designates as Confidential Information, whether or not owned or developed by the Company. Notwithstanding the above, however, no information constitutes confidential information if it is generic information or general knowledge which Lee would have learned in the course of similar employment elsewhere in the trade or if it is otherwise publicly known and in the public domain.

(b)

To the extent that Lee has not already done so, he shall on or before March 31, 2001 surrender to the Company all notes, data, sketches, drawings, manuals, documents, records, data bases, programs, blueprints, memoranda, specifications, customer lists, financial reports, equipment and all other physical forms of expression incorporating or containing any Confidential Information, it being distinctly understood that all such writings, physical forms of expression and other things are the exclusive property of the Company. Lee acknowledges that the unauthorized taking of any of the Company's trade secrets is a crime under California Penal Code Section 499(c) and is punishable by imprisonment. Lee further acknowledges that such unauthorized taking of the Company's trade secrets could also result in civil liability under California Civil Code Section 3426, and that willful misappropriation may result in an award against him for triple the amount of the Company's damages and the Company's attorneys fees in collecting such damages. The Parties agree that Lee shall have the right to

2

retain and use the contact information contained on his Company Rolodex as well as Lee's contacts file maintained on the Company's software systems for personal purposes as long as those purposes are not inconsistent with Lee's obligations under this Section 4, the Agreement or the Addendums.

(c)

If Lee breaches, or threatens to commit a breach of, any of these non-disclosure provisions (collectively, the "Restrictive Covenants"), the Company shall have the following rights and remedies, each of which shall be in addition to, and not in lieu of, any other rights and remedies available to the Company under law or in equity: the right and remedy to have the Restrictive Covenants specifically enforced or to have any actual or threatened breach thereof enjoined by any court having equity jurisdiction, all without the need to prove any amount of actual damage or that monetary damages would not provide an adequate remedy, it being acknowledged and agreed that any such breach or threatened breach will cause irreparable injury to the Company and that monetary damages will not provide an adequate remedy to the Company; and the right and remedy to require Lee to account for and pay over to the Company all compensation, profits, monies, accruals, increments or other benefits derived or received by him or any associated party deriving such benefits as a result of any such breach of the Restrictive Covenants.



(d)

Nothing in this Agreement or any other agreement between Lee and the Company shall prohibit or impede or be construed to prohibit or impede Lee from lawfully competing with the Company, lawfully working for any competitor of Company or otherwise lawfully pursuing his career in the residential and commercial development industry, so long as Lee complies with these non-disclosure provisions. The Parties agree that these non-disclosure provisions shall continue in effect after Lee's employment with the Company as an employee and/or consultant has terminated and notwithstanding any termination of this Agreement.

5.

Non-Solicitation of Employees or Customers. For a period of one (1) year following the last date of Lee's employment with the Company as an employee or consultant, Lee agrees not to solicit or induce any employee of the Company to terminate his/her employment with the Company or to, directly or indirectly, solicit the trade of or otherwise do business with any customer of the Company and/or any one of its affiliated entities so as to offer or sell any product or service which would be competitive with any product or service sold by the Company or its affiliates during that period.

6.

Miscellaneous.

(a)

The Parties to this Consulting Agreement each acknowledge that they have read the Consulting Agreement, have had it explained to them by counsel of their choice, are aware of the contents and legal effects thereof, and in entering into this Consulting Agreement are acting on the advise of counsel of their choice.

(b)

The Parties each further acknowledge that no representation, promise or inducement has been made other than as set forth in this Consulting Agreement, and that the Parties do not enter into this Consulting Agreement in reliance of any representation, promise or inducement not set forth herein.

(c)

This Consulting Agreement contains all of the terms and provisions of the agreement between the Parties with respect to the subject matter hereof. There are no oral understandings, statements or stipulations bearing upon the effect of this Consulting Agreement which have not been incorporated herein.

(d)

All notices and other communications desired or required to be given under this Consulting Agreement shall be in writing and shall be deemed adequately given for purposes hereof upon delivery in person, or on the day mailed by first class mail, postage prepaid, to such address as either Party may give to the other Party in writing.

3

(e)

Any provision of this Agreement that is invalid, prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions of this Consulting Agreement. To the extent permitted by applicable law, the Company and Consultant hereby waive any provision of law that renders any portion of this Consulting Agreement prohibited or unenforceable in any respect.



(f)

This Agreement may not be amended, modified or terminated orally, and no obligation hereunder may be waived orally. No amendment, modification, termination or waiver shall be effective for any purpose unless it is in writing and signed by the Party against whom enforcement thereof is sought.



(g)

The provisions of this Consulting Agreement shall be binding upon, and shall enure to the benefit of, the Parties and their respective heirs, executors, administrators, successors and assigns.



(h)

This Consulting Agreement shall be governed by and construed in accordance with the laws of the State of California.

IN WITNESS WHEREOF, the Parties hereto have executed this Consulting Agreement as of the day and year first above written.

	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:	NEWHALL MANAGEMENT LIMITED
CONSULTANT:		PARTNERSHIP, its Managing General Partner
	By:	NEWHALL MANAGEMENT
		CORPORATION, its Managing General Partner
	By:
Thomas L. Lee		Gary M. Cusumano, President

4

EX-99

EXHIBIT 99

AMENDED AND RESTATED
PARTNERSHIP AGREEMENT
OF
NEWHALL GENERAL PARTNERSHIP

     This AMENDED AND RESTATED PARTNERSHIP AGREEMENT is made and entered into as of April 1, 2001, by and among Newhall Management Limited Partnership, a California limited partnership, Gary M. Cusumano and Thomas E. Dierckman.

WITNESSETH:

WHEREAS, pursuant to the restructuring of Newhall Management Corporation, a Delaware corporation ("NMC"), in December of 1990, Newhall Management Limited Partnership became the successor to substantially all of the assets and liabilities of NMC and successor general partner to this Partnership;

WHEREAS, as part of the restructuring of NMC, NMC was dissolved and Newhall Management Corporation, a California corporation, was formed to serve as the managing general partner of Newhall Management Limited Partnership; and

WHEREAS, this Partnership was formed to act as one of the general partners of The Newhall Land and Farming Company (a California Limited Partnership) ("Limited Partnership").

NOW THEREFORE, in consideration of the premises, the parties have formed a general partnership under the California Uniform Partnership Act upon the following amended and restated terms and conditions.

ARTICLE 1
DEFINITIONS

When used in this Agreement the following terms shall have the meanings set forth below except as otherwise specifically modified:

    1.1 "Agreement" means this Agreements as it may be amended from time to time.

    1.2 "Limited Partnership" means The Newhall Land and Farming Company (a California Limited Partnership), its successors and assigns.

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

    1.4 "Managing Partner" means the Person so designated pursuant to Section 5.2.

    1.5 "Newhall Management Corporation" means the restructured Newhall Management Corporation, a California corporation.

    1.6 "Partners" means the parties to this Agreement and their successors as partners of the Partnership. "Partner" means any one of the Partners.

    1.7 "Partnership" means the partnership created by this Agreement and any successor partnership which continues the business of this partnership and which is a reformation or reconstitution of a partnership governed by this Agreement.

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    1.8 "Person" means an individual, partnership, joint venture, estate, association, corporation, trust company, trust or other legal entity.

    1.9 "Unit" means a unit of interest in the Limited Partnership as defined in the Limited Partnership Agreement.

ARTICLE 2
GENERAL PROVISIONS

    2.1 Formation of the Partnership. The Partners agree to form by execution of this Agreement enter into a general partnership.

    2.2 Name of the Partnership. The name of the Partnership is "Newhall General Partnership." This name may be changed at any time or from time to time by the Managing Partner.

    2.3 Business and Purpose of the Partnership. The business and purpose of the Partnership shall be to act as one of the general partners of the Limited Partnership, and to engage in any other act or activity incidental thereto.

    2.4 Principal Place of Business. The principal place of business of the Partnership shall be at 23823 Valencia Boulevard, Valencia, California 91355, but the Partners may establish any other place or places of business for the Partnership (within or without the State of California) as they may deem necessary or appropriate.

    2.5 Term. The term of the Partnership commenced on August 15, 1984 and shall continue until the Limited Partnership or any successor of the Limited Partnership which continues the business of the Limited Partnership is dissolved, liquidated and wound up and any trust or other entity formed for the purpose of liquidating or winding up the Limited Partnership is liquidated and wound up, unless sooner terminated pursuant to the provisions of this Agreement or in accordance with law.

ARTICLE 3
POWERS AND DUTIES

    3.1 General. The Partners shall devote such time and attention to the business of the Partnership as may be reasonably necessary to carry out their duties, but, subject to any policies adopted by the Limited Partnership, Newhall Management Limited Partnership, Newhall Management Corporation or this Partnership, neither this Agreement nor the relationship of the parties as partners shall remove or impair the right of any Partner and its partners, directors, officers and shareholders, directly or indirectly (including, without limitation, through any entity in which the Partner or any such Person holds an ownership interest) to be otherwise employed by an entity or entities other than the Partnership on a part-time or full-time basis.

    3.2 Management Power. The Managing Partner shall have management and control of the ordinary course of the day-to-day business of the Partnership for the purposes stated in this Agreement and shall serve as tax matters partner for the Partnership. All matters outside the ordinary course of the day-to-day business of the Partnership shall be decided by a majority vote of the Partners.

    3.3 Similar Activities of Partners. Subject to any policies adopted by the Limited Partnership, Newhall Management Limited Partnership, Newhall Management Corporation or this Partnership, the Partners and their partners, directors, officers and shareholders may, directly or indirectly (including, without limitation, through any entity in which the Partner or any such Person holds an ownership interest), engage in any and all aspects of any business in which the Partnership or the Limited Partnership is engaged or plans to engage, or any other businesses and activities, whether competitive with the Partnership or otherwise, for their own account and for the account of others, without having or incurring any obligation to offer any interest in such properties, businesses or activities to the Partnership, the Limited Partnership or any Partner, and nothing in this Agreement shall be deemed to

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prevent or any such Person from conducting other businesses and activities. Neither the Partnership, the Limited Partnership nor any of the Partners shall have any rights by virtue of this Agreement in any independent business ventures of such Person. However, all records kept and maintained by the Partners for the Partnership pursuant to this Agreement shall be maintained separately from those for other operations of such Persons.

    3.4 Indemnification of Partners. The Partners and their partners, shareholders, directors and officers shall each be indemnified and held harmless to the same extent as the general partners of the Limited Partnership and their partners, shareholders, directors and officers are indemnified under the Limited Partnership Agreement.

    3.5 Other Matters Concerning Partners.

(A)

Each of the Partners may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.



(B)

Each of the Partners may execute any of the powers hereunder or perform any duties hereunder either directly or by or through agents, including, without limitation, partners, directors, officers, shareholders and affiliates of a Partner, the Partnership or the Limited Partnership. Each of the Partners may consult with counsel, accountants, appraisers, management consultants, investment bankers, and other consultants and advisers selected by it (who may serve as such for the Partnership or any affiliated Person) and any opinion of such Person as to matters which the Partner believes to be within its professional or expert competence shall be full and complete authorization and protection in respect to any action taken or suffered or omitted by the Partner hereunder in good faith and in accordance with such opinion. None of the Partners shall be responsible for the misconduct, negligence, acts or omissions of any such Person or of any agent or employee of the Partnership, a Partner or the Limited Partnership, nor shall any Partner assume any obligations in connection therewith other than the obligation to use due care in the selection of such Persons.



(C)

Any and all fees, commissions, compensation and other consideration received by a Partner or a partner, director, officer or shareholder of a Partner permitted hereunder shall be the exclusive property of the recipient, in which the Partnership shall have no right or claim, and the participation by any such Person in any agreement permitted hereunder shall not constitute a breach by such Person of any duty that it may owe the Partnership or the Partners under this Agreement or by operation of law.


ARTICLE 4
CAPITAL ALLOCATIONS AND DISTRIBUTIONS

    4.1 Capital Contributions. Each Partner shall contribute twenty (20) Units or the right to receive twenty (20) units to the capital of the Partnership. This contribution shall be made no later than the date the Person becomes a General Partner. No Partner shall be required to make additional contributions to the capital of this Partnership.

    4.2 Compensation. The Partnership shall pay all of the costs and expenses incurred by the Partners in connection with the business and affairs of the Partnership and the Partners shall receive such other compensation as is approved by the board of directors of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be.

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    4.3 Allocations and Distributions. All revenue, income, expenditures, losses, credits and distributions of cash or property shall be allocated or distributed to the Partners in proportion to the number of Units contributed by them for the period or day to which the allocation or distribution pertains.

    4.4 Capital Account. A capital account shall be established for each Partner. All allocations of revenue and income shall be credited, and distributions and all allocations of expenditures, losses and credits, shall be debited to the respective capital accounts of the Partners.

    4.5 No Interest or Withdrawals. No Partner shall be entitled to interest on any capital contribution, and no Partner shall have the right to withdraw or demand the return of any or all of its capital contribution, except as specifically provided in this Agreement.

    4.6 Creditor's Interest in the Partnership. No creditor who makes a loan to the Partnership shall have or acquire at any time as a result of making the loan, any direct or indirect interest in the profits, capital or property of the Partnership other than as a creditor.

    4.7 Nature of Interests. All property owned by the Partnership, whether real or personal, tangible or intangible, shall be deemed to be owned by the Partnership as an entity, and none of the Partners shall have any direct ownership of such property.

ARTICLE 5
ADMISSION AND WITHDRAWAL

    5.1 Assignment or Transfer. No Partner shall sell, assign, transfer, mortgage, hypothecate, or encumber its interest in the Partnership, except (i) to a revocable inter vivos trust for the exclusive benefit of such Partner and such Partner's spouse or (ii) with the written consent of Newhall Management Limited Partnership or its successor.

    5.2 Partners; Managing Partner. The Persons serving as Partners of this Partnership shall be (1) Newhall Management Limited Partnership or any successor to Newhall Management Limited Partnership which serves as managing general partner of the Limited Partnership pursuant to the Limited Partnership Agreement, (2) the chief executive officer of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, and (3) another officer or director of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, designated by the board of directors of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be. The individual who serves as Partner pursuant to (2) above shall be the Managing Partner. If the chief executive officer of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be, ceases to serve in that capacity, he shall cease at the same time to serve as a Partner and as Managing Partner and his successor as chief executive officer shall be admitted as a Partner of this Partnership and shall serve as Managing Partner of the Partnership. If the individual serving as a Partner pursuant to (3) above ceases to be an officer or director of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be, or the board of directors of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be, appoints another officer or director of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be, to serve as a Partner in his stead, he shall cease at the same time to serve as Partner, and his successor shall be appointed by the board of directors of Newhall Management Corporation or its successor, or the managing general partner of its successor if its successor is a partnership, as the case may be, from among its officers and directors. The successor shall be admitted as a Partner of this Partnership immediately upon his appointment by that board and his acceptance of that appointment. If Newhall Management Limited Partnership or its successor ceases

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to serve as a Partner the individual Partners shall continue to serve as Partners notwithstanding anything in this Section 5.2 to the contrary until other Persons become Partners pursuant to Section 5.3.

    5.3 Other Partners. If Newhall Management Limited Partnership ceases to serve as a general partner of the Limited Partnership, then it shall cease at the same time to serve as a Partner and its successor as a general partner of the Partnership and two Persons designated in Sections 5.2(2) and (3) shall each be admitted as a Partner of this Partnership. Any other Persons serving as Partners of the Partnership when Newhall Management Limited Partnership or its successor ceases to serve as a general partner of the Limited Partnership shall cease to serve as a Partner at the time when the successor to Newhall Management Limited Partnership is admitted as a general partner of the Limited Partnership.

    5.4 Other Admission of a Partner. Any Person admitted as a Partner other than pursuant to Sections 5.2 or 5.3 shall become a Partner only with the approval of all Partners.

    5.5 Consent of Spouse. Within twenty (20) days after any individual becomes a Partner or the Partner marries, the Partner shall have the Partner's spouse execute a consent substantially in the form attached as Exhibit A.

    5.6 Return of Capital. Upon ceasing to serve as a Partner, a former Partner shall be entitled to a return of the same number of Units (as adjusted for any Unit split, stock dividend, recapitalization or other similar change affecting the number of Units held by the Partnership) it contributed to the Partnership plus a return of any other capital contributed to the Partnership.

    5.7 Capital Contribution of a New Partner. Upon the admission of any Person to serve as a Partner, the Person shall contribute Units to the capital of the Partnership as provided in Article 4.

    5.8 Withdrawal. Newhall Management Limited Partnership or its successor may not withdraw as a Partner unless it no longer serves as a general partner of the Limited Partnership, this Partnership no longer serves as a general partner of the Limited Partnership or this Partnership is dissolved and its business is not continued. Any individual serving as a Partner may not withdraw except upon appointment of his successor pursuant to Sections 5.2(2) and (3). Except as provided in this Article 5, no Partner may withdraw from the Partnership.

    5.9 Additional Partners. The Partners agree and consent in advance that upon the election or appointment of a new Partner to the Partnership, the new Partner shall, upon agreeing in writing to be bound by the terms and provisions of this Agreement, and upon agreeing to contribute to the capital of the Partnership of the number of Units pursuant to Section 4.1, become a party to this Agreement. If other Persons become parties to this Agreement, this Agreement will continue to be binding upon every Partner without the re-execution of, or amendment to this Agreement.

ARTICLE 6
BOOKS AND RECORDS

    6.1 Fiscal Year and Method of Accounting. The fiscal year of Partnership shall be as selected by the Managing Partner, and the books, of the Partnership shall be kept on any basis determined by the Partners.

    6.2 Books of Account. Complete and accurate accounts of all transactions of the Partnership shall be kept in proper books, and each Partner shall enter, or cause to be entered therein, a full and accurate account of all its transactions on behalf of the Partnership.

    6.3 Inspection of Books. The books of account and other records of the Partnership shall, at all times, be kept in the principal place of business of the Partnership, and each of the Partners shall, at all times, have access to, and may inspect and copy, any of them.

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    6.4 Tax Returns. The Managing Partner shall arrange for the preparation and timely filing of all necessary tax returns for the Partnership.

ARTICLE 7
TERMINATION, DISSOLUTION AND LIQUIDATION

    7.1 Termination. The Partnership shall terminate upon the occurrence of any event of dissolution as defined in Section 7.2.

    7.2 Dissolution. The Partnership shall be dissolved by the occurrence of any event which under applicable law causes the dissolution of a general partnership notwithstanding an agreement to the contrary, or of any of the following events:

    (a) The distribution of substantially all Partnership property;

    (b) The written election of all Partners to dissolve and wind up the affairs of the Partnership which specifies the date such election shall be effective;

    (c) The Partnership ceases to serve as a general partner of the Limited Partnership;

    (d) The expiration of the term of the Partnership; or

    (e) An event which makes it unlawful to conduct the business of the Partnership.

    7.3 Liquidation. Upon the dissolution of the Partnership, no further business shall be conducted, except for the taking of such action as shall be necessary for the winding up of the affairs of the Partnership and the distribution of its assets to the Partners. Partnership properties may be sold, if a price deemed reasonable by the Partners maybe obtained therefor, and the proceeds thereof as well as all other cash and properties of the Partnership shall be distributed as follows:

First, all of the Partnership's debts and liabilities to Persons other than a Partner, but excluding secured creditors whose obligations will be assumed or otherwise transferred on the liquidation of Partnership assets, shall be paid and discharged;

Second, all of the Partnership's debts and liabilities to Partners shall be paid and discharged; and

Third, subject to the maintenance of a reserve for contingent liabilities as agreed by the Partners, the Partners shall receive either in cash or in kind, the amounts allocated to their respective capital accounts in accordance with this Agreement.

    7.4 Distribution to Partners. Upon liquidation pursuant to Section 7.3, any Units or other securities held by the Partnership shall be partitioned and the Partners shall cause appropriate certificates or evidences of ownership to be issued in the names of the Partners according to their respective interests.

    7.5 No Recourse. The Partners shall look solely to the assets of the Partnership for the payment of any income allocated to the Partners and the return of any capital contributed to the Partnership and if the assets of the Partnership remaining after payment or discharge of the debts and liabilities of the Partnership are insufficient to pay all or any part of such amounts, they shall have no recourse against any Partner, or any director, officer, shareholder, employee or agent of a Partner, the Limited Partnership or a partner of the Limited Partnership for such purpose.

ARTICLE 8
MISCELLANEOUS

    8.1 Notices. All notices or other communications required or permitted to be given pursuant to this Agreement shall be in writing and shall be considered as properly given or made if personally delivered or if mailed by United States first class mail, postage prepaid and addressed to the Partner's address for notices as it appears on the records of the Partnership. Any Partner may change the address for notices, by giving notice of the change to the Partnership. Commencing on the tenth (10th)

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day after the giving of such notice, the newly designated address shall be the Partner's address for the purpose of all notices or other communications required or permitted to be given pursuant to this Agreement. Any notice or other communication shall be deemed to have been given as of the date on which it is personally delivered or, if mailed, the date on which it is deposited in the United States mails.

    8.2 Amendment. This Agreement may be amended at any time and from time to time with the approval of Newhall Management Limited Partnership or its successor and at least one other Partner. All amendments shall be in writing and shall be signed by the Partners approving the amendment.

    8.3 Choice of Law. This Agreement and all rights and liabilities of the parties hereto with reference to the Partnership shall be subject to and governed by the laws of the State of California as applied to agreements solely among California residents to be entered into and performed entirely within California.

    8.4 Article and Section Headings. The headings in this Agreement are inserted for convenience and identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision hereof.

    8.5 Execution of Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties had all signed the same document. All counterparts shall be construed together and shall constitute one agreement. Each party shall become bound by the Agreement immediately upon affixing his or her signature hereto, independently of the signature of any other party.

    8.6 Remedies Cumulative. The remedies of the parties under this Agreement are cumulative and shall not exclude any other remedies to which any Person may be lawfully entitled.

    8.7 Waiver. No failure by any party to insist upon the strict performance any covenant, duty, agreement, or condition of this Agreement or to exercise any right or remedy consequent upon a breach thereof shall constitute a waiver of any such breach or any other covenant, duty, agreement, or condition.

    8.8 Assignability. Subject to the restrictions on transferability contained herein, each and all of the covenants, terms, provisions and agreements contained in this Agreement shall be binding upon and inure to the benefit of the successors and assigns of the respective parties.

    8.9 Gender and Number. Whenever the context requires, the gender of all words used hereby shall include the masculine, feminine and neuter; the singular of all words shall include the singular and plural, and the plural of all words shall include the singular and plural.

    8.10 Severability. If any provision of this Agreement, or application thereof, shall, for any reason and to any extent, be invalid or unenforceable, the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected thereby, but rather shall be enforced to the maximum extent permissible under applicable law.

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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the day and year first written above.

NEWHALL MANAGEMENT LIMITED PARTNERSHIP, a California limited partnership By: Newhall Management Corporation, a California Corporation, and its Managing General Partner
By:	/s/ TRUDE A. TSUJIMOTO Name: Trude A. Tsujimoto Title: Secretary
	/s/ GARY M. CUSUMANO Gary M. Cusumano
	/s/ THOMAS E. DIERCKMAN Thomas E. Dierckman

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EXHIBIT A
CONSENT OF SPOUSE

    I, the undersigned, certify as follows:

    1.  I am the spouse of            , one of the Partners of Newhall General Partnership.

    2.  I have received, read and approved the provisions of the Amended and Restated Partnership Agreement dated as of April 1, 2001 ("Partnership Agreement") of Newhall General Partnership as amended to the date of this Consent, including without limitation the provisions regarding withdrawal of Partners and return of capital to a withdrawn Partner.

    3.  I agree to be bound by and accept the provisions of the Partnership Agreement of Newhall General Partnership as it may be amended from time to time insofar as those provisions may affect any interest I may have in that Partnership, whether the interest may be community property or otherwise. I further agree that amendment of the Partnership Agreement of Newhall General Partnership and any continuation or reconstitution of Newhall General Partnership or its business shall not require my consent.

Executed as of            , 2001.

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