10-Q

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

FORM 10-Q

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

For the quarterly period ended June 30, 2002

or

o 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 91355
(Address of principal executive offices) (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  ý        No  o

At July 31, 2002, 24,006,963 partnership units were outstanding

Part I. Financial Information
Item 1. Financial Statements

Consolidated Statements of Income
(Unaudited)

In thousands except per unit				Three Months Ended June 30,						Six Months Ended June 30,
				2002			2001			2002			2001
Revenues
	Real estate
		Residential land sales		$	27,878		$	73		$	44,775		$	179
		Industrial and commercial sales			9,802			89,337			31,563			97,712
		Commercial operations
			Income-producing properties		9,742			11,088			19,471			21,977
			Valencia Water Company		3,480			3,076			6,279			5,532
					50,902			103,574			102,088			125,400
Agriculture operations					1,308			1,603			1,931			2,311
Total revenues				$	52,210		$	105,177		$	104,019		$	127,711
Contribution to income
	Real estate
		Residential land sales		$	9,532		$	(1,032	)	$	14,065		$	(1,763	)
		Industrial and commercial sales			5,049			82,794			14,736			84,918
		Community development			(4,829	)		(4,147	)		(7,719	)		(5,763	)
		Commercial operations
			Income-producing properties		3,139			3,150			6,179			7,401
			Valencia Water Company		734			528			1,176			1,012
					13,625			81,293			28,437			85,805
Agriculture operations					(7	)		207			267			600
General and administrative expense					(3,529	)		(4,120	)		(6,349	)		(6,365	)
Operating income					10,089			77,380			22,355			80,040
Interest and other, net					(714	)		(2,043	)		(1,857	)		(3,664	)
Net income				$	9,375		$	75,337		$	20,498		$	76,376
Net income per unit				$	0.39		$	2.94		$	0.85		$	2.94
Net income per unit—diluted				$	0.38		$	2.91		$	0.83		$	2.91
Number of units used in computing per unit amounts:
	Net income per unit				24,064			25,588			24,144			25,990
	Net income per unit—diluted				24,560			25,875			24,589			26,256
Cash distributions per unit:
	Regular			$	0.10		$	0.10		$	0.20		$	0.20
	Special				—			—			0.13			0.10

See notes to consolidated financial statements

2

Consolidated Balance Sheets

In thousands			June 30, 2002		December 31, 2001
			(Unaudited)
ASSETS
	Cash and cash equivalents		$	2,065	$	3,050
	Accounts and notes receivable			27,840		17,310
	Land under development			80,704		77,885
	Land held for future development			21,938		22,029
	Income-producing properties held for sale, net			2,322		2,322
	Income-producing properties, net			150,549		148,610
	Property and equipment, net			74,934		72,763
	Investment in joint venture			1,058		743
	Other assets and deferred charges			15,106		13,607
			$	376,516	$	358,319
LIABILITIES AND PARTNERS' CAPITAL
	Accounts payable		$	24,372	$	21,544
	Accrued expenses			41,678		45,386
	Deferred revenues			30,699		13,681
	Mortgage and other debt			82,288		85,511
	Advances and contributions from developers for utility construction			37,553		34,200
	Other liabilities			22,797		22,786
		Total liabilities		239,387		223,108
	Partners' capital
	24,073 units outstanding, excluding 12,699 units in treasury (cost-$314,916), at June 30, 2002 and 24,374 units outstanding, excluding 12,398 units in treasury (cost-$304,335), at December 31, 2001			137,129		135,211
			$	376,516	$	358,319

See notes to consolidated financial statements

3

Consolidated Statements of Cash Flow
(Unaudited)

			Six Months Ended June 30,
In thousands
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	20,498		$	76,376
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		5,689			5,865
		Increase in land under development		(47,104	)		(26,645	)
		Cost of sales and other inventory changes		44,376			6,577
		(Increase) decrease in accounts and notes receivable		(10,530	)		10,399
		Increase (decrease) in accounts payable, accrued expenses and deferred revenues		16,138			(7,274	)
		Cost of property sold		124			1,235
		Other adjustments, net		(1,482	)		(112	)
	Net cash provided by operating activities			27,709			66,421
CASH FLOWS FROM INVESTING ACTIVITIES:
	Development of income-producing properties			(5,798	)		(3,179	)
	Purchase of property and equipment			(4,131	)		(5,472	)
	Investment in joint venture			(315	)		(125	)
	Net cash used in investing activities			(10,244	)		(8,776	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions paid			(7,999	)		(7,817	)
	Decrease in mortgage and other debt, net			(3,223	)		(4,193	)
	Increase in advances and contributions from developers for utility construction			3,353			1,294
	Purchase of partnership units			(12,703	)		(48,012	)
	Issuance of partnership units			2,122			2,854
	Net cash used in financing activities			(18,450	)		(55,874	)
Net (decrease) increase in cash and cash equivalents				(985	)		1,771
Cash and cash equivalents, beginning of period				3,050			3,717
Cash and cash equivalents, end of period			$	2,065		$	5,488
Supplemental schedule of non-cash investing and financing activites:
	Payable for unit repurchases					$	(4,052	)

See notes to consolidated financial statements

4

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, consisting of normal and recurring items, necessary for a fair presentation of the results of operations for the three and six months ended June 30, 2002 and 2001 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 28 through 40 of the Company's 2001 Annual Report on Form 10-K. In addition, a summary of the accounting policies that management considers significant in the preparation of the Company's consolidated financial statements is included in Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. 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, provided profit recognition criteria are met, at the close of escrow or, if the Company has an obligation to complete certain future improvements, on the percentage of completion basis.



•

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)			June 30, 2002		December 31, 2001
Valencia
	Residential development		$	45,154	$	44,911
	Industrial and commercial land development			34,206		32,687
Agriculture				1,344		287
		Total land under development	$	80,704	$	77,885

5

Note 3. Details for Earnings per Unit Calculation

(In 000's except per unit)		Income (numerator)		Units (denominator)	Per Unit
For three months ended June 30, 2002
Net income per unit
	Net income available to unitholders	$	9,375	24,064	$	.39
Effect of dilutive securities
	Unit options		—	496		(.01	)
Net income per unit—diluted		$	9,375	24,560	$	.38
For three months ended June 30, 2001
Net income per unit
	Net income available to unitholders	$	75,337	25,588	$	2.94
Effect of dilutive securities
	Unit options		—	287		(.03	)
Net income per unit—diluted		$	75,337	25,875	$	2.91
For six months ended June 30, 2002
Net income per unit
	Net income available to unitholders	$	20,498	24,144	$	.85
Effect of dilutive securities
	Unit options		—	445		(.02	)
Net income per unit—diluted		$	20,498	24,589	$	.83
For six months ended June 30, 2001
Net income per unit
	Net income available to unitholders	$	76,376	25,990	$	2.94
Effect of dilutive securities
	Unit options		—	266		(.03	)
Net income per unit—diluted		$	76,376	26,256	$	2.91

6

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

(In $000s)		June 30, 2002			December 31, 2001
Income-producing properties
	Land	$	36,600		$	36,600
	Buildings		133,173			132,432
	Other		9,443			8,754
	Properties under development		11,748			7,614
			190,964			185,400
	Accumulated depreciation		(40,415	)		(36,790	)
		$	150,549		$	148,610
Income-producing properties held for sale
	Office	$	2,720		$	2,720
	Accumulated depreciation		(398	)		(398	)
		$	2,322		$	2,322
Property and equipment
	Land	$	3,759		$	3,760
	Buildings		6,034			6,022
	Equipment		10,294			9,770
	Water supply systems, orchards and other		92,020			87,462
	Construction in progress		3,948			5,115
			116,055			112,129
	Accumulated depreciation		(41,121	)		(39,366	)
		$	74,934		$	72,763

Note 5. Disclosure about Certain Financial Statement Captions

Accounts and notes receivable—The $10.5 million increase in accounts and notes receivable at June 30, 2002 compared to the prior year end was primarily due to the Company's acceptance in the 2002 first quarter of $18.7 million in promissory notes in conjunction with the terms of certain commercial land and residential lot sales. The term of each of these notes is less than one year and they are expected to be collected prior to December 31, 2002. One of these notes in the amount of $3 million was collected in the 2002 second quarter. In addition, $5.5 million of notes receivable outstanding at December 31, 2001 were collected in the 2002 second quarter.

Deferred revenues—The $17.0 million net increase in deferred revenues for the six months ended June 30, 2002 was primarily attributable to $23.5 million in deferred revenues for certain commercial land and residential lot sales recorded under percentage of completion accounting in 2002, including $12.4 million recorded in the 2002 second quarter. (See definition of percentage of completion in the "Significant Accounting Policies and Estimates" section of Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.) This increase was partially offset by recognizing $6.8 million of deferred revenues earned in 2002 to date, including $4.7 million of deferred revenues recognized in the 2002 second quarter.

7

Note 6. 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 June 30, 2002
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	27,878	$	9,634		$	44,194
	Industrial and commercial		9,802		5,237			55,978
	Community development		—		(4,612	)		34,726
	Income-producing properties		9,742		3,171			150,354
	Valencia Water Company		3,480		781			75,706
Agriculture			1,308		15			7,218
Central administration			—		(3,037	)		8,340
All other			—		(1,100	)		—
			52,210		10,089			376,516
Interest and other, net			—		(714	)		—
		$	52,210	$	9,375		$	376,516

		Three months ended June 30, 2001
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	73	$	(789	)	$	22,981
	Industrial and commercial		89,337		83,416			41,809
	Community development		—		(3,560	)		31,335
	Income-producing properties		11,088		3,256			167,142
	Valencia Water Company		3,076		697			70,086
Agriculture			1,603		301			7,693
Central administration			—		(2,416	)		14,355
All other			—		(3,525	)		—
			105,177		77,380			355,401
Interest and other, net			—		(2,043	)		—
		$	105,177	$	75,337		$	355,401

8

		Six months ended June 30, 2002
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	44,775	$	14,286		$	44,194
	Industrial and commercial		31,563		15,133			55,978
	Community development		—		(7,259	)		34,726
	Income-producing properties		19,471		6,249			150,354
	Valencia Water Company		6,279		1,278			75,706
Agriculture			1,931		315			7,218
Central administration			—		(5,297	)		8,340
All other			—		(2,350	)		—
			104,019		22,355			376,516
Interest and other, net			—		(1,857	)		—
		$	104,019	$	20,498		$	376,516

		Six months ended June 30, 2001
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	179	$	(1,515	)	$	22,981
	Industrial and commercial		97,712		85,552			41,809
	Community development		—		(5,153	)		31,335
	Income-producing properties		21,977		7,509			167,142
	Valencia Water Company		5,532		1,184			70,086
Agriculture			2,311		697			7,693
Central administration			—		(4,634	)		14,355
All other			—		(3,600	)		—
			127,711		80,040			355,401
Interest and other, net			—		(3,664	)		—
		$	127,711	$	76,376		$	355,401

9

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

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

        The Company's consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States. Inherent in the preparation of these financial statements are certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The Company evaluates these estimates and assumptions on a regular basis taking into account historical experience and other relevant current factors. Therefore, actual results may differ from reported amounts under different assumptions or conditions.

        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 28 through 40 of the Company's 2001 Annual Report on Form 10-K. A summary of the accounting policies that management considers significant in the preparation of the Company's consolidated financial statements follows.

Revenue recognition—The majority of revenues for the Company result from land sales. The Company follows the provisions in Statement of Financial Accounting Standards No. 66, Accounting for Sales of Real Estate ("FAS 66"), to record these sales. FAS 66 provides specific sales recognition criteria to determine when land sales revenues can be recorded. For example, FAS 66 requires a sale must be consummated with a sufficient down payment of at least 20% to 25% of the sales price depending upon the type and timeframe for development of the property sold, and that any receivable from the sale cannot be subject to future subordination. In addition, the seller cannot retain any material continuing involvement in the property sold.

Percentage of completion—When the Company has an obligation to complete development on sold property it utilizes the percentage of completion method of accounting to record revenues and income. Under percentage of completion accounting, the Company recognizes revenues and income based upon the ratio of development cost completed to the estimated total cost of the property sold, provided required sales recognition criteria have been met. Unearned revenues resulting from applying percentage of completion accounting are reported as deferred revenues in the liabilities section of the balance sheet. The Company estimates total project costs associated with the parcel sold. Revisions in profit estimates and changes in percentages complete are recorded in the consolidated statement of income in subsequent periods, as they become known and the development progresses toward completion.

Project costs—Costs incurred after the earlier of specific plan or tentative map approval are capitalized as a cost of that project and included as an asset in land under development on the balance sheet. Preliminary planning and entitlement costs, including litigation costs, are charged to expense when incurred. Indirect costs that do not clearly relate to projects under development, including general and administrative expenses, are charged to expense when incurred.

Cost allocations—The Company generally allocates onsite costs to individual parcels within a project on a square foot basis if the parcels in the project are of similar value. In mixed-use projects, where there may be both a residential and a commercial component with varying fair values, onsite costs are allocated to the respective parcels using the relative sales value method. Under the relative sales value method, each parcel in the project under development is allocated onsite costs in proportion to the estimated overall sales prices of the project such that each parcel to be sold reflects the same gross profit margin. Since this method requires the Company to estimate the expected sales prices for

10

the entire project, the profit margin on subsequent parcels sold will be impacted by both changes in the estimated total revenues as well as any changes in the estimated total costs of the project.

        Offsite improvements with regional benefit, such as freeway on-ramps and off-ramps and water storage tanks, are referred to as infrastructure costs. The Company estimates the total cost to develop the infrastructure within a defined major development area and allocates this cost to the land within the area. Changes in the estimated remaining infrastructure costs or changes in the remaining developable acreage will impact the infrastructure cost allocation and corresponding profit margin for unsold land within a major development area.

11

RESULTS OF OPERATIONS

Comparison of Second Quarter and Six Months of 2002 to Second Quarter and Six Months of 2001
Unaudited

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

				Second Quarter Increase (Decrease)					Six Months Increase (Decrease)
				Amount			%		Amount			%
Revenues
	Real estate
		Residential land sales		$	27,805		38089	%	$	44,596		24914	%
		Industrial and commercial sales			(79,535	)	-89	%		(66,149	)	-68	%
		Commercial operations
			Income-producing properties		(1,346	)	-12	%		(2,506	)	-11	%
			Valencia Water Company		404		13	%		747		14	%
					(52,672	)	-51	%		(23,312	)	-19	%
	Agriculture Operations				(295	)	-18	%		(380	)	-16	%
Total revenues				$	(52,967	)	-50	%	$	(23,692	)	-19	%
Contribution to Income
	Real estate
		Residential land sales		$	10,564		1024	%	$	15,828		898	%
		Industrial and commercial sales			(77,745	)	-94	%		(70,182	)	-83	%
		Community development			(682	)	-16	%		(1,956	)	-34	%
		Commercial operations
			Income-producing properties		(11	)	0	%		(1,222	)	-17	%
			Valencia Water Company		206		39	%		164		16	%
					(67,668	)	-83	%		(57,368	)	-67	%
Agriculture Operations					(214	)	-103	%		(333	)	-56	%
General and administrative expense					591		14	%		16		0	%
Operating income					(67,291	)	-87	%		(57,685	)	-72	%
Interest and other, net					1,329		65	%		1,807		49	%
Net income				$	(65,962	)	-88	%	$	(55,878	)	-73	%
Net income per unit				$	(2.55	)	-87	%	$	(2.09	)	-71	%
Net income per unit—diluted				$	(2.53	)	-87	%	$	(2.08	)	-71	%
Number of units used in computing per unit amounts:
Net income per unit					(1,524	)	-6	%		(1,846	)	-7	%
Net income per unit—diluted					(1,315	)	-5	%		(1,667	)	-6	%

        The increases and decreases in revenues and income for the three and six months are attributable to the following:

        For the three months ended June 30, 2002, revenues totaled $52.2 million and net income totaled $9.4 million compared to revenues for the 2001 second quarter of $105.2 million and net income of $75.3 million. Revenues for the six months ended June 30, 2002 totaled $104.0 million and net income

12

totaled $20.5 million compared to revenues of $127.7 million and net income of $76.4 million for the same period in 2001.

        Major contributors to both second quarter and six-month 2002 results were the sales of the entire 326 entitled, unimproved residential lots in the community of Alta Vista, 95 entitled, improved lots in the Company's Westridge golf course community and 16.7 acres of commercial land planned for an 185,000 square foot specialty retail center across from Valencia Town Center. Combined, these sales added $33.0 million to revenues and $14.3 million to income in the 2002 second quarter.

        Major contributors to both second quarter and six-month 2001 results were the sales of the Company's Chiquita Canyon Landfill, its option to purchase approximately 1,800 acres in Broomfield, Colorado and a 7.9-acre commercial parcel for 341 apartments with 10,000-square-feet of ground floor retail. Combined, these sales added $88.1 million to revenues and $84.6 million to income in the 2001 second quarter.

        The Company has increased its earnings estimate for the full year ending December 31, 2002 to a range of approximately $1.50 to $1.60 per unit. This estimate is an increase from the $1.10 to $1.15 net income per unit range previously reported. The new estimate includes the sale of 1,331 residential lots in the communities of Westridge (730 lots), Alta Vista (326 lots) and Hidden Creek (275 lots); approximately 60 acres of commercial land; 14 acres of industrial land; and income from the Company's portfolio of income-producing properties of approximately $12 million after depreciation. The estimate for 2002 does not include any income-producing asset sales. For the first six months of 2002, the Company closed escrows on 733 residential lots and 55.5 acres of commercial land. During the second half of 2002, the Company expects to close escrows on an additional 598 residential lots and about 20 acres of commercial and industrial land. The ability to complete sales in 2002 will be dependent upon a variety of factors including, but not limited to, identification of suitable buyers, agreement with the buyers on definitive terms, successful completion of the due diligence work by buyers, availability of financing to suitable buyers, regulatory and legal issues, market and other conditions.

Residential Land Sales

        In the 2002 second quarter, 421 residential lots closed escrow. The entire inventory of 326 entitled, unimproved residential lots in the community of Alta Vista and 95 entitled, improved lots in the Westridge golf course community contributed $25.5 million to revenues and $9.4 million to income under percentage of completion accounting. For the six months ended June 30, 2002, the Company closed escrows on 407 residential lots in the Westridge community and the 326 lots in Alta Vista, for a total of 733 residential lots sold, which combined contributed $41.4 million to revenues and $13.9 million to income.

        No residential lots were sold during the 2001 second quarter or the six-month period ended June 30, 2001. For the three- and six-months periods ended June 30, 2001 revenues of $73,000 and $179,000, respectively, and net losses of $1.0 million and $1.8 million, respectively, were primarily due to amounts received from merchant builders under price and profit participation agreements offset by administrative expenses.

        At June 30, 2002, the entire 275 residential lots in the community of Hidden Creek and 278 residential lots in Valencia Westridge were in escrow for a combined sales price of approximately $70 million with closings scheduled in the second half of 2002. There were no residential lots in escrow at the end of the 2001 second quarter. All escrow closings are subject to market and other conditions beyond the control of the Company.

        Home sales by merchant builders on lots previously purchased from the Company continued at record pace with 696 homes sold for the six-month period ended June 30, 2002 compared to 448 sold

13

during the same period last year. A record level of Valencia home sales could be achieved this year, exceeding the record home sales of 873 achieved last year, if the current sales pace continues and merchant builders are able to close escrow on homes in the Company's Valencia Westridge community before year-end.

        At June 30, 2002, merchant builders had 457 homes in escrow, compared to 369 at June 30, 2001. While the Company does not participate directly in profits generated from escrow closings by merchant builders, the sale of these previously sold lots to homebuyers is key to the Company's future success in selling additional lots.

        Lot sales in 2001 were impacted by the California Public Utilities Commission's (CPUC) decision to combine its review of Valencia Water Company's request to expand its service area together with the Valencia Water Company's water management plan. Late in 2001, the CPUC approved the Valencia Water Company's water management plan and granted the service expansion request, which permits Valencia Water Company to expand its service area to the Hidden Creek, Creekside, Alta Vista and West Creek communities (see the "Community Development" section below). These communities include approximately 4,000 potential residential lots and apartments. Valencia Water Company is Newhall Land's wholly-owned public water utility company serving Valencia and nearby areas. In April 2002, the CPUC denied opponents' request for a re-hearing regarding the CPUC's approval of Valencia Water Company's water management plan and service area expansion. Opponents' appeal of the CPUC's decision to the California Supreme Court was denied on June 19, 2002.

Industrial and Commercial Sales

Industrial Land Sales

        Demand for industrial land in the Company's business parks remains weak as evidenced by higher vacancy rates in Valencia industrial properties constructed by third-party developers and lower sales and leasing of new industrial space by third-party developers and the Company. At June 30, 2002, the combined vacancy rate in both Valencia Industrial Center and Valencia Commerce Center increased to 14% compared to 11% in the 2002 first quarter and 6.4% at June 30, 2001.

        No industrial land sales closed escrow in the quarter or six-month periods ended June 30, 2002. Results for the six months ended June 30, 2001 included the sale of a 9.5-acre industrial parcel which contributed $4.7 million to revenues and $1.3 million to income. The Company continues to market for sale 14 acres of industrial land; however, at June 30, 2002, no industrial parcels were in escrow. One industrial parcel, totaling 15.0 acres, was in escrow at June 30, 2001 but the escrow was subsequently canceled. The ability to complete sales in 2002 will be dependent upon a variety of factors including, but not limited to, identification of suitable buyers, agreement with the buyers on definitive terms, successful completion of the due diligence work by buyers, availability of financing to suitable buyers, regulatory and legal issues, market and other conditions. The Company has 369 net acres of industrial land remaining in Valencia.

Commercial Land Sales

        In the 2002 second quarter, the Company recorded $8.8 million in revenues and $5.8 million in income from commercial land sales under the percentage of completion accounting method. Commercial land sales consisted primarily of a sale of a 16.7-acre parcel across from Valencia Town Center regional mall planned for an 185,000 square foot retail center to be anchored by Kohl's department store. For the six-months ended June 30, 2002, the Company closed escrows on 55.5 acres of commercial land, contributing $30.5 million to revenues and $17.2 million to income. In addition to the 16.7 acres sold in the 2002 second quarter, the 55.5 acres included 22.3 acres in the Westridge golf course community for two commercial sites and an apartment site, which contributed $17.3 million to revenues and $9.3 million to income.

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        For the quarter and six-months ended June 30, 2001, the Company closed escrows on 12.0 acres of commercial land, including a 7.9-acre commercial parcel in Town Center for a 341-unit apartment community with 10,000-square-feet of ground floor retail space in Valencia Town Center which contributed $10.1 million to revenues and $7.7 million to income.

        At June 30, 2002, one commercial parcel totaling 4.6 acres was in escrow compared to no commercial parcels in escrow at the end of the 2001 second quarter. All escrow closings are subject to market and other conditions beyond the control of the Company.

Income Property and Other Sales

        No income property sales were completed in the six-months ended June 30, 2002. The Company has only one minor income property that currently is being marketed for sale. In the 2001 second quarter, the Company sold its Chiquita Canyon Landfill and its option to purchase approximately 1,800 acres in Broomfield, Colorado for a combined total of $78.0 million in revenues and $76.9 million in income.

        No income properties were in escrow at June 30, 2002. The Bank of America office building and a small office building were in escrow at June 30, 2001 which escrows subsequently closed in the 2001 third quarter.

Community Development

        Community development expenses increased 16% for the three-month period and 34% for the six-month period ended June 30, 2002 compared to the same 2001 periods primarily due to an increase in legal expense. Community development expenses for the year are expected to increase about 42% from the 2001 level due to the Company's response to third-party legal challenges and its continued focus on entitlements, planning and community marketing to complete the projected sellout of Valencia residential land and to position Newhall Ranch to commence development.

        In late May 2002, the California Department of Fish and Game (Fish and Game) conducted a search on certain areas of Newhall Ranch. Fish and Game claims that the search was to determine if Newhall Land had destroyed an endangered plant called the San Fernando Valley Spineflower, even though the Company was conducting agricultural activities on the property, which are permissible under the California Endangered Species Act. In 2000, the Company had notified Fish and Game and other agencies that it had found the plant in one small area of Newhall Ranch. During the May 2002 search, Fish and Game found the plant in additional locations on a portion of Newhall Ranch. The Department of Fish and Game is continuing its investigation. The existence of the plant may affect the development plans for a portion of Newhall Ranch where the plant has been located. The Company is surveying other portions of Newhall Ranch to determine other possible locations of the plant. The Company expects that additional surveys will be conducted in subsequent years. The Company currently is planning its first neighborhood, River Village, in Newhall Ranch. As part of planning for that project, a rare plant survey was conducted and Spineflowers were not found.

        The Company recently announced that hearings before the Los Angeles County Board of Supervisors concerning the Newhall Ranch Environmental Impact Report six issues identified by a Kern County Superior Court as requiring additional analyses are expected to be further delayed until early 2003. Adequacy and reliability of the Newhall Ranch water supply was one of the six issues requiring additional analyses. The delay is a result of the de-certification of an environmental impact report regarding the acquisition and importing of 41,000 acre feet per year of state water by Castaic Lake Water Agency (CLWA), the water wholesaler serving the Santa Clarita Valley. CLWA appealed the de-certification decision to the California Supreme Court and the appeal was denied. Of the 41,000 acre feet of water that is the subject of the CLWA environmental impact report, about 1,600 acre feet per year was expected to be used for Newhall Ranch. Consequently, the Company is working on

15

securing alternative water supplies for the additional annual supply of 1,600 acre feet. Based on the current schedule, the Company expects to return to the Kern County Superior Court late next year. The target date for commencement of initial development of Newhall Ranch remains 2005. The length of time necessary to obtain completion of governmental review and approvals and the judicial process are difficult to predict. Additional delays in these processes would adversely affect development plans.

        West Creek is a 2,214-home community in the Valencia North River planning area. The project received tentative approval from the Los Angeles County Board of Supervisors in September 2000 and final approval in January 2001. Opponents to the community filed a California Environmental Quality Act (CEQA) lawsuit challenging the Board of Supervisors' approval. In November 2001, the Superior Court dismissed opponents' claims, and the decision has been appealed by opponents. The length of time required to resolve this matter and outcome of the judicial process are difficult to predict. An adverse decision would affect the timing and costs of the project.

Income-Producing Properties

        For the three- and six-months periods ended June 30, 2002, revenues were down 12% and 11%, respectively, over the same periods in 2001. The decreases primarily were due to the loss of revenues generated from sold income-producing properties that closed escrow in the second, third and fourth quarters of 2001, and the closing of the Edwards movie theaters in the Valencia Town Center regional shopping mall late in the 2001 third quarter. Income for the three-month period essentially was unchanged from the same period in 2001, while income for the six-month period ended June 30, 2002 was down 17% over the same period in 2001 primarily due to the sale of income-producing properties.

        Income for the current and prior year second quarters include the effects of the cessation of depreciation on Properties Held for Sale and Sold Properties of $17,000 and $120,000, respectively, and for the current and prior six-month periods of $36,000 and $275,000, respectively. In the 2001 second quarter, the Spectrum Club, which had been classified as a property held for sale, was re-classified as held for investment. Accordingly, depreciation expense was recorded covering the entire period the property was held for sale.

        Retained properties produced slightly lower net operating income (before administration, depreciation and interest expenses) in the second quarter 2002 primarily due to certain one-time common area maintenance expenses. Net operating income for the six-month period ended June 30, 2002 was higher versus the same period in 2001 due to the strong operating results of the hotels in the 2002 first quarter. Net operating income for 2002 from the Company's income portfolio is expected to be approximately $22 million, and income (after administration, depreciation and interest expenses) is expected to be approximately $12 million.

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Income-producing Properties

	Three Months Ended June 30,						Six Months Ended June 30,
Net Operating Income (Dollars in thousands)
	2002			2001			2002			2001
Retained Properties(1)	$	5,570		$	5,647		$	11,034		$	10,986
Properties Held for Sale(2)		(6	)		(35	)		(12	)		32
Sold Properties(3)		19			390			(4	)		1,691
Net Operating Income(4)		5,583			6,002			11,018			12,709
Admin/Depreciation		(2,444	)		(2,852	)		(4,839	)		(5,308	)
Total Contribution to Income	$	3,139		$	3,150		$	6,179		$	7,401

(1)

Includes NorthPark Village Square and River Oaks shopping centers, Valencia Town Center regional mall and entertainment center, retail along Town Center Drive, Hyatt Valencia and Valencia Hilton hotels, restaurants, leases, etc.

(2)

Consists of a 35,310 sq. ft. building located in Valencia Commerce Center.

(3)

Includes in 2001, the Chiquita Canyon Landfill (sold in 2^nd quarter), the Bank of America Building and a small office building (sold in 3^rd quarter) and the Town Center Plaza mixed-use building (sold in 4^th quarter).

(4)

Before administration, depreciation and interest expenses. Maintenance costs are expensed as incurred.

        Occupancy rates at the Company's various income-producing properties were as follows at June 30, 2002 and 2001:

	June 30, 2002	June 30, 2001
Occupancy Rates*:
Valencia Town Center Mall**	82%	94%
Entertainment Center***	97%	96%
Valencia Town Center Master Lease****	80%	56%
NorthPark/River Oaks Shopping Centers	99%	100%
Hotels	75%	77%

*

Includes signed lease space and leases to short-term tenants.

**

Includes 334,470 sq. ft. of leasable retail space and 8,400 sq. ft. of office space.

***

Includes 129,103 sq. ft. of leasable space.

****

Includes 50,000 sq. ft. of retail space from a 12¹/2 year lease-back agreement that was part of the sale of four office buildings along Town Center Drive that closed in early December 2000.

Valencia Water Company

        Valencia Water Company is a regulated utility and a wholly-owned subsidiary of the Company serving approximately 24,000 metered connections. In February 2002, Valencia Water Company voluntarily reduced its general rates by 4.85% in order to obtain a rate of return at or below its authorized rate of return with the California Public Utilities Commission (CPUC). However, Valencia Water Company filed an application with the CPUC on May 3, 2002 for a proposed rate increase to cover rising costs and planned capital expenditures to improve system reliability and water quality. The

17

CPUC is expected to complete its review of the application and render a decision in early 2003. There is no assurance that the requested rate increase will be approved.

        Despite the 4.85% rate reduction that took effect at the end of February 2002, revenues for the three- and six-months periods ended June 30, 2002 increased 13% and 14%, respectively, from the same periods in 2001 primarily due to a 3% year to date increase in the water company's customer base and increased water usage due to drier weather conditions. Income for the quarter and six-month period ended June 30, 2002 increased 39% and 16%, respectively. The increase was primarily due to the increase in revenue expenses partially offset by higher legal expenses related to proceedings in which Valencia Water Company is involved.

Agricultural Operations

        For the three- and six-month periods ended June 30, 2002, revenues from agriculture operations were 18% and 16% lower, respectively, than the same periods in 2001, primarily due to a reduction in sales volume and prices on alfalfa and a decrease in oil and gas prices. Income for the three- and six-months ended June 30, 2002 decreased 103% and 56%, respectively, compared to the same periods in 2001 due to the factors mentioned above as well as costs associated with increased acreage being converted to idle farmland as a result of low commodity prices and dryland crop losses resulting from the lack of rain.

General and Administrative Expense

        General and adminstrative expenses for the 2002 second quarter decreased 14% while expenses for the six-months ended June 30, 2002 remained comparable with the prior year. The 2002 second quarter decrease was primarily due to reduced levels of incentive-based compensation expense accrual resulting from lower earnings for the 2002 second quarter. For the six-months ended June 30, 2002, the reduction in incentive-based compensation expense accrual was offset by an increase in expense for unit ownership plans. General and administrative expenses for all of 2002 are expected to be comparable to 2001 levels.

Interest and Other, net

        Interest and other, net decreased 65% and 49% for the 2002 second quarter and the six-months ended June 30, 2002, respectively. Lower interest rates on the Company's bank line borrowings together with increased interest income from promissory notes accepted by the Company in conjunction with certain commercial land and residential lots sales in the 2001 fourth quarter and 2002 first quarter were the primary contributors to the decrease over the same 2001 periods. Interest expense in 2002 is expected to be 34% lower than 2001 due to lower interest rates on the Company's bank line borrowings, increase in interest income from promissory notes and an increase in capitalized interest on active real estate projects.

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FINANCIAL CONDITION

Liquidity and Capital Resources

        At June 30, 2002, the Company had cash and cash equivalents of $2.1 million and $136.5 million available under bank lines, net of $24.2 million in letters of credit. Borrowings outstanding on unsecured lines of credit totaled $23.3 million. In addition, the Company had fixed rate debt totaling $59.0 million. The Company believes it has adequate sources of cash from operations and debt capacity, combined with anticipated land sales, to finance future operations on both a short- and long-term basis and to fund unit repurchases. (See additional information on the unit repurchase program below.) The Company utilizes its available debt capacity to fund on-going operations, as well as administration and legal costs to bring future projects online over the longer term to enable the Company to complete the development of Valencia and begin development of Newhall Ranch. As a guideline, the Company targets to limit total debt to no more than 60% of the appraised value of the income portfolio. The Company ended the 2002 second quarter with a conservative debt to income portfolio value ratio of 31%, which provides adequate debt capacity to fund operations. At June 30, 2002, there was no debt secured by the Company's raw land or land under development inventories.

        In May 2001, the Board of Directors authorized a unit repurchase program of up to 2,520,000 units, or 10% of the then outstanding units. The Company repurchases units from time to time at prevailing market prices and, depending on market conditions, either through open market, or unsolicited negotiated transactions. Repurchases are funded from cash flow generated from normal business operations. As of June 30, 2002, a total of 1,386,085 units had been repurchased under this program for $40.3 million, or an average price of $29.10 per unit, and 1,133,915 units remained to be repurchased. Factors that could affect the Company's ability to complete its unit repurchase program include, but are not limited to, governmental approvals, changing market and economic conditions, changing interest rates, challenges to governmental approvals and finding suitable buyers for certain properties. The Company recently announced that due to uncertainties of the economy and various legal challenges concerning Newhall Ranch and West Creek (see the "Community Development" section above), the Company has reduced significantly the pace of repurchases and likely will not complete the current program during 2002.

        For the six months ended June 30, 2002, the Company invested approximately $14 million in major roads and freeway improvements, which is included in land under development on the accompanying balance sheet. In addition, the Company invested approximately $300,000 (net of a settlement received in May 2002 from Edwards Theatres, Inc. bankruptcy proceedings) on the remodel of the former Edwards Theatres space in Valencia Town Center regional mall for relocation of the existing food court and creation of new retail space, and approximately $3.5 million on the construction of Tournament Players Club® at Valencia championship golf course, in the Company's Westridge community, which are included in income-producing properties on the accompanying balance sheet. For the remainder of 2002, the Company expects to invest approximately $17 million in major roads and freeway improvements to enable the Company to continue its land sales program in Valencia. Another approximately $5.3 million is expected to be invested in 2002 in Valencia Town Center regional shopping mall for the remodel of the former Edwards Theatres space for relocation of the existing food court and creation of new retail space with an additional $14.7 million in 2003, for a total of $20 million for the project. Additionally, the Company expects to invest another approximately $10.5 million in 2002 and $5.5 million in 2003 on the completion of the golf course. As of June 30, 2002, there were no other material commitments for capital expenditures.

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

Operating Activities

        Net cash provided by operating activities totaled $27.7 million for the first six months of 2002 versus $66.4 million for the six months ended June 30, 2001. For the six months ended June 30, 2002, revenues generated from operating activities included the sale of 733 residential lots, the sale of approximately 56 commercial acres and revenue from the Company's portfolio of income-producing properties, combined for a total of $91.3 million. This was offset by the Company's acceptance in the 2002 first quarter of $18.7 million in promissory notes in conjunction with the terms of certain commercial land and residential lot sales. The terms of these notes are less than one year and are expected to be collected prior to December 31, 2002. One of these notes in the amount of $3 million was collected in the 2002 second quarter. In addition, $5.5 million of notes receivables outstanding at December 31, 2001 were collected in the 2002 second quarter. Cash used in operating activities also included the use of approximately $47 million for land under development expenditures mostly related to land preparation and infrastructure improvements to ready the land for development or sale. Additional uses of cash included the Company's general and administrative expenses and interest expense.

        For the six months ended June 30, 2001, cash provided by operating activities included revenues from the sale of 21.5 industrial/commercial acres, the sale of the Chiquita Canyon Landfill, the sale of an option on 1,800 acres in Broomfield, Colorado, revenues from the portfolio of income-producing properties, and the collection of a $9.4 million land sale note, which combined generated a total of $127.1 million. Cash used in operating activities included primarily $26.6 million of expenditures for land under development inventories mostly related to land preparation and infrastructure improvements to ready land for sale. Additional uses of cash included the Company's general and administrative expenses and interest expense.

Investing Activities

        Expenditures for the development of income-producing properties for the six-months ended June 30, 2002 totaled $5.8 million and were primarily for the Valencia Town Center food court remodel and expansion, and construction of Tournament Players Club® at Valencia championship golf course, in the Company's Westridge community. Expenditures for the development of income-producing properties for the six-month period ended June 30, 2001 totaled $3.2 million and were primarily for the completion of two office buildings sold in December 2000. Purchase of property and equipment totaled $4.1 million for the six-month period ended June 30, 2002 compared to $5.5 million for the same 2001 period and was primarily for water utility construction.

Financing Activities

        Distributions of $8.0 million for the six-months ended June 20, 2002 consisted of two regular quarterly distributions of $.10 per unit and a $.13 per unit special distribution. For the six month period ended June 30, 2001, two quarterly distributions of $.10 per unit each and a $.10 per unit special distribution were paid for a total of $7.8 million. The Company declared a third quarter 2002 regular distribution of $.10 per unit, payable September 16, 2002 to unitholders of record on August 2, 2002. 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.

        During the six months ended June 30, 2002, 415,935 partnership units were repurchased for $12.7 million, or an average price of $30.54. For the six-month period ended June 30, 2001, a total of 1,955,090 units were repurchased for $52.1 million, or an average price of $26.63 per unit.

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FORWARD-LOOKING INFORMATION

        Except for historical matters, the matters discussed in this report are forward-looking statements that involve inherent risks and uncertainties. We have tried, wherever practical, to identify these forward-looking statements by using words like "anticipate," "believe," "estimate," "target", "project," "expect," "plan," and similar expressions. Forward-looking statements include, but are not limited to, statements about plans; opportunities; anticipated regulatory approvals; 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 expressly undertake no obligation to publicly revise or update 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. See our risk factors below.

        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 and commercial income property can be 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 north Los Angeles County. The Southern California economy is profoundly affected by the entertainment, technology, defense and certain other segments. Consequently, all sectors of the Company's real estate operations tend to be cyclical. The regional economy, like that of the state and nationally, has slowed into a recession. There can be no assurances that the recession will not worsen or the economy will recover in the near future.

        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. 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 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 comparable to that sold and leased by the Company and the level of demand for such real estate. Currently, the residential market in the Santa Clarita Valley, including Valencia, remains strong and has been capturing an increasing portion of Los

21

Angeles County's new home sales. However, there is no assurance that this trend will continue. The industrial market in Valencia is experiencing declining demand and rising vacancy rates since the national and regional economy has slowed and concerns linger over California's power crisis. In addition, local competition has intensified as local business parks have opened or are in the planning stages.

        Geographic Concentration:    The Company's real estate development activities are focused on the 18,600 acres that it owns in north 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 and Acts of Terror:    The Company's assets and real estate operations may be adversely affected by natural occurrences such as earthquakes and weather conditions, and acts of terrorism or armed conflict that may cause damage to assets, delay progress and increase the costs of infrastructure construction and land development, and affect 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. (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 may be beyond the Company's control and could restrict or prevent development of otherwise desirable new projects. 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 their 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.

        Environmental Remediation:    The Company owns or formerly owned properties with respect to which the Company may be required to remediate environmental effects of prior releases of contamination. Future environmental costs are difficult to estimate because of factors such as, but not limited to, the unknown magnitude of possible contamination, the unknown timing and extent of remediative actions that may be required, the determination of the Company's potential liability, and the extent to which such costs are recoverable from third parties or from applicable insurance coverages. In addition, the length of time to perform any required remediation or the successful pursuit of responsible third parties is difficult to predict. The ability to, or length of time required to, remediate any property could increase the costs of, and restrict, prevent or delay the development of a new project.

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Part I. Financial Information
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 June 30, 2002, the Company had $23.3 million of variable debt outstanding with a weighted average interest rate of 3.31% and $59.0 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 June 30, 2002 by expected maturity dates:

Dollars in thousands		2002			2003			2004			2005			2006			Thereafter			Total			Fair Value
Mortgage and Other Debt
	Fixed Rate Debt	$	1,269		$	10,970		$	1,509		$	1,657		$	23,525		$	20,058		$	58,988		$	64,579	(2)
	Weighted Average Interest Rate		7.57	%		8.32	%		7.38	%		7.35	%		7.43	%		7.70	%		7.69	%
	Variable Rate Debt(1)	$	2,000						21,300											$	23,300		$	23,300
	Weighted Average Interest Rate		3.09	%					3.33	%											3.31	%

(1)

The Company has a $50 million revolving mortgage facility which bears interest at LIBOR plus 1.40% against which no borrowings were outstanding at June 20, 2002. The Company also has unsecured lines of credit consisting of a $130 million line on which the interest rate is LIBOR plus 1.25% to 1.45% and a $2 million line on which the rate is LIBOR plus 1.35%, against which borrowings of $21.3 million and $2 million were outstanding, respectively at June 30, 2002. 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 with similar terms, subject to market conditions existing at the times of renewal.

(2)

The fair values of the Company's fixed rate debt either approximate carrying value or are estimated using discounted cash flow analyses based on the Company's current incremental borrowing arrangments ranging from 4.88% to 7.00%.

        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 June 30, 2001 by expected maturity dates:

Dollars in thousands		2001			2002			2003			2004			2005			Thereafter			Total			Fair Value
Mortgage and Other Debt
	Fixed Rate Debt	$	1,167		$	1,479		$	10,968		$	1,512		$	1,655		$	43,583		$	60,364		$	60,364
	Weighted Average Interest Rate		7.59	%		7.55	%		8.32	%		7.35	%		7.37	%		7.55	%		7.68	%
	Variable Rate Debt				$	10,000														$	10,000		$	10,000
	Weighted Average Interest Rate					5.25	%														5.25	%

        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. As of June 30, 2002, the Company's debt to income portfolio value ratio was 31%.

23

Part II. Other Information
Item 1. Legal Proceedings.

Please refer to "Residential Land Sales" and "Community Development" 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(a)  The Newhall Land and Farming Company Retirement Plan (Restatement effective January 1, 2002)

10(b)  The Newhall Land and Farming 2002 Equity Compensation Plan and Related Form of Agreements

99(a)  Certification of Principal Executive Officer

99(b)  Certification of Principal Financial Officer

(b)

No reports on Form 8-K were filed in the second quarter ended June 30, 2002.

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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: August 12, 2002	By	/s/  GARY M. CUSUMANO Gary M. Cusumano, President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer)
Date: August 12, 2002	By	/s/  STUART R. MORK Stuart R. Mork, Senior Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer)
Date: August 12, 2002	By	/s/  DONALD L. KIMBALL Donald L. Kimball, Vice President—Finance and Controller of Newhall Management Corporation (Principal Accounting Officer)

25

THE NEWHALL LAND AND FARMING COMPANY

INDEX TO EXHIBITS

Exhibit Number	Description
10(a)	The Newhall Land and Farming Company Retirement Plan (Restatement effective January 1, 2002)
10(b)	The Newhall Land and Farming 2002 Equity Compensation Plan and Related Form of Agreements
99(a)	Certification of Principal Executive Officer
99(b)	Certification of Principal Financial Officer

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EX-10.A

Exhibit 10.a

THE NEWHALL LAND AND FARMING COMPANY

RETIREMENT PLAN

(Restatement Effective January 1, 2002)
THE NEWHALL LAND AND FARMING COMPANY
RETIREMENT PLAN

TABLE OF CONTENTS

			Page
ARTICLE I DEFINITIONS			6
	1.01	Actuarial Equivalent	6
	1.02	Affiliated Company	6
	1.03	Annuity Starting Date	6
	1.04	Beneficiary	6
	1.05	Board	6
	1.06	Break in Service	6
	1.07	Code	6
	1.08	Committee	7
	1.09	Company	7
	1.10	Compensation	7
	1.11	Contributing Participant	8
	1.12	Contribution Account	8
	1.13	Credited Benefit Service	8
	1.14	Covered Compensation	9
	1.15	Credited Compensation	9
	1.16	Cumulative Vesting Service	10
	1.17	Early Retirement Date	10
	1.18	Eligible Employee	10
	1.19	Employee	10
	1.20	Employee Provided Benefit	10
	1.21	Employee Savings Plan	11
	1.22	ERISA	11
	1.23	Fiduciary	11
	1.24	Final Average Credited Compensation	11
	1.25	Five-Percent Owner	11
	1.26	Hour of Service	11
	1.27	Insurance Company	13
	1.28	Investment Manager	13
	1.29	Late Retirement Date	13
	1.30	Leased Employee	13
	1.31	Liquidation Date	13
	1.32	Managing General Partner	13

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	1.33	Non-Seasonal Agricultural Employee	13
	1.34	Normal Retirement Date	13
	1.35	OBRA 93	13
	1.36	One-Percent Owner	13
	1.37	Participant	13
	1.38	Participating Company	13
	1.39	Plan	13
	1.40	Plan Administrator	13
	1.41	Plan Year	13
	1.42	Primary Social Security Benefit of a Participant	14
	1.43	Regulation	14
	1.44	Related Company	14
	1.45	Remuneration	14
	1.46	Rule of Parity Break	15
	1.47	Seasonal Agricultural Employee	15
	1.48	Social Security Taxable Wage Base	15
	1.49	Trust	15
	1.50	Trustee	15
	1.51	Year of Service	15
ARTICLE II PARTICIPATION			16
	2.01	General Eligibility Requirements	16
ARTICLE III RETIREMENT BENEFITS			17
	3.01	Normal Retirement Benefit	17
	3.02	Provisions Relating to Benefits Commencing Prior to January 1, 1985 and Certain Spousal Benefits	18
	3.03	Early Retirement Benefit	19
	3.04	Late Retirement Benefit	20
	3.05	Benefits for Contributing Participants	21
	3.06	Benefits upon Termination	21
ARTICLE IV REEMPLOYMENT			22
	4.01	Repayment	22
	4.02	Suspension Before a Participant's Normal Retirement Date	22
	4.03	Suspension After a Participant's Normal Retirement Date	22
	4.04	Resumption	22
	4.05	Death	22
ARTICLE V DEATH BENEFITS			23
	5.01	Preretirement Survivor Benefits	23
ARTICLE VI CERTAIN BENEFITS FOR CONTRIBUTING PARTICIPANTS			24
	6.01	Withdrawal	24
	6.02	Preretirement Death Benefit	24
	6.03	Postretirement Death Benefit	24
ARTICLE VII DISTRIBUTIONS OF BENEFITS			25
	7.01	Normal Payment Method	25
	7.02	Optional Payment Methods	25

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	7.03	Procedures for Election of Optional Payment Methods and Designation of Beneficiary	25
	7.04	Notification and Explanation	26
	7.05	Small Benefits	27
	7.06	Facility of Payment	27
	7.07	Limitation on Time and Manner of Distribution	27
ARTICLE VIII LIMITATIONS ON BENEFITS			29
	8.01	Section 415 Limitation	29
	8.02	Annual Benefit	29
	8.03	Maximum Permissible Amount	29
	8.04	Adjustment	30
	8.05	Multiple Defined Benefit Plans	30
	8.06	Annual Addition	31
	8.07	Adjustments	31
	8.08	Freeze Date	31
	8.09	Limitation on Benefits for Highest Paid	31
ARTICLE IX FUNDING			32
	9.01	Agreements Relating to Funding	32
	9.02	Establishment of Trust Agreement	32
	9.03	Appointment of Investment Manager	32
	9.04	Insurance or Annuity Contracts	32
	9.05	Voting of Securities in Trust	32
	9.06	Participating Company Contributions	32
	9.07	Effect of Transfer of Employment on Participating Company Liability	33
	9.08	Application of Forfeitures	33
ARTICLE X ADMINISTRATION OF THE PLAN			34
	10.01	The Board and the Committee	34
	10.02	Organization of Committee	34
	10.03	Powers and Duties	34
	10.04	Uniform Administration	35
	10.05	Benefit Claims Procedures	35
	10.06	Fiduciary Responsibilities	36
	10.07	Liability	36
	10.08	Indemnification	36
	10.09	Reliance on Documents	36
	10.10	Member's Own Participation	36
	10.11	Delegation of Responsibility	36
	10.12	Investment Policy	36
	10.13	Compensation and Expenses	36
	10.14	Multiple Fiduciary Capacity	37
ARTICLE XI AMENDMENT			38
	11.01	Amendment	38
	11.02	Technical Amendments	38
	11.03	Effect of Amendments by Participating Companies	38
ARTICLE XII MERGER			39

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	12.01	Successors to Participating Companies	39
	12.02	Merger or Transfer of Plan Assets	39
ARTICLE XIII TERMINATION			40
	13.01	Power to Terminate	40
	13.02	Vesting and Allocation of Assets upon Termination	40
	13.03	Partial Termination	40
ARTICLE XIV MISCELLANEOUS			41
	14.01	Source of Payment	41
	14.02	Inalienability of Benefits	41
	14.03	Return of Contributions	42
	14.04	Determination of Primary Social Security Benefit	42
	14.05	No Right to Employment	42
	14.06	Payments to Minors or Incompetents	42
	14.07	Lost Participant or Beneficiary	42
	14.08	Satisfaction of Claims	43
	14.09	Determinations	43
	14.10	Mistaken Payments	43
	14.11	Direct Rollover	43
	14.12	Interpretation	44
	14.13	Applicable Law	44
	14.14	USERRA Compliance	44
ARTICLE XV TOP-HEAVY RULES			45
	15.01	Definitions	45
	15.02	Top-Heavy Status	47
	15.03	Minimum Benefit	48
	15.04	Vesting	48
ARTICLE XVI EXECUTION			50

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PREAMBLE

        The Newhall Land and Farming Company Retirement Plan (the "Plan"), established effective December 16, 1951, was last restated in its entirety effective January 1, 1984, and subsequently amended on six separate occasions. Effective January 1, 2002, or as otherwise indicated, this document constitutes another complete amendment and restatement of the Plan.

        The principal purpose of this amendment and restatement is to bring the Plan document into compliance with the requirements of the Uruguay Round Agreements Act, the Uniformed Services Employment and Reemployment Rights Act of 1994, the Small Business Job Protection Act of 1996, the Taxpayer Relief Act of 1997, the Internal Revenue Service Restructuring and Reform Act of 1998 and the Community Renewal Tax Relief Act of 2000.

        The rights and benefits of a Plan Participant who ceased to be an Employee on or prior to December 31, 2001 shall be determined in accordance with the provisions of the Plan in effect on the date on which that Participant ceased to be an Employee, and any provisions of this Plan that are specifically made effective to such date.

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ARTICLE I
DEFINITIONS

        Unless otherwise required by the context, the terms used herein shall have the meanings set forth in the remaining paragraphs of Article I. As used herein, the masculine pronoun shall include the feminine and the singular shall include the plural, unless a different meaning is plainly required by the context.

        1.01    Actuarial Equivalent shall mean the determination of a benefit having the same value as the benefit under the Plan which it replaces. Determination of a Participant's vested accrued benefit for purposes other than a lump sum payment shall be based on an interest rate of six percent (6%) and mortality specified in Table 18-a of the Society of Actuaries 1983 Exposure Draft on Development of the 1983 Group Annuity Mortality Table ("GAM 83"); mortality rates used for individual Participants shall be based on Table 18-a rates for individuals one year younger. Notwithstanding the preceding sentence, determining (i) whether the present value of a Participant's accrued benefit exceeds $5,000 for purposes of Section 7.05 and (ii) the amount of a lump sum benefit, shall be calculated using whichever of the following yields the largest present value of the vested accrued lump sum retirement benefit due an Employee:

(a)

The Applicable Interest Rate under Section 417(e) of the Code for the second full calendar month before the date of distribution, and the Applicable Mortality Table under Section 417(e) of the Code; or



(b)

Eighty-eight percent (88%) of the average interest rate on 30-year Treasury securities for the third full calendar month before the date of distribution, and the GAM 83 mortality table blended 50% male and 50% female.

        Notwithstanding any other provision of the Plan to the contrary, the present value of the accrued lump sum retirement benefit due an Employee who became a Participant prior to January 1, 2000 shall not be less than the present value of such Participant's vested accrued benefit as of December 31, 1999 utilizing an interest rate that is equal to nine percent (9%) and mortality table specified above for purposes other than a lump sum payment.

        1.02    Affiliated Company shall mean each Participating Company and each entity which is a Related Company with respect to any Participating Company.

        1.03    Annuity Starting Date shall mean the first day of the first period for which an amount is received as an annuity.

        1.04    Beneficiary shall mean the person or persons entitled to receive benefits under the Plan upon the death of the Participant as set forth in Section 7.03.

        1.05    Board shall mean the Board of Directors of Newhall Management Corporation or such other corporate entity as may from time to time be the Managing General Partner.

        1.06    Break in Service shall mean any Plan Year in which:

(a)

a Participant who is not at any time during such Plan Year a Seasonal Agricultural Employee does not complete more than 500 Hours of Service, or



(b)

a Participant who is at any time during such Plan Year a Seasonal Agricultural Employee does not complete more than 300 Hours of Service.

        1.07    Code shall mean the Internal Revenue Code of 1986 as amended.

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        1.08    Committee shall mean the Employee Benefit Committee appointed by the Board in accordance with Article X and shall include, where appropriate, any party to whom responsibility has been properly delegated under Section 10.11.

        1.09    Company shall mean The Newhall Land and Farming Company, a California limited partnership.

        1.10    Compensation shall mean the compensation reportable for Federal Income Tax purposes, including severance payments, that is or would have been paid to an Employee if such Employee had not made (i) a salary deferral election under The Newhall Land and Farming Company Employee Savings Plan, (ii) an election under any plan described in Section 125 of the Code or (iii) an election to defer the receipt of salary or bonus (whether payable in cash or employer securities) under a nonqualified deferral arrangement; provided that, effective for terminations of employment on and after December 1, 1993, Compensation does not include severance pay. If an amount is included in Compensation at the time of deferral pursuant to the previous sentence, no amount attributable to the amount so deferred will be included in Compensation at the time the deferred amount is actually paid.

(a)

Compensation does not include that portion of compensation imputed for tax purposes as a result of fringe benefits (including any gain upon the exercise of options to acquire employer securities or the sale of securities acquired thereunder, the vesting of restricted employer securities or other gains from equity compensation other than employer securities that are payable (or would be payable absent a deferral election by the Participant) as an annual bonus) and other similar forms of compensation as determined in accordance with nondiscriminatory rules adopted by the Committee.



(b)

In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, effective for Plan Years beginning on and after January 1, 2002, the annual Compensation of an Employee taken into account under the Plan shall not exceed $200,000 adjusted for increases in the cost-of-living as provided under Code Section 401(a)(17)(B). With respect to an Employee who performs an Hour of Service after December 31, 2001, for purposes determining such Employee's benefit accruing in Plan Years beginning prior to 2002, the annual Compensation limit shall be $200,000.



(c)

Unless otherwise provided under the Plan, each Code Section 401(a)(17) Employee's accrued benefit under this Plan will be the greater of the accrued benefit determined for the Employee under 1 or 2 below:



(1)

The Employee's accrued benefit determined with respect to the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employee's total Years of Service taken into account under the Plan for the purposes of benefit accruals, or



(2)

The sum of:



(i)

the Employee's accrued benefit as of the last day of the last Plan Year beginning before January 1, 1994, frozen in accordance with Section 1.401(a)(4)-13 of the Regulations, and



(ii)

the Employee's accrued benefit determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employee's Years of Service credited to the Employee for Plan Years beginning on or after January 1, 1994, for purposes of benefit accruals.




(d)

For purposes of this Section, a Section 401(a)(17) Employee means an Employee whose current accrued benefit as of a date on or after the first day of the first Plan Year beginning

7

on or after January 1, 1994, is based on compensation for a year beginning prior to the first day of the first Plan Year beginning on or after January 1, 1994, that exceeded $150,000.

        1.11    Contributing Participant shall mean any Participant who elected, under the provisions of the Plan in effect prior to January 1, 1976, to make monthly contributions under the Plan by payroll deduction. From and after January 1, 1976, employee contributions to the Plan are neither required nor permitted.

        1.12    Contribution Account shall mean, with respect to a particular Contributing Participant, an amount equal to:

(a)

such Contributing Participant's own contributions to the Plan under the provisions hereof in effect prior to January 1, 1976, plus



(b)

interest on the net balance in the account from time to time: (i) for periods prior to January 1, 1976, in accordance with the provisions of this Plan then in effect; and (ii) for periods after December 31, 1975, compounded annually at the rate of five percent (5%) per annum (or such different rate as may be established by the Secretary of the Treasury pursuant to Section 204(c)(2)(d) of ERISA) or such greater rate as may be determined by the Committee less



(c)

any amounts withdrawn from time to time pursuant to Section 5.01.

        1.13    Credited Benefit Service shall mean, for purposes of determining benefits under this Plan, shall be a number of years and months (or twelfths of years) found by application of subsections (a), (b) and (c) to periods of service beginning on the date (determined by reference to available employment records of the employer) on which an Employee first renders an Hour of Service with a Participating Company, unless such service is excluded by application of subsection (d).

(a)

An Employee's Credited Benefit Service with respect to the period prior to January 1, 1976 shall include all Plan Years and completed calendar months (treating fractional months as complete months) of employment, provided that no Credited Benefit Service shall be taken into account for any period:



(1)

during which the Plan was not in existence;



(2)

during which such Employee was not an Eligible Employee; or



(3)

excluded by application of subsection (d).




(b)

With respect to the period beginning on January 1, 1976, the Credited Benefit Service of an Employee who is not, at any time during a Plan Year, a Seasonal Agricultural Employee shall

8

accrue based on the following table of Hours of Service rendered during each Plan Year while he is an Eligible Employee:

Hours of Service	Credited Service
Under 500	0
500—599	2/12 of a year
600—699	3/12 of a year
700—799	4/12 of a year
800—899	5/12 of a year
900—999	6/12 of a year
1000—1099	7/12 of a year
1100—1199	8/12 of a year
1200—1299	9/12 of a year
1300—1399	10/12 of a year
1400—1499	11/12 of a year
1500 and Over	12/12 of a year

(c)

With respect to the period beginning on January 1, 1976, the Credited Benefit Service of an Employee who is, at any time during a Plan Year, a Seasonal Agricultural Employee shall accrue based on the following table of Hours of Service rendered during such Plan Year while he is an Eligible Employee:

Hours of Service	Credited Service
Under 300	0
300—499	1/12 of a year
500—599	2/12 of a year
600—699	3/12 of a year
700—799	4/12 of a year
800—899	5/12 of a year
900—999	6/12 of a year
1000—1099	7/12 of a year
1100—1199	8/12 of a year
1200—1299	9/12 of a year
1300—1399	10/12 of a year
1400—1499	11/12 of a year
1500 and Over	12/12 of a year

(d)

Notwithstanding subsections (a) through (c), an Employee's Credited Benefit Service shall not include service prior to a Rule of Parity Break.

        1.14    Covered Compensation shall mean the average of the contribution and benefit bases in effect under Section 230 of the Social Security Act for each year in the 35-year period ending with the year in which the Participant attains the social security retirement age as defined in Section 415(b)(8) of the Code. For purposes of the above, the determination for any year preceding the year in which the Participant attains the social security retirement age will be made by assuming that there is no increase in the bases described above after the determination year and before the Participant attains the social security retirement age.

        1.15    Credited Compensation shall mean aggregate Compensation for the performance of duties as an Eligible Employee.

9

        1.16    Cumulative Vesting Service shall mean, with respect to a particular Employee, the aggregate of all such Employee's Years of Service, except that the following Years of Service shall not be taken into account:

(a)

Years of Service ending before January 1, 1976, if they would have been disregarded under the break in service rules of the Plan effective for such years.



(b)

Years of Service completed before the Year of Service in which the Employee attains the age of 22 (or, for an Employee who has at least one Hour of Service after December 31, 1984, the age of 18), unless such Employee:



(1)

was, at any time during the particular Year of Service in question, a Seasonal Agricultural Employee, or



(2)

was a Participant on December 31, 1975 and has been a Participant continuously thereafter.




(c)

Years of Service before a Break in Service, unless and until the Employee has completed one Year of Service after such Break in Service.



(d)

Years of Service before a Rule of Parity Break.

Subject to subsection (d), any Participant who is a Seasonal Agricultural Employee shall be credited with a year of Cumulative Vesting Service for each year (if any) for which he is entitled to receive a past service benefit credit under Section 3.01(a)(3).

        1.17    Early Retirement Date shall have the meaning set forth in Section 3.03(a).

        1.18    Eligible Employee shall mean any Employee of a Participating Company, but excluding:

(a)

any Leased Employee.



(b)

any Employee whose compensation and conditions of employment are established by the terms of a collective bargaining agreement in the negotiation of which retirement benefits were the subject of good faith bargaining, except that any otherwise eligible Employee whose compensation and conditions of employment are established by the terms of a collective bargaining agreement shall be an Eligible Employee if his participation in this Plan is specifically provided for in a collective bargaining agreement entered into by a Participating Company with such Employee's lawful representative or bargaining agent. For purposes of the preceding sentence, the term "collective bargaining agreement" shall not apply if more than two percent (2%) of the employees covered pursuant to such agreement are "professionals" as defined in Regulation 1.410(b)-9(g).

        1.19    Employee shall mean:

(a)

Any person who is employed by and engaged in rendering personal services to an Affiliated Company, or



(b)

Any Leased Employee unless: (i) such individual is covered by a money purchase pension plan described in Section 414(n)(5)(A)(i) of the Code; and (ii) Leased Employees do not constitute more than twenty percent (20%) of the Associated Companies' non-highly compensated work force (as defined in Section 414(n)(5)(C)(ii) of the Code).

A person employed by an Affiliated Company as an officer shall be deemed an Employee, whether or not he is also a director of such Affiliated Company, but no person shall be deemed an Employee solely by reason of serving as a director of an Affiliated Company.

        1.20    Employee Provided Benefit shall mean an annual amount determined by increasing a Contributing Participant's Contribution Account at time of termination or severance from employment

10

(not later than his Normal Retirement Date) by the interest rate provided in Section 1.12 as of such date compounded annually to the Normal Retirement Date and then dividing by ten (10).

        1.21    Employee Savings Plan shall mean The Newhall Land and Farming Company Employee Savings Plan.

        1.22    ERISA shall mean the Employee Retirement Income Security Act of 1974, as amended.

        1.23    Fiduciary shall mean any person who exercises discretionary authority or control over the management of the Plan, assets held under the Trust, or disposition of Trust assets; who renders investment advice for direct or indirect compensation as to assets held under the Plan or has any authority or responsibility to do so; or who has any discretionary authority or responsibility in the administration of the Plan. Any person may serve in more than one fiduciary capacity with respect to the Plan if so duly appointed or delegated such responsibility.

        1.24    Final Average Credited Compensation shall mean:

(a)

The annual average Credited Compensation during the five (5) consecutive year period during the Participant's last ten (10) years of participation in the Plan for which such Credited Compensation is highest. If the participant was not employed for five (5) of the last ten (10) calendar years or if the Participant was on a leave of absence other than a long term disability leave during such period, the average will be based on the actual number of most recent consecutive years completed; or



(b)

For any Participant who has at least one Hour of Service with an Affiliated Company on or after January 1, 1993 the annual average Credited Compensation of the five years during the Participant's last ten (10) years of participation in the Plan for which such Credited Compensation is highest. For purposes of determining this average, the Plan shall disregard all years in which the Participant has zero earnings. If the participant was not employed for five (5) of the last ten (10) calendar years or if the Participant was on a leave of absence other than a long term disability leave during such period, the average will be based on the actual number of most recent years completed.



(c)

If in a calendar year the Hours of Service of a Participant do not equal or exceed 1500 for a Participant who is, at any time during such calendar year, a Seasonal Agricultural Employee, 2080 for a Participant who is a Non-Seasonal Agricultural Employee, or 2080 for all other Participants, then such Participant's Credited Compensation for such calendar year shall be deemed to be the sum of: (i) his Credited Compensation for such calendar year (exclusive of any bonus or severance payments) divided by the actual number of Hours of Service (not more than the appropriate number set forth in item (I)) completed by the Participant during the applicable period and then multiplied by the appropriate number set forth in item (II); plus (ii) any bonus received by the Participant during the calendar year.

        1.25    Five-Percent Owner of an entity shall mean any Participant who owns (or is considered as owning, within the meaning of Section 318 of the Code, applied by substituting "one-twentieth" for "50%" in Section 318(a)(2)(C)) more than five percent (5%) of the capital or profits interest of the entity (or, if such entity is a corporation, more than five percent (5%) of its outstanding stock or stock possessing more than five percent (5%) of the total combined voting power of all stock).

        1.26    Hour of Service shall mean:

(a)

In general:



(1)

An hour for which an Employee is paid or entitled to payment by an Affiliated Company for the performance of duties;

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(2)

An hour for which an Employee is paid or entitled to payment by an Affiliated Company for a period during which no duties are performed (whether or not the employment relationship has been terminated) on account of vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military duty or leave of absence; provided, however, that:



(i)

No hour for which an Employee is directly or indirectly paid under a plan maintained by an Affiliated Company solely to comply with applicable worker's compensation, unemployment compensation or disability insurance laws or solely to reimburse the Employee for medical or medically related expenses incurred by the Employee shall be counted as an Hour of Service; and



(ii)

Under no circumstances shall more than 501 Hours of Service be credited to an Employee for any single continuous period during which the Employee performs no duties.




(3)

An hour (to the extent not already credited under paragraphs (1) or (2) above) for which an Employee is awarded back pay from an Affiliated Company, irrespective of mitigation of damages.




(b)

Subsection (a) shall be applied in accordance with the following:



(1)

The number of Hours of Service to be credited for periods during which the Employee performs no duties and the crediting of Hours of Service to specific Plan Years shall be determined by the Committee in accordance with subsections (b) and (c) of Department of Labor Regulations §2530.200b-2; and



(2)

An Employee whose compensation for the performance of duties is computed without reference to specific numbers of hours shall be deemed to have 190 Hours of Service in any calendar month in which such Employee completes one Hour of Service.




(c)

Solely for the purpose of determining whether a Break in Service has occurred, an Hour of Service shall include, effective for unpaid absences which commence on or after January 1, 1985, any unpaid absence from work for any period:



(1)

By reason of pregnancy of the Employee;



(2)

By reason of the birth of a child of the Employee;



(3)

By reason of the placement of a child with the Employee in connection with the adoption of such child by such Employee; or



(4)

For purposes of caring for such child for the period beginning immediately following such birth or placement.

For purposes of calculating Hours of Service under this subsection, the Plan shall treat as Hours of Service either: (i) the hours which otherwise would normally have been credited to the Employee but for such absence; or (ii) in any case in which the Plan is unable to determine the hours described in clause (i), eight (8) hours per day of absence.

Provided, however, that no more than 501 Hours of Service shall be credited for each pregnancy or placement described in paragraphs (1) through (4) above. All Hours of Service credited under this subsection shall be credited in the Plan Year during which the first day of the absence described in (i) through (iv) above occurs if, but only if, the Employee would have had a Break in Service in such Plan Year were the Hours of Service under this subsection not credited in such year or, in any other case, in the immediately following Plan Year. No Hours of Service will be credited under this subsection unless the Employee furnishes to the Committee such timely

12

information as the Committee may reasonably require to establish that the absence from work is for reasons set forth in (i) through (iv) above and the total number of days for which there was such an absence.

        1.27    Insurance Company shall have the meaning set forth in Section 9.04.

        1.28    Investment Manager shall have the meaning set forth in Section 9.03.

        1.29    Late Retirement Date shall have the meaning set forth in Section 3.03(a).

        1.30    Leased Employee means any person, other than a common law employee of an Affiliated Company, who pursuant to an agreement between an Affiliated Company and any other person ("leasing organization") has performed services for the Affiliated Company (or for the Affiliated Company and related persons determined in accordance with Section 414(n)(6) of the Code) on a substantially full time basis for a period of at least one year as determined in accordance with the applicable provisions of the proposed Income Tax Regulations Section 1.414(n)-1(b)(10), and such services are performed under the primary direction or control of the Affiliated Company.

        1.31    Liquidation Date shall mean January 8, 1985.

        1.32    Managing General Partner shall mean Newhall Management Corporation, a California corporation, the managing general partner of the Company, and any successor managing general partner.

        1.33    Non-Seasonal Agricultural Employee shall mean any employee engaged as an agricultural worker by a component of an Affiliated Company that is predominantly involved in producing agricultural commodities, and who is not a Seasonal Agricultural Employee.

        1.34    Normal Retirement Date shall mean, effective August 1, 1987, the first day of the month coinciding with or next following a Participant's sixty-fifth (65) birthday.

        1.35    OBRA 93 shall mean the Omnibus Budget Reconciliation Act of 1993.

        1.36    One-Percent Owner of an entity shall mean any person who would be described by the definition of Five Percent Owner herein if "one percent" (1%)" were substituted for "five percent (5%)" each place it appears in such definition.

        1.37    Participant shall mean any Eligible Employee of a Participating Company who becomes a Participant in the Plan in accordance with Article II and who has not either: (i) incurred a Rule of Parity Break; or (ii) received the entire amount of his benefits under the Plan.

        1.38    Participating Company shall mean the Company and any other employer: (i) authorized by the Board to adopt the Plan; and (ii) which adopts the Plan for its employees.

        1.39    Plan shall mean The Newhall Land and Farming Company Retirement Plan, as in effect from time to time. With respect to the period from and after January 1, 1989, the Plan shall be as set forth in this document and as amended from time to time.

        1.40    Plan Administrator shall mean, with respect to the period prior to January 8, 1985, The Newhall Land and Farming Company, a corporation, and for the period from and after January 8, 1985, the Managing General Partner.

        1.41    Plan Year shall mean: (i) for any year beginning after December 31, 1975, the period from any January 1st to the following December 31st; and (ii) for any period prior to January 1, 1976, the Plan Year specified in the Plan as in effect for such period.

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        1.42    Primary Social Security Benefit of a Participant shall mean the following, computed in accordance with Section 14.04:

(a)

If determined as of a date on or after his Normal Retirement Date, the estimated annual old age insurance benefit available to him on his Normal Retirement Date under the Social Security Act as in effect on such date.



(b)

If determined as of the date of his retirement or termination of employment prior to his Normal Retirement Date, the estimated annual primary old age insurance available to him at his Normal Retirement Date, computed: (i) as though his Compensation would continue from the date of determination to his Normal Retirement Date at the rate in effect immediately prior to his actual retirement or termination; and (ii) without regard to any increases in the Social Security Taxable Wage Base or benefit levels or any other change in the Social Security Act or regulations thereunder that may take effect after the date of such determination.

        1.43    Regulation shall mean the Federal Income Tax Regulations, as amended.

        1.44    Related Company shall mean, with respect to a particular Participating Company: (i) each other entity, trade or business (whether or not incorporated) which is included within a controlled group of corporations or a group of trades or businesses under common control within which such Participating Company is also included, as determined under Section 414(b) or (c) of the Code and Regulations thereunder; and (ii) any employer which is a member of an affiliated service group with such Participating Company, as determined under Section 414(m) of the Code; and (iii) any other entity required to be aggregated with such Participating Company pursuant to regulations under Section 414(o) of the Code. For purposes of the limitation on benefits set forth in Section 8.01, Sections 414(b) and (c) of the Code shall be applied as modified by Section 415(h) of the Code (relating to the substitution of a 50 percent ownership test for an 80 percent ownership test).

        1.45    Remuneration shall mean an Employee's wages, salaries, and fees for personal services and other amounts received for personal services actually rendered in the course of employment with a Participating Company or any Related Company. Remuneration includes, but is not limited to: (i) commissions, compensation for services on the basis of percentage of profits, overtime payments and bonuses; (ii) earned income from sources without the United States (whether or not excludable from gross income under Section 911 of the Code); (iii) amounts received through accident or health insurance or through a self-insured medical reimbursement plan for personal injuries or sickness (but only to the extent includable in gross income); (iv) in the case of an Employee who has not attained age 65 before the close of the taxable year and who retired on account of permanent and total disability, wages or payments in lieu of wages (whether or not excludable from gross income under Section 105(d) of the Code); (v) amounts paid or reimbursed by such Participating Company or any Related Company for moving expenses (but only to the extent not deductible by the Employee); and (vi) amounts included in gross income by reason of elections made under Section 83(b) of the Code. Remuneration does not, however, include:

(a)

Contributions of such Participating Company or any Related Company to any other plan of deferred compensation to the extent deductible by, or not includable in taxable income of, the Employee for the taxable year of contribution (including contributions to a simplified employee pension plan), and distributions from any plan of deferred compensation other than an unfunded plan not qualified under Section 401 of the Code;



(b)

Amounts realized from the exercise of an employee option to purchase securities of such Participating Company or any of its Related Companies or the disposition of securities acquired upon exercise of such an option;



(c)

Amounts realized upon the vesting of restricted property; and

14

(d)

All other amounts which receive special tax benefits.

Notwithstanding the foregoing,

(I)

Remuneration shall include any employer contribution under a cash or deferred arrangement to the extent not included in gross income under Code Section 402(g)(3) and any amount which the Employee would have received in cash but for an election under a cafeteria plan (within the meaning of Code Section 125). Effective January 1, 2001, Remuneration also shall include any elective salary reductions not includible in gross income as a qualified transportation fringe under Code Section 132(f)(4).



(II)

For purposes of Section 15.01(b), an Employee's Remuneration shall not exceed the limitation amount contained in Section 1.10(b).

        1.46    Rule of Parity Break shall mean a Break in Service incurred by a Participant who has not met the vesting requirement of Section 3.06(a) prior to such Break in Service and consisting of a number of consecutive Breaks in Service which: (i) equals or exceeds the number of such Participant's Years of Service prior to such Break in Service; and (ii) unless clause (i) is satisfied prior to January 1, 1985, equals or exceeds five (5). Years of Service prior to any Rule of Parity Break shall be disregarded in determining whether a subsequent Break in Service constitutes a Rule of Parity Break.

        1.47    Seasonal Agricultural Employee shall mean any Eligible Employee engaged as an agricultural worker on a seasonal basis by a component of any Affiliated Company that is predominantly involved in producing agricultural commodities, and who is scheduled to work less than one thousand five hundred (1500) hours per calendar year. Any Employee who is a Seasonal Agricultural Employee during any portion of a Plan Year shall, notwithstanding his transfer to or from other employment status, be entitled in that Plan Year to the benefit of such provisions of this Plan as pertain to a Seasonal Agricultural Employee (including, but not limited to, Sections 1.06, 1.13, 1.16, 1.24, 1.51, 2.01, 3.1(b), and 15.3).

        1.48    Social Security Taxable Wage Base means the contribution and benefit base as determined under Section 230 of the Social Security Act with respect to a particular time.

        1.49    Trust shall mean the aggregate of all the assets of the Plan, including: (i) assets held hereunder pursuant to a trust agreement entered into between the Company and the Trustee, pursuant to Section 9.02; and (ii) assets held pursuant to a contract with an Insurance Company, pursuant to Section 9.04.

        1.50    Trustee shall mean any trustee appointed by the Committee.

        1.51    Year of Service shall mean:

(a)

As to Plan Years beginning after December 31, 1975, each Plan Year during which:



(1)

An Employee who is not at any time during such Plan Year a Seasonal Agricultural Employee completes at least one thousand (1000) Hours of Service; or



(2)

An Employee who at any time during such Plan Year is a Seasonal Agricultural Employee completes at least three hundred (300) Hours of Service; and




(b)

As to years prior to 1976, each full or partial year of employment commencing upon the completion of one Hour of Service and each anniversary thereof.

15

ARTICLE II
PARTICIPATION

        2.01    General Eligibility Requirements.    

(a)

Every Participant in the Plan on December 31, 1988 shall continue to be a Participant hereunder.



(b)

Any Eligible Employee who is not a Participant by virtue of subsection (a) shall become a Participant on the earlier of:



(1)

The date he first performs an Hour of Service for a Participating Company as a Seasonal Agricultural Employee (and no subsequent transfer of employment status shall make such individual subject to clause (2)); or



(2)

The first day of the first calendar month coinciding with or following the date on which he has completed both the service requirement set forth in subsection (c) and the age requirement set forth in subsection (d).




(c)

An Eligible Employee has satisfied the service requirement on the earlier of the following dates:



(1)

The first anniversary of the date of his first Hour of Service with any Affiliated Company (or his first Hour of Service after a Year Break in Service), if he completed 1,000 Hours of Service during such period; or



(2)

The last day of the first Plan Year which commences after the date of his first Hour of Service with any Affiliated Company (or his first Hour of Service after a Year Break in Service) and in which he completes at least 1,000 Hours of Service.




(d)

An employee has satisfied the age requirement on the earlier of the following dates:



(1)

Such date prior to January 1, 1985 as he attains age 22; or



(2)

Such date on or after January 1, 1985 as he attains or has attained age 21.




(e)

An Employee who is not an Eligible Employee on the date he would otherwise become a Participant under subsection (b) shall become a Participant on the first date thereafter on which he is an Eligible Employee.

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ARTICLE III
RETIREMENT BENEFITS

        3.01    Normal Retirement Benefit.    

(a)

Subject to Article VIII, a Participant who has at least one Hour of Service with an Affiliated Company on or after January 1, 1989 and who elects to retire on his Normal Retirement Date shall be entitled to receive as his Normal Retirement Benefit an annual benefit in an amount (expressed in the form of a single life annuity) equal to the greater of:



(1)

The sum of: (i) 1.35% of the Participant's Final Average Credited Compensation not in excess of his Covered Compensation multiplied by his years of Credited Benefit Service prior to January 1, 1997, not to exceed 30 such years (1.35% shall be changed to 1.08% of the Participant's Final Average Credited Compensation not in excess of his Covered Compensation multiplied by his years of Credited Benefit Service beginning on or after January 1, 1997 not to exceed a total of 30 years); plus (ii) 2% of the Participant's Final Average Credited Compensation in excess of his Covered Compensation multiplied by his years of Credited Benefit Service prior to January 1, 1997, not to exceed 30 such years (2% shall be changed to 1.60% of the Participant's Final Average Credited Compensation not in excess of his Covered Compensation multiplied by his years of Credited Benefit Service beginning on or after January 1, 1997, not to exceed a total of 30 years); finally, for a Contributing Participant, the sum is increased by such Participant's Employee Provided Benefit; or



(2)

(i) First the Participant's Final Average Credited Compensation is multiplied by two percent (0.02) (one and two-thirds percent (0.0167) for Participants who terminated employment prior to January 1, 1985), and the product thereof is multiplied by the lesser of thirty (30) or the number of the Participant's years of Credited Benefit Service; (ii) Next, the product of fifty percent (0.50) of the Participant's Primary Social Security Benefit and the number of the Participant's years of Credited Benefit Service is divided by the greater of thirty (30) or the number of years of Credited Benefit Service the Participant had at his Normal Retirement Date (or would have had if he had worked continuously from his termination date to his Normal Retirement Date); (iii) Next, the quotient determined in (ii) is subtracted from the product determined in (i); and (iv) Finally, for a Contributing Participant, the difference determined in (iii) is increased by such Participant's Employee Provided Benefit.

        For purposes of the benefit formula contained in subsection (2) above, a Participant's Normal Retirement Benefit shall be based on his Final Average Credited Compensation and his Credited Benefit Service through December 31, 1988.

(3)

For any Employee who was a Participant on January 1, 1979; (i) First, with respect to each calendar year (or portion of a calendar year) during the period beginning on the later of January 1, 1976 or the date the Employee became a Participant, an amount equal to one and one-half percent (0.015) of that portion of his Credited Compensation for such year (or portion thereof) not in excess of the Social Security Taxable Wage Base applicable for such year shall be added to two percent (0.02) of that portion (if any) of his Credited Compensation for such year (or portion thereof) in excess of such Social Security Taxable Wage Base; (ii) Next, with respect to any Employee who was a Participant on December 31, 1975, the sum determined in (i) shall be increased by the amount of the annual fixed retirement benefit that was accrued with respect to such Participant under the Plan as of December 31, 1975; and (iii) Finally, the sum determined in (i), increased if applicable as set forth in (ii), shall be further increased by a past

17

service credit for Seasonal Agricultural Employees under this (iii), if applicable. Each Seasonal Agricultural Employee shall be allowed benefits for each calendar year through 1975 which follows the latest two-consecutive-calendar-year period in which such Employee has a total of not less than six hundred (600) Hours of Service in the amount of one and one-half percent (1¹/2%) of his Credited Compensation for each calendar year up to the Social Security Wage Base in effect for such year and two percent (2%) of his Credited Compensation for such year in excess of such Social Security Wage Base. Any employee who was a Seasonal Agricultural Employee during any portion of any Plan Year shall, notwithstanding his transfer to other employment status, be entitled in that Plan Year to the benefit of the provisions of this clause (iii) which pertain to a Seasonal Agricultural Employee. Provided, however, that no credits or benefits shall be allowed in (i) or (ii) above with respect to service not required to be taken into account in determining Cumulative Vesting Service by reason of subsection (c) and (d) of Section 1.15.

        For purposes of the benefit formula contained in subsection (3) above, a Participant's Normal Retirement Benefit shall be based on his Final Average Credited Compensation and his Credited Benefit Service through December 31, 1988.

(4)

A benefit computed by the multiplication of $132.00 by the number of the Participant's years of Credited Benefit Service (expressed as twelfths of years) not to exceed 30 such years.




(b)

A Participant whose employment with an Affiliated Company terminated prior to January 1, 1989 and who elects to retire on his Normal Retirement Date shall be entitled to receive as his Normal Retirement Benefit an annual benefit in an amount (expressed in the form of a single life annuity) equal to the greater of the benefit determined under subsection (2), (3) and (4).

        3.02    Provisions Relating to Benefits Commencing Prior to January 1, 1985 and Certain Spousal Benefits.    

(a)

Except as provided in subsections (b), (c), and (d) of this section, retirement benefits for Participants (and Beneficiaries of the interests of such Participants) who first received benefits prior to January 1, 1976 shall be governed by the provisions of this Plan (or the applicable predecessor plan) existing on such Participant's retirement date, except to the extent that variable benefits under predecessor plans were converted at the Participant's election into fixed credits.



(b)

With respect to: (i) any Participant who had retired on an Early, Normal, or Late Retirement Date and was in receipt of retirement income under the Plan as of December 31, 1978; (ii) any spouse of such a Participant who becomes or has become entitled to benefits under Articles III or VI; and (iii) any beneficiary who is entitled to be paid a survivor annuity according to the provisions of Article IV and who was in receipt of monthly benefits as of December 31, 1978, the monthly benefit shall be increased effective November 1, 1979 by a percentage representing 80 percent of the percentage increase of the Consumer Price Index which occurred between the month of retirement or death and June 1979. In no event shall the resulting monthly benefit be less than: (I) in the case of a Participant receiving benefits in the form of a single life annuity, $15.00 multiplied by the former Participant's service at retirement to a maximum of 10 years; or (II) in the case of a Participant, beneficiary or spouse receiving benefits in a form other than under a single life annuity, the benefit which would have been payable under such form if the Participant had been entitled to receive a single life annuity in the amount described in item (I).

18

(c)

For: (i) any Participant who had retired on an Early, Normal or Late Retirement Date and was in receipt of retirement income as of December 31, 1982; (ii) any spouse of such a Participant if such spouse becomes or has become entitled to benefits under Article III or VI; and (iii) any beneficiary who is entitled to be paid a survivor annuity according to the provisions of Article IV and who was in receipt of monthly benefits as of December 31, 1982, the monthly benefit shall be increased effective July 1, 1983 by 0.632% per month, compounded monthly, for each month beginning with the later of: (I) the date the Participant, spouse or beneficiary began receiving payments; or (II) January 1, 1979 and ending on December 31, 1982. Notwithstanding the foregoing, any benefit payable on January 1, 1983 in excess of nine hundred dollars per month ($900 per month) will not be increased by this subsection.



(d)

For: (i) any Participant who had retired on an Early, Normal, or Late Retirement Date and was in receipt of retirement income as of December 31, 1984; (ii) any spouse of such a Participant if such spouse becomes or has become entitled to benefits under Article III or VI; and (iii) any beneficiary who is entitled to be paid a survivor annuity according to the provisions of Article IV and who was in receipt of monthly benefits as of December 31, 1984, the monthly benefit shall be increased effective January 1, 1986 by 0.285 percent per month, compounded monthly, for each month during the period beginning with the later of: (I) the date the Participant, spouse, or beneficiary began receiving payments; or (II) January 1, 1983 and ending on August 31, 1985. In no event shall the resulting monthly benefit be less than: (A) in the case of a Participant who retired on or after Normal Retirement Date and who is receiving benefits in the form of a single life annuity, $11 multiplied by his full years and months (expressed as twelfths of full years) of Credited Benefit Service to a maximum of 30 years; or (B) in any other case, the Actuarial Equivalent of the benefit described in item (A), reduced pursuant to Section 3.02(c) if applicable. Notwithstanding the foregoing, any benefit payable on January 1, 1985 in excess of nine hundred dollars per month ($900 per month) will not be increased by this subsection.



(e)

With respect to any Participant who had retired on an Early, Normal, or Late Retirement Date and began receiving retirement benefits under the Plan on or before December 31, 1982, and whose monthly retirement benefit under the Plan as of July 31, 1987 was less than $900, such monthly retirement income shall be increased as of August 1, 1987 by one percent (1%) for each full year elapsed between the date of such Participant's first retirement benefit payment under the Plan and July 31, 1987, but not more than 20%.



(f)

The benefits payable under Article III or VI of the Plan, with respect to a deceased Participant who began receiving benefits under the Plan on or before December 31, 1982, to a surviving spouse or contingent annuitant whose monthly retirement income under the Plan as of July 31, 1987 was less than $900 shall be increased as of August 1, 1987 by one percent (1%) for each full year elapsed between the date of the Participant's first retirement income payment under the Plan and July 31, 1987, but not more than 20%.



(g)

The benefits payable under Article V to the surviving spouse of a deceased Participant shall, in the case of a spouse who began receiving such benefits under the Plan on or before December 31, 1982 and whose monthly benefit under the Plan as of July 31, 1987 was less than $900, be increased as of August 1, 1987 by one percent (1%) for each full year elapsed between the date of such spouse's first benefit payment under the Plan and July 31, 1987, but not more than 20%.

        3.03    Early Retirement Benefit.    

(a)

A Participant who has completed ten (10) years of Cumulative Vesting Service and who has attained age 55 may elect to retire on an Early Retirement Date which is the first day of a

19

calendar month by filing a written notice of such election with the Committee at least 120 days prior to such Early Retirement Date.

(b)

A Participant who elects an Early Retirement Date may elect to have his retirement income commence either on his Normal Retirement Date or as of the first day of any earlier month selected by him which is on or after his Early Retirement Date.



(c)

Subject to subsection (d), the retirement benefit of a Participant electing early retirement under subsection (a) shall be computed in accordance with Section 3.01, applied as though such Participant had retired on his Normal Retirement Date with the number of years of Credited Benefit Service and Cumulative Vested Service he has actually completed as of his severance from employment. In the event payment of benefits commences before his Normal Retirement Date, the amount of such benefits shall be reduced by one-fifteenth (¹/15) for each of the first five (5) years and one-thirtieth (¹/30) for each of the next five (5) years that commencement of benefits under this section precedes his normal Retirement Date. In the case of fractional years, the reduction factor specified in the preceding sentence shall be prorated to the nearest full month.



(d)

The retirement benefit of a Participant who has at least one Hour of Service on or after January 1, 1989 and elects early retirement under subsection (a) shall be computed in accordance with Section 3.01, applied as though such Participant had retired on his Normal Retirement Date with the number of years of Credited Benefit Service and Cumulative Vested Service he has actually completed as of his Early Retirement Date. In the event payment of benefits commences before his Normal Retirement Date, multiply the Base Benefit Factors in Table I by the benefit determined under clause (i) of Section 3.01(a) and the excess benefit factor based on a Participant's year of birth by the benefit determined under clause (ii) of Section 3.01(a) or multiply the Base Benefit Factors in Table I by the benefit determined in paragraphs (2), (3) and (4).

TABLE 1

Base Benefit Factor		Excess Benefit Factor
Age at Benefit Commencement		Year of Birth 1954 or earlier	Year of Birth 1955 or later
65	1.000	1.000	1.000
64	933	933	933
63	867	867	867
62	800	800	800
61	733	733	733
60	667	667	667
59	633	633	633
58	600	600	600
57	567	567	567
56	533	533	529
55	500	500	486

        In the case of fractional years, the reduction factors are interpolated to the completed month of age at benefit commencement.

        3.04    Late Retirement Benefit.    

(a)

A Participant who continues in the employ of an Affiliated Company past his Normal Retirement Date may elect to retire on a Late Retirement Date which is the first day of a calendar month by filing a written notice of such election with the Committee at least 120 days prior to such Late Retirement Date.

20

(b)

Subject to subsection (c), the retirement benefit of a Participant electing late retirement shall be, if paid in a single life annuity form, the same monthly amount he would have received had he retired on his Normal Retirement Date. Such single life annuity amount shall not be adjusted to reflect the Participant's age upon commencement of benefits, but alternative forms of benefit payment shall be determined with reference to such single life annuity amount on the basis of appropriate factors (including the age of the Participant at the date of his actual retirement). No additional benefits shall accrue under this Plan by reason of employment after an employee's Normal Retirement Date.



(c)

The retirement benefit of a Participant with one (1) Hour of service on or after January 1, 1988 who elects late retirement shall be determined in the same manner as his Normal Retirement Benefit taking into account his Final Average Credited Compensation and total Credited Benefit Service (not in excess of 30 years) during his employment with all Affiliated Companies.

        3.05    Benefits for Contributing Participants.    

        In no event shall the retirement benefits payable to a Contributing Participant be less than the minimum aggregate benefits provided for in Section 6.03.

        3.06    Benefits upon Termination.    

(a)

Subject to subsection (b) and (if applicable) Section 15.04, a Participant whose employment with all Affiliated Companies terminates for any reason other than death or retirement in accordance with the provisions of this Plan shall be entitled to benefits as set forth in subsection (c) only if at least one of the following applies:



(1)

He has completed ten (10) years of Cumulative Vesting Service (five (5) years of Cumulative Vesting Service for Participants with one (1) Hour of service on or after January 1, 1989);



(2)

His employment terminates on or after the date he attains age 65; or



(3)

He was an employee of a Participating Company on December 31, 1975 and continuously thereafter, has attained age forty (40), and has been a Participant for at least five (5) years.




(b)

Notwithstanding subsection (a):



(1)

A Contributing Participant's right to his Contribution Account shall at all times be fully vested and nonforfeitable; and



(2)

Any Participant whose employment with the Company or any of its Related Companies terminated in connection with the partial liquidation of the Company effective March 9, 1983 shall be fully vested in his accrued benefit under the Plan as of such date.




(c)

The benefit payable to a terminated Participant entitled to a benefit by virtue of subsection (a) shall be an annual benefit expressed in the form of single life annuity equal to the benefit earned prior to termination of employment computed in accordance with Section 3.01. Such benefit shall be payable commencing on his Normal Retirement Date, except that if as of the date of termination of employment such Participant had satisfied the service requirement but not the age requirement set forth in Section 3.03(a), he may, upon attaining age 55, elect to receive the retirement income otherwise payable to him, commencing as of the first day of any month selected by him which is on or after his attainment of age 55 and prior to his Normal Retirement Date, reduced as provided in Section 3.03(c) or (d) by reason of the commencement of payments prior to his Normal Retirement Date.



(d)

If a Participant separates from service before the Participant is vested in his accrued benefit, the Participant's accrued benefit will be deemed to have received a distribution equal to $0 and to forfeit the remainder of their benefit. Subject to the Rule of Parity Break, such a participant's accrued benefit will be restored at such time as the participant again becomes an Employee.

21

ARTICLE IV
REEMPLOYMENT

        4.01    Repayment.    As permitted under Section 411(a)(7)(C) of the Code, if a Participant who has received his or her vested accrued benefit again becomes an Eligible Employee, the Participant may repay in cash the total amount that he received under the Plan with interest from the date of receipt at the rate permitted under Section 411(c)(2)(C) of the Code. Such repayment must be made by delivering the required amount to the Trustee within 5 years after the date on which the Participant again becomes an Eligible Employee. By making this repayment, the Participant will be entitled to have reinstated the Credited Benefit Service with which the Participant was credited as of the date of the separation from service to which the benefit relates and to have no reduction made to any subsequent benefit under the Plan for any prior benefit payments.

        4.02    Suspension Before a Participant's Normal Retirement Date.    If a Participant who has separated from service again becomes an Employee, any Plan benefit payable to the Participant will be suspended beginning with the first month after the month in which the Participant is credited with at least 1,000 Hours of Service for a Plan Year and continuing until the Participant again separates from service. Any benefits to which the Participant may become entitled because of this subsequent separation from service will be actuarially determined on the basis of increased service, age and other relevant factors and will be actuarially reduced for payments received before reemployment unless the Participant repaid all such amounts in accordance with the preceding Section.

        4.03    Suspension After a Participant's Normal Retirement Date.    Notwithstanding the foregoing, a Participant who continues in employment with an Affiliated Company or who is reemployed by an Affiliated Company on or after attaining age 65 will be eligible for his retirement benefit for any month in which the Participant is expected to receive compensation for less than 40 Hours of Service or such other amount of time that does not constitute Section 203(a)(3)(B) service under ERISA.

        4.04    Resumption.    Benefits suspended because they constitute Section 203(a)(3)(B) service under ERISA will resume on the first day of the third calendar month after the calendar month in which the Participant ceases such service and has notified the appropriate Participating Company of such cessation of service.

        4.05    Death.    If a Participant dies while benefits are suspended, with respect to the Participant's retirement benefits earned before the suspension, a death benefit will be paid as provided under the form of benefit payment previously elected by the Participant, and will be based on the benefit that would have been paid if the Participant had again retired on the date of death. With respect to the benefit earned during the suspension, any death benefits will be provided in accordance with Article V.

22

ARTICLE V
DEATH BENEFITS

        5.01    Preretirement Survivor Benefits.    Upon the death of a vested Participant prior to his Annuity Starting Date, survived by a spouse to whom he was married throughout the one-year period ending on the date of death, a benefit under subsection (a) shall be payable to such spouse if the Participant dies on or after August 23, 1984 after: (i) completing at least one Hour of Service on or after August 23, 1984; or (ii) completing ten (10) Years of Service and completing at least one Hour of Service on or after January 1, 1976. In the case of any other Participant, no benefit shall be payable except as provided in subsection (b).

(a)

In a case to which this subsection (a) applies, the surviving spouse shall receive a monthly annuity equal to the amount which would be payable as a survivor annuity if—



(1)

In the case of a Participant who dies after becoming eligible for early retirement under Section 3.03 but before retirement, such Participant had retired and received an annuity pursuant to the normal payment method set forth in Section 7.01(b), on the day before such Participant's death, and the annuity shall start as of the first day of the month coinciding with or next following the date of death.



(2)

In the case of a Participant who dies after retirement under Section 3.03(a) but before his Annuity Starting Date, such Participant elected on the day before his death to begin receiving benefits immediately under Section 3.03(b), and the annuity shall start as of the first day of the month coinciding with or next following the date of death.



(3)

In the case of a Participant who dies before the date on which he would have attained age fifty-five (55), such Participant had: (i) separated from service on the date of death (or, if earlier, the date of actual separation from service); (ii) survived to his fifty-fifth (55th) birthday; (iii) retired in accordance with Section 3.03 and received an annuity pursuant to the normal payment method set forth in Section 6.01(b); and (iv) died on the day after his fifty-fifth (55th) birthday. This annuity shall start as of the first day of the first month after the Participant would have attained age fifty-five (55).




(b)

In a case to which subsection (a) does not apply, a benefit shall be payable to the surviving spouse under this subsection if the Participant completed ten (10) years of Cumulative Vesting Service and attained age fifty-four and one-half (54¹/2), prior to the termination of his employment. The amount of the preretirement survivor benefit under this subsection shall be equal to the payments such spouse would have received as a survivor annuity if the Participant had retired or terminated employment immediately prior to his death (or, if earlier, on his actual date of retirement or termination of employment) without electing any optional form of benefit under Sections 7.02 and 7.03. The annuity shall start as of the first day of the month coinciding with or next following the date of death.

23

ARTICLE VI
CERTAIN BENEFITS FOR CONTRIBUTING PARTICIPANTS

        6.01    Withdrawal.    Any Contributing Participant whose Annuity Starting Date has not occurred may, by so electing in writing on a form approved by the Committee, and with the consent of his spouse (if any), withdraw in a lump sum an amount equal to any of the following:

(a)

The balance of his Contribution Account;



(b)

The amount of his contributions to such account; or



(c)

Any interest earnings in such account.

        With respect to any such withdrawal on or after January 1, 1985 by a Participant having at least one Hour of Service or hour of paid leave on or after August 23, 1984, the consent of such Participant's spouse shall meet requirements (ii), (iii), and (iv) set forth in the first sentence of Section 7.03(b)(1). Following any such withdrawal, such Participants shall have no right to any Employee Provided Benefit with respect to the amount withdrawn.

        6.02    Preretirement Death Benefit.    Subject to subsections (a) and (b), upon the death prior to his Annuity Starting Date of a Contributing Participant entitled to benefits under Section 5.01, no amount shall be payable other than under Section 5.01.

(a)

Notwithstanding the above paragraph, a Contributing Participant entitled to benefits under Section 5.01 may elect, with the consent of his spouse in a writing meeting requirements (ii), (iii) and (iv) set forth in the first sentence of Section 7.03(b)(1), to receive payment of the balance of such Participant's Contribution Account in a lump sum in the event of the Participant's death prior to his Annuity Starting Date. Such election may specify a Beneficiary other than the spouse in accordance with Section 7.03(b). The Committee shall provide such notice of the election set forth in the preceding sentence as may be required by law.



(b)

Notwithstanding the first paragraph, the surviving spouse of a Contributing Participant entitled to benefits under Section 5.01(a) who dies before his Annuity Starting Date without making an election under subsection (a) may elect in writing within 60 days of such Participant's death to receive payment of such Participant's Contribution Account in a lump sum.



(c)

In any case in which the Contribution Account of a Contributing Participant is paid in a lump sum pursuant to subsection (a) or (b), the benefits payable under Section 5.01 with respect to such Participant shall be computed by disregarding any Employee Provided Benefit.



(d)

Upon the death prior to his Annuity Starting Date of a Contributing Participant not entitled to benefits under Section 5.01, the Beneficiary of such Contributing Participant shall be entitled to payment of the balance of such Participant's Contribution Account in a lump sum as soon as administratively feasible (but in no case later than one year) after such Participant's death.

        6.03    Postretirement Death Benefit.    Upon the death of a Contributing Participant receiving benefits under Article III, the excess (if any) of (1) the balance in his Contribution Account as of his Annuity Starting Date over (2) the total amount received by such Participant as retirement benefits shall be paid in a lump sum to his Beneficiary. However, if the Participant's benefits are payable in the form of a joint and survivor annuity under Section 7.01(b) or a life and contingent annuity under Section 7.02(b) and the spouse or contingent annuitant survives the Participant, the preceding sentence shall not apply, but, upon the death of the spouse or contingent annuitant, the excess, if any, of (A) the balance in the Participant's Contribution Account as of his Annuity Starting Date over (B) the total amount received as annuity payments by the Participant and his spouse or contingent annuitant shall be paid in a lump sum to the Participant's designated Beneficiary. For purposes of the preceding sentence, if no Beneficiary was designated or none survives, payment shall be made notwithstanding Section 7.03(a) to the estate of the Participant's spouse or contingent annuitant.

24

ARTICLE VII
DISTRIBUTIONS OF BENEFITS

        7.01    Normal Payment Method.    

(a)

Unmarried Participant. A Participant who on his Annuity Starting Date is unmarried shall receive monthly benefits determined in accordance with Article III payable over his lifetime, unless the Participant elects, pursuant to Section 7.03, an alternate form of benefit provided under Section 7.02.



(b)

Married Participant. A vested Participant who on his Annuity Starting Date is married shall receive benefits in the form of a joint and survivor annuity which shall be the Actuarial Equivalent of the retirement benefit which would otherwise be payable over his lifetime determined in accordance with Article III and which provides a reduced monthly payment to the Participant for his life and thereafter a monthly survivor annuity payment of fifty percent (50%) of such amount to the Participant's surviving spouse, unless the Participant and his spouse elect, pursuant to Section 7.03, an alternate form of benefit provided under Section 7.02.

        7.02    Optional Payment Methods.    In lieu of the normal payment method specified in Section 7.01 and subject to Sections 7.03 and 7.07 and the insurance contract or contracts which may be obtained from time to time to fund benefits hereunder, any Participant may elect to receive a monthly annuity under any of the optional payment methods described in this Section, which shall be the Actuarial Equivalent of the benefit provided for in Section 7.01(a):

(a)

Single Life Annuity: A monthly payment of retirement benefits to the Participant during his lifetime.



(b)

Life and Contingent Annuity: Monthly payment of retirement benefits to the Participant during his lifetime with provision for the continuance of retirement benefits to the Participant's designated annuitant during the lifetime of such annuitant in an amount equal, at the election of the Participant under Section 7.03, to fifty percent (50%) or one hundred percent (100%) of the monthly benefit paid to such Participant prior to his death.



(c)

Life Annuity With Guaranteed Period: Monthly payment of retirement benefits to the Participant during his lifetime with provision for the continuance of monthly payments, in the same amount, to the Participant's designated Beneficiary following the Participant's death until a total number of payments equal, at the election of the Participant under Section 7.03, to sixty (60) or one hundred twenty (120) have been paid; provided, however, that:



(1)

No guaranteed period shall exceed the life expectancy, determined as of the Annuity Starting Date, of the Participant and his designated Beneficiary; and



(2)

If both the Participant and his designated Beneficiary die before such payments have been made for a total of sixty (60) or one hundred twenty (120) months, as the case may be, the commuted value of the remainder of such payment shall be paid to the estate of the last of them to die.




(d)

Single Lump Sum: Effective January 1, 1987, in addition to the annuity forms of payment described in subsections (a) through (c) above, benefits may be paid in a single lump sum to a Participant who is entitled to early retirement benefits under Section 3.03(a) or elects to retire on or after his Normal Retirement Date.

        7.03    Procedures for Election of Optional Payment Methods and Designation of Beneficiary.    

(a)

Absent a valid election of optional payment method as set forth in this section, benefits shall be paid in the form set forth in Section 7.01. Absent a valid designation of a named

25

Beneficiary as set forth in this section, the benefits payable to a Beneficiary shall be paid to the surviving spouse of the Participant, if any, or if none, to such Participant's surviving children in equal shares, or, if none, to such Participant's estate.

(b)

Any election of an optional payment method pursuant to Section 7.02 or designation of Beneficiary shall be made subject to the following rules:



(1)

Married Participant. Each married Participant may elect to receive his benefits in a form set forth in Section 7.02 other than that specified in Section 7.01 by so electing, within the 90-day period ending on the Annuity Starting Date, by a written election filed with the Committee and consented to in writing by such Participant's spouse, and for benefits commencing on or after January l, 1985, the consent of such spouse shall be set forth in a writing witnessed by a notary public which: (i) is executed within such 90-day period; (ii) acknowledges the effect of such consent on the spouse's right to receive benefits under the Plan; (iii) identifies each specific nonspouse contingent annuitant and/or Beneficiary; and (iv) either provides that such consent may be revoked only by the joint action of the Participant and the spouse or that the spouse may execute a general consent permitting the Participant to unilaterally change the nonspouse contingent annuitant and/or Beneficiary and the form of payment. Each married Participant may designate a Beneficiary other than his spouse for purposes of Sections 6.02(b) and 6.03 by a written designation filed with the Committee and consented to in writing by such Participant's spouse. The Committee shall make forms for such elections and designations available to Participants upon request. The Committee may dispense with the requirement of spousal consent if it is established to the Committee's satisfaction that there is no spouse or that the spouse cannot be located.



(2)

Unmarried Participant. Instead of receiving retirement benefits in the normal annuity form set forth in Section 7.01, an unmarried Participant may elect, prior to his Annuity Starting Date, to receive the Actuarial Equivalent of such benefits in one of the optional benefit forms described in Section 7.02. Such election shall be in writing on a form prescribed by the Committee and may be revoked in writing at any time prior to such Participant's Annuity Starting Date. An unmarried Participant may designate a Beneficiary for purposes of Sections 6.03(b), 6.03(c), and/or 7.2(c) by a written designation on a form prescribed by the Committee and filed with the Committee, which may be revoked by such Participant in writing at any time.




(c)

If the Participant is legally separated or abandoned (within the meaning of local law) and the Participant has a court order to that effect (and there is no Qualified Domestic Relations Order as defined in Code Section 414(p) that provides otherwise), or the surviving spouse cannot be located, then the waiver described in the preceding paragraph need not be filed with the Committee when a married Participant elects an optional form of benefit.



(d)

Any waiver by a spouse obtained pursuant to these procedures (or establishment that the consent of a spouse could not be obtained) shall be effective only with respect to that spouse.

        7.04    Notification and Explanation.    No less than 30 days and no more than 90 days before the Annuity Starting Date, the Committee will provide the Participant with a written explanation of the terms and conditions of the form of a joint and survivor annuity, the Participant's right to make, and the effect of, an election to waive the joint and survivor annuity form, the rights of the Participant's spouse to approve such a waiver, the Participant's right to revoke such a waiver and the effect of the Participant's right to revoke such a waiver.

        A Participant's waiver must be made on a form prepared by, and delivered to, the Committee no earlier than 90 days before the Participant's Annuity Starting Date.

26

        Participants may revoke or change their waivers at any time prior to their Annuity Starting Date by delivering a subsequent form to the Committee.

        The Annuity Starting Date for a distribution in a form other than a joint and survivor annuity may be less than 30 days after receipt of the written explanation described above provided: (a) the Participant has been provided with information that clearly indicates that the Participant has at least 30 days to consider whether to waive the joint and survivor annuity and to elect (with spousal consent) a form of distribution other than a joint and survivor annuity; and (b) the Participant is permitted to revoke any affirmative distribution election at least until the annuity starting date or, if later, at any time prior to the expiration of the 7-day period that begins the day after the explanation of the joint and survivor annuity is provided to the Participant.

        7.05    Small Benefits.    

(a)

Notwithstanding Sections 7.01 through 7.04, if the Actuarial Equivalent of a Participant's accrued vested benefits is less than or equal to $1,750 ($3,500 after December 31, 1984 and before July 15, 1998 with respect to Participants having at least one Hour of Service or one hour of paid leave on or after August 23, 1984; and $5,000 on and after July 15, 1998 with respect to all Participants), the Committee may direct that such Participant be paid the Actuarial Equivalent of such benefits in one lump sum. No distribution may be made under this subsection after the Annuity Starting Date unless the Participant and his spouse (or, if the Participant has died, the surviving spouse) consent to such distribution in a writing: (i) in which the spouse acknowledges the effect of such consent on such spouse's right to receive benefits under the Plan; and (ii) which is witnessed, as to the spouse's execution thereof, by a notary public.



(b)

Notwithstanding any provision in this Plan for the payment of monthly benefits, if such monthly benefit is less than twenty-five dollars ($25), the Committee, in its discretion and with the consent of the Participant (or, where the Participant has died, the surviving spouse or other contingent annuitant), may pay a sum quarterly, semi-annually, or annually which is the Actuarial Equivalent of the monthly payment.

        7.06    Facility of Payment.    If the Committee deems any person entitled to a payment under the Plan to be incapable of personally receiving such payment and giving a valid receipt therefor, then unless and until claim therefor shall have been made by a duly appointed guardian, conservator, or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be made for the account of such person and shall discharge the Plan of any liability therefor.

        7.07    Limitation on Time and Manner of Distribution.    Distribution of benefits to each Participant shall conform to the requirements of subsections (a) through (c) of this section.

(a)

Any lump sum payable by reason of the death of a Participant shall be paid no later than the first anniversary of such death. Any other form of benefit payable by reason of the death of a Participant shall be distributed at least as rapidly as under the method of distribution being used as of the date of the Participant's death.



(b)

Distribution of a Participant's benefits under the Plan shall commence, unless the Participant otherwise elects, not later than the 60th day after the close of the Plan Year in which the latest of the following events occurs: (i) the participant's attainment of age 65; (ii) the tenth anniversary of the year in which the Participant's participation in the Plan commenced; or (iii) the Participant ceases to be an Employee.

27

(c)

Minimum Distributions. Notwithstanding the preceding subsection, for Plan years beginning after December 31, 1988, distributions will be made in accordance with the following:



(1)

Regulations under Code Section 401(a)(9), and the incidental death benefit requirements in Code Section 401(a)(9)(G);



(2)

Distribution of a Participant's benefits under the Plan shall commence no later than April 1 of the calendar year following the later of: (i) the calendar year in which the Participant attains age 70¹/2 or, if the Participant attains age 70¹/2 after December 31, 1999, and is not, with respect to the Plan Year ending in the calendar year in which he attains age 70¹/2, a Five Percent Owner, (ii) the calendar year in which the Participant retires.



(3)

If, pursuant to Section 7.07(c)(2) above, distribution of a Participant's benefit begins later than April 1 of the calendar year following the calendar year in which the Participant attains age 70¹/2, the Participant's retirement benefit at such time thereafter as benefits begin shall be equal to the Actuarial Equivalent of the retirement benefit that would have been payable to such Participant beginning on the later of such April 1 or January 1, 1997, plus the Actuarial Equivalent of any benefits accrued after that date.

28

ARTICLE VIII
LIMITATIONS ON BENEFITS

        8.01    Section 415 Limitation.    The annual benefit (as defined below) payable to a Participant at any time will not exceed the maximum permissible amount (as defined below). This limit will be deemed satisfied if the annual benefit is not more than $1,000 multiplied by the Participant's Years of Service or parts thereof (not to exceed 10) with an Affiliated Company, and the Affiliated Company has not at any time maintained a defined contribution plan, a welfare benefit plan as defined in Code Section 419(e), or an individual medical account as defined in Code Section 415(1)(2) in which the Participant participated.

        8.02    Annual Benefit.    An annual benefit is a retirement benefit that is payable annually in the form of a straight life annuity under all qualified defined benefit plans maintained by an Affiliated Company, excluding any benefits attributable to the Participant's contributions or rollover contributions, if any, to the plans or to any assets transferred from a qualified plan that was not maintained by an Affiliated Company. If the benefit is payable in a form other than a straight life annuity (and other than a form subject to Code Section 417(e)(3)), the amount must be adjusted to an actuarially equivalent straight life annuity determined by using the greater of the interest rate specified in the Plan's definition of Actuarial Equivalent or five percent. If the benefit is payable in a form subject to Code Section 417(e)(3), the amount must be adjusted to an actuarially equivalent straight life annuity determined by using the greater of the interest rate specified in the Plan's definition of Actuarial Equivalent or the applicable interest rate defined in Code Section 417(e)(3). No actuarial adjustment is required to account for the value of a qualified joint and survivor annuity or any other joint and survivor annuity, provided the Participant's spouse is the sole Beneficiary, the value of benefits which are not directly related to retirement benefits (such as qualified disability benefits, preretirement death benefits, or postretirement medical benefits) or for the value of postretirement cost-of-living increases made in accordance with Treasury Regulations.

        8.03    Maximum Permissible Amount.    

(a)

The Maximum Permissible Amount shall be the lesser of the defined benefit dollar limitation of Code Section 415(b)(1)(A) or the Remuneration limitation which is 100% of the Participant's highest average Remuneration, as defined in Code Section 415(b)(3), as adjusted automatically pursuant to Regulations to reflect cost of living increases consistent with Code Section 415(d).



(b)

If a Participant has fewer than 10 years of participation (as defined below) in this Plan, the defined benefit dollar limitation is reduced by ¹/10 for each year of participation (or part thereof) less than 10, and the Remuneration limitation is reduced by ¹/10 for each Year of Service (or part thereof) less than 10. These adjustments shall be applied in the denominator of the defined benefit fraction based upon Years of Service. Years of Service shall include future years occurring before the Participant's Normal Retirement Date, only if it can be reasonably anticipated that the Participant will receive a Year of Service for such a year.



(1)

A Participant will be credited with a year of participation (computed to fractional parts of a year) for each accrual computation period for which the following conditions are met: (i) The Participant is credited with at least the number of Hours of Service (or period of service if the elapsed time method is used) required under the terms of the Plan in order to accrue a benefit; and (ii) The Participant is included as a Participant under the eligibility provisions of the Plan for at least one day of the accrual computation period.



(2)

If the above two conditions are met, the portion of a year of participation credited to the Participant shall equal the amount of benefit accrual service credited to the Participant for such accrual computation period. A Participant who is permanently and totally

29

disabled within the meaning of Code Section 415(c)(3)(C)(i) for an accrual computation period shall receive a year of participation with respect to that period. In addition, for a Participant to receive a year of participation (or part thereof) for an accrual computation period, the Plan must be established no later than the last day of such accrual computation period. In no event will more than one year of participation be credited for any 12-month period.

(c)

To the extent provided in Regulations, or in other guidance issued by the Internal Revenue Service, the participation limit applicable to the defined benefit dollar limitation shall also be applied separately with respect to each change in the benefit structure of the Plan.



(d)

The following provisions shall not apply in Plan Years beginning after December 31, 2001, and the maximum permissible amount will not be adjusted unless benefits begin prior to the Participant's attainment of age 62 as described in Section 8.03(e). For Plan Years beginning prior to January 1, 2002, the following provisions will apply:



(1)

If the annual benefit of the Participant commences before the Participant's social security retirement age (as defined below), but on or after age 62, the defined benefit dollar limitation, as reduced above if necessary, shall be determined as follows:



(2)

If a Participant's social security retirement age is 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined benefit dollar limitation by ⁵/9 of 1% for each month by which benefits commence before the month in which the Participant attains age 65.



(3)

If a Participant's social security retirement age is greater than age 65, the dollar limitation for benefits commencing on or after age 62 is determined by reducing the defined benefit dollar limitation by ⁵/9 of 1% for each of the first 36 months and ⁵/12 of 1% for each of the additional months (up to 24 months) by which benefits commence before the month of the Participant's social security retirement age.




(e)

If the annual benefit of a Participant begins before age 62, the defined benefit dollar limitation will be the actuarial equivalent of an annual benefit beginning at age 62, as determined above, reduced for each month by which benefits commence before the month in which the Participant attains age 62. To determine actuarial equivalence, the interest rate assumption is the greater of the rate specified in the Plan's definition of Actuarial Equivalent, or 5%. Any decrease in the defined benefit dollar limitation determined in accordance with this provision shall not reflect the mortality decrement to the extent that benefits will not be forfeited upon the death of the Participant.



(f)

If the annual benefit of a Participant commences after the Participant's social security retirement age, the defined benefit dollar limitation shall be increased so that it is the actuarial equivalent of an annual benefit beginning at the Participant's social security retirement age. To determine actuarial equivalence, the interest rate assumption used will be the lesser of the rate specified in the Plan's definition of Actuarial Equivalent or 5%.



(g)

Age 65 for a Participant born before January 1, 1938; age 66 for a Participant born after December 31, 1937, but before January 1, 1955; and age 67 for a Participant born after December 31, 1954.

        8.04    Adjustment.    If the benefit the Participant would otherwise accrue in a limitation year would produce an annual benefit in excess of the maximum permissible amount, the rate of the Participant's benefit accrual will be reduced so that the annual benefit will equal the maximum permissible amount.

        8.05    Multiple Defined Benefit Plans.    If a Participant has ever been covered under more than one defined benefit plan maintained by an Affiliated Company, and the sum of the Participant's annual

30

benefits from all such plans would exceed the maximum permissible amount, the rate of the Participant's benefit accrual in each of the plans will be reduced, pro rata, so that the annual benefit will equal the maximum permissible amount.

        8.06    Annual Addition.    For purposes of this Appendix, "Annual Addition" means, for any Plan Year, the aggregate amount (excluding Rollover Contributions and trustee-to-trustee transfers) credited to a Participant's accounts under each defined contribution plan of an Affiliated Company with respect to such Plan Year from:

(a)

Employer contributions and forfeitures allocated to a Participant's account (excluding any amount reinstated to an account pursuant to Code Sections 411(a)(7)(C) (cash-outs) or 411(a)(3)(D) (mandatory contributions)).



(b)

A Participant's own contributions made on behalf of the Participant; provided, however, that the Annual Addition for any Plan Year beginning before January 1, 1987, shall not be recomputed to treat all Participant contributions as Annual Additions.



(c)

With respect to a Participant who is a key employee, as defined in Code Section 416(i), with respect to such Plan Year or any preceding Plan Year, any amount paid or accrued to such Participant's account under a welfare benefit fund pursuant to Section 419A(d) of the Code and contributions to an individual medical account (as defined in Section 415(1) of the Code) for a Participant as part of a defined benefit plan.

        8.07    Adjustments.    In the case of an individual who was a Participant in one or more defined benefit plans of the Employer as of the first day of the first limitation year beginning after December 31, 1986, the application of the limits of this Section will not cause the maximum permissible amount for such individual under all such defined benefit plans to be less than the individual's current accrued benefit (as defined below).

(1)

The preceding sentence applies only if such defined benefit plans met the requirements of Code Section 415, for all limitation years beginning before May 6, 1986.



(2)

A Participant's current accrued benefit is the Participant's accrued benefit, determined as if the Participant had separated from service as of the close of the last limitation year beginning before January 1, 1987, when expressed as an annual benefit. In determining a Participant's current accrued benefit, the following shall be disregarded: (i) any change in the terms and conditions of the plan after May 5, 1986; and (ii) any cost of living adjustments occurring after May 5, 1986.

        8.08    Freeze Date.    In no event shall the benefit payable to a Participant determined as if the Participant had separated from service as of December 31, 1999 be less than the Participant's Accrued Benefit determined as if the Participant had separated from service on or after January 1, 2000.

        8.09    Limitation on Benefits for Highest Paid.    To the extent required by law, benefits paid from this Plan to the 25 highest paid Employees shall be subject to the provisions of Regulation 1.401-4(c).

31

ARTICLE IX
FUNDING

        9.01    Agreements Relating to Funding.    Benefits under this Plan shall be provided pursuant to one or more written agreements entered into between the Company and one or more Trustees (as described in Section 9.02), Insurance Companies (as described in Section 9.04), or a combination thereof, as designated by the Committee. To the extent that the provisions of this Plan are inconsistent with those of a trust agreement entered into under Section 9.02 or a contract with an Insurance Company entered into under Section 9.04 with respect to the rights, duties or obligations of the Trustee or Insurance Company, the provisions of the trust agreement or contract shall control.

        9.02    Establishment of Trust Agreement.    Some or all of the assets of the Plan may be held pursuant to trust agreements with one or more Trustees. The Trustees shall be such one or more individuals, banks, or trust companies as may be designated by the Committee. Each trust agreement shall provide for the investment of the trust assets and prescribe the powers, duties, obligations and functions of the Trustee with respect to the Plan. Each Trustee shall control and manage the assets of its trust, subject to the terms of its trust agreement and this Plan. A Trustee shall be subject to the direction of any Investment Manager appointed pursuant to Section 9.03 with respect to acquisition, retention, or disposition of investments of that portion of the Trust over which such Investment Manager has been given authority by the Committee. Any trust agreement with a Trustee which is a bank shall authorize such Trustee to make deposits in such Trustee's commercial banking department (or in any other bank or similar financial institution) provided that such deposits bear a reasonable rate of interest.

        9.03    Appointment of Investment Manager.    The Committee may, in its discretion, appoint one or more Investment Managers within the meaning of Section 3(38) of ERISA, and may authorize each such Investment Manager to direct any Trustee with respect to acquisition, retention, or disposition of any specified portion (or all) of the Trust.

        9.04    Insurance or Annuity Contracts.    Some or all of the assets of the Plan may be held pursuant to insurance or annuity contracts or policies with one or more Insurance Companies which are qualified to do business as insurance companies under the laws of more than one state (including but not limited to Group Retirement Policy No. 6-9019A issued to the Company by Pacific Mutual Life Insurance Company, effective October 1, 1970). Such contracts or policies may include a contract providing for or guaranteeing a specified rate of interest or return. Each contract described in this Section 9.04 may be executed and held either by the Company or, if the Committee so elects, by the Committee.

        9.05    Voting of Securities in Trust.    Each Trustee and Insurance Company shall have the authority to exercise any voting rights relating to stock and securities in the Trust, except that an Investment Manager may assume responsibility for exercising voting rights with respect to those securities which are managed by such Investment Manager, by complying with such procedures as the Committee or the Trustee or Insurance Company holding such securities shall determine.

        9.06    Participating Company Contributions.

(a)

Subject to the right of the Participating Companies to amend or terminate this Plan, as provided in Articles XI and XII, each Participating Company shall periodically remit, in accordance with the written instructions of the Committee, to the Trustee and/or Insurance

32

Company, such amounts as the Committee may determine on an actuarial basis to be necessary, in accordance with the following:

(1)

Subject to Section 9.07, a Participating Company's contributions shall be determined solely with respect to benefits accrued hereunder by reason of the employment of Participants with such Participating Company; and



(2)

Section 412 of the Code, determined in accordance with Section 413(c)(4) of the Code, shall be satisfied.





(b)

Notwithstanding the foregoing, no Participating Company shall be under any obligation to make any contributions under the Plan after the Plan is terminated with respect to such Participating Company, whether or not benefits accrued or vested prior to the date of such termination have been fully funded.

        9.07    Effect of Transfer of Employment on Participating Company Liability.    A Participant's participation in the Plan shall be deemed not to terminate because of a transfer of employment from one Participating Company to another Participating Company, so long as such Participant remains an Eligible Employee. To the extent permitted by Section 413(c) of the Code, and subject to Section 9.06 the full actuarial liability with respect to such a transferred Participant shall be deemed to become the liability of the Participating Company to which the Participant transfers, and appropriate entries shall be made in the records and books of account of the Plan and any Trustee and Insurance Company to reflect such transfer of employment.

        9.08    Application of Forfeitures.    All benefits forfeited under this Plan for any reason, including death before retirement and termination of participation before vesting, shall be applied to reduce future contributions by the Participating Company which had been the employer of the Participant whose benefits are forfeited or, in the event the foregoing is inapplicable, to reduce pro rata the future contributions of all Participating Companies.

33

ARTICLE X
ADMINISTRATION OF THE PLAN

        10.01    The Board and the Committee.    The Board shall from time to time appoint an Employee Benefit Committee of two or more members (who may, but need not, be members of the Board, officers or individual general partners of the Company or officers of the Managing General Partner) which shall be responsible for the administration of the Plan. Such members shall serve at the pleasure of the Board. The Committee and the members thereof shall be deemed to be the "named fiduciaries" of the Plan for purposes of Section 402(a) of ERISA. Notwithstanding the preceding sentence, the Company shall be the "administrator" of the Plan within the meaning of Section 3(16)(A) of ERISA.

(a)

Any member of the Committee may resign at any time by giving written notice to the other members and to the Secretary of the Company, effective as therein stated. Any member of the Committee employed by a Participating Company who leaves the employ of said Participating Company and who is not thereupon employed by any other Participating Company, shall be deemed to have resigned as a member of the Committee on the date of his termination of employment. Upon the death, resignation, or removal of any member, the Board shall appoint a successor.

        10.02    Organization of Committee.    

(a)

The members of the Committee shall elect from their number a chairman. They shall also elect a secretary who may, but need not, be one of the members of the Committee.



(b)

The Committee shall hold meetings upon such notice, and at such place or places and at such intervals as it may from time to time determine.



(c)

A majority of the members of the Committee at any time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee shall be by vote of a majority of those present at a meeting of the Committee; or without a meeting by instrument in writing signed by a majority of the members of the Committee.

        10.03    Powers and Duties.    The Committee shall have full discretionary authority to administer and interpret the Plan, including discretionary authority to determine eligibility for participation and benefits under the Plan. The Committee may, however, delegate such discretionary authority and such duties and responsibilities as it deems appropriate to facilitate the day-to-day administration of the Plan as set forth in Section 12.10. Any determination by the Committee or the Committee's delegate shall be final and conclusive upon all persons. The Committee's duties shall include, but not be limited to, the following:

(a)

To make and enforce such rules and regulations as it shall deem necessary or proper for the efficient administration of the Plan and Trust;



(b)

To interpret the Plan and to decide any and all matters arising hereunder; including the right to remedy possible ambiguities, inconsistencies or omissions; provided, however, that all such interpretations and decisions shall be applied in a uniform and nondiscriminatory manner to all Employees similarly situated;



(c)

To select or establish funds or vehicles for investment of Accounts hereunder and to establish rules for allocations of Accounts among such funds or vehicles;



(d)

To compute the Vested Value of an Account which shall be payable to any Participant or Beneficiary in accordance with the provisions of the Plan;

34

(e)

To authorize disbursements from the Trust. Any instructions of the Committee to the Trustee or Insurance Company shall be evidenced in writing and signed by a member of the Committee delegated with such authority by a majority of the Committee; and



(f)

To provide for disclosure of all information and filing or provision of all reports and statements to Participants, Beneficiaries, or governmental bodies as shall be required by ERISA or the Code.

        10.04    Uniform Administration.    Whenever in the administration of the Plan any action is required by the Committee, including, but not limited to, action with respect to valuation, such action shall be uniform in nature as applied to all persons similarly situated and no such action shall be taken which will discriminate in favor of officers, shareholders or highly compensated Participants.

        10.05    Benefit Claims Procedures.    

(a)

All applications for benefits under the Plan (including applications for in-service withdrawals under Article VI) shall be submitted to The Newhall Land and Farming Company, Attention: Employee Benefit Committee, 23823 Valencia Boulevard, Valencia, California 91355. Applications for benefits (including in-service withdrawals) must be in writing on the forms prescribed by the Committee and must be signed by the Participant or, if he is deceased, by his Beneficiary or legal representative.



(b)

Each application shall be acted upon and approved or disapproved within sixty (60) days following its receipt by the Committee. In determining whether to approve or deny any application for benefits (including in-service withdrawals), the Committee shall exercise discretionary authority to interpret the Plan and the facts presented with respect to such application. If any application for benefits is denied, in whole or in part, the Committee shall notify the applicant in writing of such denial and of his right to a review by the Committee and shall set forth in a manner calculated to be understood by the applicant, specific reasons for such denial, specific references to pertinent Plan provisions on which the denial is based, a description of any additional material or information necessary for the applicant to perfect his application, an explanation of why such material or information is necessary, and an explanation of the Plan's review procedure.



(c)

Any person whose application for benefits is denied in whole or in part, or his duly authorized representative, may appeal from such denial to the Committee for a review of the decision by submitting to the Committee within sixty (60) days after receiving the written statement described above, a writing:



(1)

Requesting a review of his application for benefits by the Committee;



(2)

Setting forth all of the grounds upon which his request for review is based and any facts in support thereof; and



(3)

Setting forth any issues or comments which the applicant deems relevant to his application.




(d)

The Committee shall act upon each such application within sixty (60) days after the later of receipt of the applicant's request for review by the Committee or receipt of any additional materials reasonably requested by the Committee from such applicant.



(e)

The Committee shall make a full and fair review of each such application and any written materials submitted by the applicant or the employer in connection therewith and may require the employer or the applicant to submit within thirty (30) days of written notice by the Committee therefor, such additional facts, documents, or other evidence as the Committee, in its sole discretion, deems necessary or advisable in making such review. On the basis of its review and in the exercise of its discretionary authority to interpret the Plan and the facts

35

presented with respect to the request for review, the Committee shall make an independent determination of the applicant's eligibility for benefits under the Plan. The decision of the Committee on any application for benefits shall be final and conclusive upon all persons.

(f)

If the Committee denies an application in whole or in part, the Committee shall give written notice of its decision to the applicant setting forth in a manner calculated to be understood by the applicant the specific reasons for such denial and specific references to the pertinent plan provisions on which the Committee decision was based.

        10.06    Fiduciary Responsibilities.    Each member of the Committee, each Trustee, and any other person to whom any fiduciary responsibility with respect to the Plan is allocated shall be a fiduciary of the Plan and shall discharge his fiduciary duties and responsibilities with respect to the Plan in accordance with the provisions of ERISA and the provisions of the Plan and any Trust Agreement, to the extent that such provisions are consistent with ERISA.

        10.07    Liability.    No member of the Committee will be liable for any act of omission or commission except as expressly provided by ERISA.

        10.08    Indemnification.    The Committee and the individual members thereof shall be indemnified by the Company against any and all liabilities arising by reason of any act or failure to act made in good faith pursuant to the provisions of the Plan, including expenses reasonably incurred in the defense of any claim relating thereto.

        10.09    Reliance on Documents.    The Committee will be entitled to rely conclusively upon all certificates, opinions and reports which will be furnished by an accountant, controller, counsel or other person who is employed or engaged for such purposes.

        10.10    Member's Own Participation.    No member of the Committee may act, vote or otherwise influence a decision of the Committee specifically relating to his own participation under the Plan.

        10.11    Delegation of Responsibility.    The Committee from time to time may allocate to one or more of its members and may delegate to any other persons or organizations any of its rights, powers, duties and responsibilities with respect to the operation and administration of the Plan and may employ, and authorize any person to whom any of its fiduciary responsibility has been delegated to employ, persons to render advice with regard to any fiduciary responsibility held thereunder; provided, however, that: (i) no person shall be employed to exercise discretion with respect to investments except as set forth in Section 13.03; and (ii) the power to select or establish investment funds or vehicles and prescribe rules for allocation of Accounts among such funds or vehicles under Section 12.03(c) shall not be delegated. Any such allocation and delegation shall be reviewed at least annually by the Committee and shall be terminable upon such notice as the Committee, in its sole discretion, deems reasonable and prudent under the circumstances.

        10.12    Investment Policy.    At periodic intervals, not less frequently than annually, the Committee shall review the long-run and short-run financial needs of the Plan, determine an investment policy consistent with the objectives of the Plan, and shall communicate such needs and investment policy to each Investment Manager, if any, each Trustee, and each Insurance Company so that the investment and funding policy of the Plan can be appropriately coordinated with the needs of the Plan.

        10.13    Compensation and Expenses.

(a)

Each member of the Committee shall serve as such without compensation, but shall be reimbursed by the Company for any necessary expenditures incurred in the discharge of his duties as a member.

36

(b)

Compensation and expenses which are attributable to the following and approved by the Committee may, at the option of the Company, be paid by the Company, or, if not so paid, shall be paid from the Trust:



(1)

The compensation or fees, as the case may be, of all agents, counsel, each Insurance Company, each Trustee, each Investment Manager, and other persons retained or employed by the Committee;



(2)

The expenses of the Trust, including those relating to reporting obligations; and



(3)

The expenses of each Trustee, Insurance Company, and Investment Manager, if any.




(c)

At its option the Company may obtain reimbursement from the other Participating Companies for compensation and expenses paid by the Company pursuant to subsections (a) and (b), in proportion to each Participating Company's share of the assets of the Plan at the beginning of such Plan Year.



(d)

Brokerage fees, commissions, stock transfer taxes and other charges and expenses incurred in connection with transactions relating to the acquisition or disposition of property for the Trust and distributions from the Trust shall be borne by the Trust assets.

        10.14    Multiple Fiduciary Capacity.    Any person or group of persons may serve in more than one fiduciary capacity with respect to the Plan.

37

ARTICLE XI
AMENDMENT

        11.01    Amendment.    The Plan, any Trust Agreement, and any contract may be amended at any time and from time to time by an instrument in writing executed pursuant to authority granted by the Board. Upon delivery to the Trustee or Insurance Company of such instrument and of evidence of such authority, the Plan, the Trust Agreement and such contract shall be deemed to have been amended in the manner and to the extent therein set forth. Notwithstanding the foregoing, however, no such amendment shall:

(a)

Increase the duties or responsibilities of any Trustee or Insurance Company without its consent thereto in writing;



(b)

Have the effect of revesting in the Company or any other Affiliated Company the whole or any part of the principal or income of the Trust (except as permitted by Section 14.3) or of diverting any part of the principal or income of the Trust to purposes other than for the exclusive benefit of the Participants or their Beneficiaries;



(c)

Diminish the rights of any Participant with respect to contributions made by him prior to the date of such amendment; or



(d)

Create or effect any discrimination in favor of Participants who are highly paid employees.

        11.02    Technical Amendments.    Notwithstanding anything herein to the contrary, the Plan may be amended as and when necessary to conform to the provisions of ERISA and the Code in effect from time to time. When any amendments to be made to the Plan are technical or administrative in nature and have no significant effect on the cost to each Participating Company of maintaining the Plan, the Board may by resolution adopt such changes for each and every Participating Company.

        11.03    Effect of Amendments by Participating Companies.    Except as provided in Section 11.2, an amendment to the Plan shall be binding upon a Participating Company and its employees when approved in writing by the Participating Company.

38

ARTICLE XII
MERGER

        12.01    Successors to Participating Companies.    In case of the merger, consolidation, liquidation, dissolution or reorganization of a Participating Company, or the sale by a Participating Company of all or substantially all of its assets, provision may be made in written agreement between the Company and any successor corporation or other entity acquiring or receiving a substantial part of such Participating Company's assets, whereby the Plan will be continued by the successor. If the Plan is to be continued by the successor, then effective as of the date of the applicable event the successor shall be substituted for the Participating Company under the Plan. The substitution of a successor for a Participating Company shall not constitute a termination of the Plan for any purpose.

        12.02    Merger or Transfer of Plan Assets.    No merger or consolidation with, or transfer of assets or liabilities of the Plan to, any other plan shall occur unless each Participant in the Plan would, if the Plan terminated immediately after such merger, consolidation, or transfer of assets or liabilities, receive a benefit equal to or greater than the benefit that he would have been entitled to receive immediately before such merger, consolidation, or transfer if the Plan had then terminated. If assets are transferred from this Plan, the Committee will satisfy the distribution requirements of Proposed Regulation 1.401(a)(9)-G-3.

39

ARTICLE XIII
TERMINATION

        13.01    Power to Terminate.    It is the intention of the Participating Companies to continue the Plan indefinitely, but each Participating Company reserves the right, by action of such Participating Company's board of directors or managing general partner, to terminate or suspend accruals under the Plan with respect to its Participants at any time. For purposes of the preceding sentence, rights conditioned upon a sufficiency of plan assets in the event of a termination or partial termination are considered to be forfeitable by reason of such condition; however, such rights are not deemed forfeitable because in the event of a determination, an employee does not have any recourse towards satisfaction of his nonforfeitable benefits other than from the Pension Benefit Guaranty Corporation.

        13.02    Vesting and Allocation of Assets upon Termination.    Subject to the following sections of this Article XIII and the provisions of Section 8.02, upon the termination or partial termination of the Plan with respect to a Participating Company, the rights of all affected Employees to benefits accrued hereunder to the date of such termination or partial termination (based on Credited Benefit Service and Credited Compensation through such date) shall, to the extent then funded, be nonforfeitable. In the event of a Plan termination, any residual assets of the Plan will be distributed to the Participating Company designated by the Committee, provided that all liabilities of the Plan to Participants and their Beneficiaries have been satisfied, and the distribution does not contravene applicable law.

        13.03    Partial Termination.    For purposes of determining whether a partial termination has occurred, all Employees will be deemed employed by the same employer. A partial termination of the Plan will not be deemed to occur solely by reason of the sale or transfer of all or substantially all of the assets of a Participating Company, but will be deemed to occur only if there is a determination, either made or agreed to by the Committee, or made by the Internal Revenue Service and upheld by a decision of a court of last resort, that a particular event or transaction (including the sale or transfer of all or substantially all of the assets of a Participating Company) constitutes a partial termination within the meaning of Code Section 411(d)(3)(A).

40

ARTICLE XIV
MISCELLANEOUS

        14.01    Source of Payment.    Benefits under the Plan shall be payable only out of the assets hereof, and no Participating Company shall at any time, before or after termination of the Plan, have any legal obligation, responsibility or liability to make any direct payment of benefits under the Plan. Neither the Participating Companies nor any Trustee or Insurance Company guarantees against any loss or depreciation of such assets or guarantees the payment of any benefits hereunder. No persons shall have any rights under the Plan or against any Trustee or Insurance Company, the Company or any Participating Company, except as specifically provided for herein. Upon any termination of the Plan, benefits shall be paid solely from assets of the Plan or by the Pension Benefit Guaranty Corporation, and neither the Company, any Participating Company, the Committee, nor any fiduciary shall be liable or responsible for any benefits under the Plan should Plan assets be insufficient to pay any benefit.

        14.02    Inalienability of Benefits.    

(a)

Subject to subsection (b) and with respect to certain judgments, orders or decrees issued or a settlement entered into, on or after August 5, 1997 in accordance with Code Sections 401(a)(13)(C) and (D), benefits under the Plan may not be assigned or hypothecated, and except to the extent required by law, no such benefits shall be subject to legal process or attachment for the payment of any claim against any person entitled to receive the same.



(b)

Effective January 1, 1985, the prohibition set forth in subsection (a) shall apply to the creation, assignment or recognition of a right to any benefit payable with respect to a Participant pursuant to a Domestic Relations Order (as defined in subsection (d)) unless the order is determined to be a Qualified Domestic Relations Order (as defined in subsection (c)). Benefits shall be paid in accordance with the applicable requirements of any Qualified Domestic Relations Order.



(c)

For purposes of this Section, the term "Qualified Domestic Relations Order" means: (i) a Domestic Relations Order which creates or recognizes the existence of an alternate payee's right, or assigns to an alternate payee the right, to receive all or a portion of the benefits payable with respect to a Participant under the Plan and with respect to which the requirements of Section 206(d)(3) of ERISA are met; or (ii) any other Domestic Relations Order entered prior to January 1, 1985 if (I) benefits are being paid by the Plan under such order as of January 1, 1985; or (II) the Committee elects to treat such order as a Qualified Domestic Relations Order.



(d)

For purposes of this Section, the term "Domestic Relations Order" means any judgment, decree or order (including approval of a property settlement agreement) which relates to the provision of child support, alimony payments or marital property rights to a spouse, former spouse, child, or other dependent of a Participant, and is made pursuant to a State domestic relations law (including a community property law).



(e)

In the case of any Domestic Relations Order received by the Plan,



(1)

The Committee shall promptly notify the Participant and any other alternate payee of the receipt of such order and the procedures for determining the qualified status of Domestic Relations Orders, and



(2)

Within a reasonable period after receipt of such order, the Committee shall determine whether such order is a Qualified Domestic Relations Order and notify the Participant and each alternate payee of such determination.

41

(f)

The Committee shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders, to segregate amounts during such determination, and to administer distributions under such orders.

        14.03    Return of Contributions.    This Plan is intended to qualify, and the Trust is intended to be exempt from tax, under the provisions of Section 401(a) and Section 501(a) of the Code, and all contributions hereunder are intended to be deductible under Section 404 of the Code. Therefore, all assets held in the Trust or held by any Insurance Company must be held for the exclusive benefit of the Participants and their Beneficiaries, and such assets may never revert to or inure to the benefit of a Participating Company except under the following conditions:

(a)

If the Internal Revenue Service shall deny a deduction for any part of a contribution made by a Participating Company, the amount of the contribution for which no deduction is allowed may be returned to the Participating Company within one (1) year of such disallowance;



(b)

If within one (1) year of making a contribution to the Plan the Committee certifies that such contribution was made by a Participating Company under mistake of fact, the Trustee or Insurance Company shall before the expiration of such year return such contribution to the Participating Company;



(c)

In the case of complete termination of the Plan in accordance with Article XIII.

        14.04    Determination of Primary Social Security Benefit.    

(a)

Unless a Participant provides documentation of actual salary history as set forth in subsection (b) the annual amount of a Participant's Primary Social Security Benefit, for purposes of this Plan, shall be determined using an estimated wage history, applying a salary scale projected backward from the date he terminates employment with an Affiliated Company, and based on the assumption that his compensation increased by six percent (6%) each year.



(b)

If, within a reasonable period following the later of: (i) the date the Participant's employment terminates (by retirement or otherwise); or (ii) notice to the Participant by the Plan of the benefit to which he is entitled, he supplies to the Committee his actual salary history, such Participant's benefit will be adjusted to reflect the use of actual rather than estimated prior compensation in determining his Primary Social Security Benefit.



(c)

The Committee shall give clear written notice to each Participant of his right to supply actual salary history and of the financial consequences of failing to supply such history. Such notice: (i) shall be given each time the summary plan description is provided to the Participant and at the time such Participant is notified of the benefit to which he is entitled under the Plan; and (ii) shall state that the Participant can obtain the actual salary history from the Social Security Administration.

        14.05    No Right to Employment.    Nothing contained herein nor any action taken under the provisions hereof shall be construed as giving any Employee the right to be retained in the employ of any Affiliated Company.

        14.06    Payments to Minors or Incompetents.    If a distribution is to be made to a minor, or to an incompetent person, the Committee may direct that the distribution be paid to the legal guardian, or if none, to a parent of such person, or to a responsible adult with whom the person maintains residence, or to the custodian for the person under the Uniform Gift to Minors Act or Gift to Minors Act, if permitted by the laws of the state in which the person resides.

        14.07    Lost Participant or Beneficiary.    In the event that a benefit has been payable for five years or more without a claim being made and the Committee is unable by reasonable diligence to locate the Participant or Beneficiary to whom payment is due, such benefit shall be forfeited and shall be applied

42

to reduce future Participating Company contributions to the Plan. However, the benefit shall be reinstated if a claim is subsequently made by the Participant or Beneficiary for such benefit.

        14.08    Satisfaction of Claims.    Any payment to a Participant, the Participant's legal representative or Beneficiary, in accordance with the terms of this Plan and the Trust, shall, to the extent thereof, be in full satisfaction of all claims such person may have against the Trustee, the Committee and any Participating Company, any of whom may condition the payment upon execution of a receipt and release therefor as determined by the Trustee, the Committee or a Participating Company.

        14.09    Determinations.    The amount of any Plan benefit will be determined under Plan provisions in effect when the Participant separated from service.

        14.10    Mistaken Payments.    Benefits improperly paid to a person will be owed by that person to the Plan and, notwithstanding any other provisions of this Plan, may be deducted from future benefits payable to the person entitled to receive such benefits.

        14.11    Direct Rollover.    Effective January 1, 1993, notwithstanding any provision of this Plan to the contrary that would otherwise limit a Distributee's election under this Plan, a Distributee may elect, at the time and in the manner prescribed by the Committee, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover. For these purposes, the following definitions apply:

(a)

An Eligible Rollover Distribution is any distribution of all or any portion of the balance to the credit of the Distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the Distributee or the joint lives (or joint life expectancies) of the Distributee and the Distributee's designated Beneficiary, or for a specified period of 10 years or more; any distribution to the extent that distribution is required under Section 401(a)(9) of the Code; the portion of any distribution that is not includable in gross income; and any hardship distribution to the extent described in Code Section 401(k)(2)(B)(i)(IV) or, effective January 1, 2002, any part of a hardship distribution.



(b)

An Eligible Retirement Plan is an individual retirement account described in Code Section 408(a), an individual retirement annuity described in Code Section 408(b), an annuity plan described in Code Section 403(a), or a qualified trust described in Code Section 401(a), that accepts the Distributee's Eligible Rollover Distribution. With respect to distributions prior to January 1, 2002, in the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. Effective January 1, 2002, Eligible Retirement Plan also shall include an annuity contract described in Code Section 403(b) and an eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state, or any agency or instrumentality of a state of political subdivision of a state, provided the plan agrees to separately account for amounts transferred into such plan from the Plan.



(c)

A Distributee includes an Employee or former Employee. In addition, the Employee's or former Employee's surviving spouse and the Employee's or former Employee's spouse or former spouse who is the alternate payee under a Qualified Domestic Relations Order, as defined in Code Section 414(p), are Distributees with regard to the interest of the spouse or former spouse.



(d)

A Direct Rollover is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

43

        14.12    Interpretation.    Article and section headings in this instrument are for convenience of reference only and shall not be deemed to be part of the substance hereof or in any way to enlarge or limit the contents of any article or section.

        14.13    Applicable Law.    The Plan shall be construed, administered and governed in all respects in accordance with ERISA and other pertinent federal laws and in accordance with the laws of the State of California to the extent not preempted by ERISA; provided, however, that if any provision is susceptible of more than one interpretation, such interpretation shall be given thereto as is consistent with the Plan being a qualified employees' pension plan within the meaning of the Internal Revenue Code. If any provision of this Plan shall be held by a court of competent jurisdiction to be invalid or unenforceable, the remaining provisions of the Plan shall continue to be fully effective.

        14.14    USERRA Compliance.    Notwithstanding any provision of this Plan to the contrary, contributions, benefits, and service credit with respect to qualified military service shall be provided in accordance with Code Section 414(u) effective December 12, 1994.

44

ARTICLE XV
TOP-HEAVY RULES

        15.01    Definitions.    For purposes of this Article XV, the following terms shall have the meanings indicated:

(a)

Determination Date shall mean, for any Plan Year, the last day of the preceding Plan Year.



(b)

Effective January 1, 2002, Key Employee with respect to a particular Participating Company for a particular Plan Year, shall mean any Participant or former Participant (or the Beneficiary of a deceased Participant) who at any time during the Plan Year containing the determination date was either:



(1)

an officer of such Participating Company or any of its Related Companies having annual Remuneration greater than $130,000 (as adjusted under Code §416(i));



(2)

a five percent owner of the Participating Company or any of its Related Companies; or



(3)

a one percent owner of the Participating Company or any of its Related Companies having annual Remuneration of more than $150,000 within the meaning of Code §415(c)(3). The determination of who is a key employee will be made consistent with Code §416(i) and related regulations.

        For Plan Years beginning before 2002, the following definition applies:

Key Employee with respect to a particular Participating Company for a particular Plan Year, a Participant or former Participant (or the Beneficiary of a deceased Participant) who, at any time during the Plan Year containing the Determination Date for the Plan Year in question or any of the four immediately preceding Plan Years, was:

(1)

An officer of such Participating Company or any of its Related Companies having aggregate annual Remuneration from all such entities for a Plan Year greater than one hundred fifty percent (150%) of the maximum dollar limitation in effect under Code Section 415(c)(1)(A) for the calendar year in which such Plan Year ended;



(2)

One of the ten employees of such Participating Company or any of its Related Companies owning the largest interests in value of any such entity, provided that: (i) such employee owns more than a one-half percent (¹/2%) interest in such entity; and (ii) such employee's aggregate annual Remuneration from all such entities exceeds the maximum dollar limitation under Section 415(c)(1)(A) of the Code;



(3)

A Five-Percent Owner of such Participating Company or any of its Related Companies; or



(4)

A One-Percent Owner of such Participating Company or any of its Related Companies whose aggregate annual Remuneration from all such entities exceeds $150,000.

        The determination of Key Employee status shall be made pursuant to the following:

(i)

For purposes of determining ownership in any entity under this subsection, the attribution principles of Section 318 of the Code shall apply by substituting "5%" for "50%" in Section 318(a)(2)(C).



(ii)

For purposes of item (I) above, the individuals actually considered as Key Employees with respect to a Participating Company by virtue of being officers: (i) shall not in number exceed the lesser of fifty (50) or that number not in excess of the greater of three (3) officers or ten percent (10%) of the total number of employees of the

45

Participating Company and its Related Companies; and (ii) shall be those individuals belonging to the group of all Participants determined to be officers for the Plan Year containing the Determination Date or any of the preceding four (4) Plan Years, who received the highest annual Remuneration from such entities for any Plan Year during such five (5) year period. Notwithstanding the preceding sentence, no entity other than a corporation shall be deemed to have officers for purposes of clause (1) for any Plan Year beginning before March 1, 1985.

(iii)

For purposes of item (II) above, should two employees own the same percentage interest in an entity, then the employee having the greater annual Remuneration shall be deemed to own the larger percentage interest.




(c)

Top-Heavy Ratio of a plan or group of plans with respect to a particular Participating Company and its Related Companies shall be a fraction, the numerator of which is the sum of: (i) the present value of all cumulative accrued benefits for all Key Employees under this Plan and under each other defined benefit plan included in the determination; and (ii) the account balances for all Key Employees under each defined contribution plan (including any simplified employee pension plan) included in the determination, and the denominator of which is the sum of: (A) the present value of the cumulative accrued benefits for all Participants under this Plan and each other defined benefit plan included in the determination; and (B) the account balances for all Participants under each defined contribution plan (including any simplified employee pension plan) included in the determination, disregarding any accrued benefits or account balances not provided with respect to an Employee of such Participating Company or any of its Related Companies.

In determining the Top-Heavy Ratio with respect to a particular Participating Company, the following rules apply:

(1)

In determining the accrued benefits and account balances of a Participant employed by a particular Participating Company, benefits attributable to service with an entity other than such Participating Company or any of its Related Companies (including service with a predecessor employer) shall be excluded.



(2)

Present value of accrued benefits shall be calculated in accordance with the provisions of the Plan (or such other defined benefit plan to which such benefits pertain). The value of account balances shall be determined as of the most recent valuation date that falls within or ends with the 12-month period ending on the Determination Date. Amounts attributable to employer contributions and employee contributions (other than deductible contributions) shall be taken into account. In the event that two or more plans with different plan years are included in the determination, accrued benefits under such plans shall be aggregated as of the Determination Dates for such plans that fall within the same calendar year. Account balances and accrued benefits so determined shall be adjusted for the amount of any contributions: (i) made after the date of such valuation but on or before the Determination Date; or (ii) due but unpaid as of the Determination Date, and, except as otherwise provided in paragraphs (3) or (4) below, shall include any amount distributed during the 5-year period (1-year period effective January 1, 2002) ending on the Determination Date.



(3)

The accrued benefit of any Participant who is not a Key Employee with respect to the Plan Year in question, will be treated as accruing at the slowest rate applicable to any plan maintained by the Participating Company.



(4)

With respect to a transfer from one qualified plan to another (by rollover or plan-to-plan transfer) which is: (i) incident to a merger or consolidation of two or more plans or a

46

division of a single plan into two or more plans; (ii) made between two plans maintained by the same employer or by employers required to be aggregated under Section 414(b), (c), or (m) of the Code; or (iii) otherwise not initiated by the employee, a Participant's accrued benefit or account balance under a plan shall include any amount attributable to any such transfer received or accepted by such plan on or before the Determination Date but shall not include any amount transferred by such plan to any other plan in such a transfer on or before the Determination Date. With respect to any rollover or plan-to-plan transfer not described in the preceding sentence, a Participant's accrued benefit or account balance under a plan shall include: (I) any amount distributed or transferred by such plan, unless the distributed or transferred amount is excludable under paragraph (2); and (II) any amount attributable to assets received in any such transfer accepted prior to January 1, 1984, but such accrued benefit or account balance shall not include any amount attributable to assets received by such plan in any such transfer accepted after December 31, 1983.

(5)

No accrued benefit or account balance for any Participant shall be taken into account with respect to: (i) a Participant who is not a Key Employee with respect to the Plan Year in question, but who was a Key Employee with respect to a prior Plan Year; or (ii) for Plan Years commencing after December 31, 1984, an Employee who has not performed services for the Participating Company or any of its Related Companies within the five (5)-year period (one-year period effective January 1, 2002) ending with the Determination Date.



(6)

Account shall be taken of any accrued benefit or account balance payable to a beneficiary (or group of beneficiaries) after the death of a Participant by disregarding the death of such Participant.




(d)

Required Aggregation Group means a group of two or more plans consisting of: (i) a qualified plan of a Participating Company or any of its Related Companies (including a simplified employee pension plan) in which at least one Key Employee participates (or has participated in the five (5)-year period ending with the Determination Date); and (ii) any other qualified plan or plans which enable the plan described in (i) to meet the requirements of Sections 401(a)(4) and 410 of the Code.



(e)

Permissive Aggregation Group means a group of plans consisting of: (i) one or more qualified plans of a Participating Company in which at least one Key Employee participates (or has participated in the five (5)-year period ending with the Determination Date) or one or more Required Aggregation Groups of plans; and (ii) any other qualified plan or plans of the Participating Company or any of its Related Companies which, when considered as a group with the plan or plans specified in (i), would continue to satisfy the requirements of Sections 401(a)(4) and 410 of the Code.

        15.02    Top-Heavy Status.    

(a)

Subject to subsection (b), with respect to a particular Participating Company, this Plan shall be considered "Top-Heavy" with respect to any Plan Year if, as of the Determination Date for such Plan Year, either:



(1)

The Top-Heavy Ratio for the Participating Company's portion of this Plan exceeds sixty percent (60%) and the Participating Company's portion of this Plan is not part of any Required Aggregation Group; or



(2)

The Participating Company's portion of this Plan is part of a Required Aggregation Group of plans and the Top-Heavy Ratio for the Required Aggregation Group exceeds sixty percent (60%).

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(b)

Notwithstanding subsection (a), if the Participating Company's portion of this Plan is part of one or more Permissive Aggregation Groups of plans for which the Top-Heavy Ratio does not exceed sixty percent (60%), this Plan shall not be Top-Heavy with respect to such Participating Company.

        15.03    Minimum Benefit.    

(a)

With regard to any Plan Year for which the Plan is Top-Heavy with respect to a particular Participating Company, each Participant: (i) who is not a Key Employee with respect to such Participating Company; and (ii) who has at least 1000 Hours of Service (or, if such Participant is at any time during such Plan Year a Seasonal Agricultural Employee, 300 Hours of Service) with such Participating Company or any of its Related Companies for such Plan Year, shall regardless of his level of compensation, have a minimum accrued benefit under this Plan equal to the product of: (i) the lesser of three percent (3%) multiplied by the Participant's years of Cumulative Vesting Service (adjusted as provided in subsection (b) below) with such Participating Company or any of its Related Companies or thirty percent (30%); and (ii) the Participant's average Remuneration from such entities for the testing period described in subsection (c) below. No Participant shall fail to accrue a minimum benefit under this section merely because he is not employed on a specific date.



(b)

Solely for the purposes of this section, years of Cumulative Vesting Service shall not include a particular year of service if: (i) the Plan was not Top-Heavy with respect to such Participating Company for any Plan Year ending during such year of service; or (ii) such year of service was completed in a Plan Year beginning before January 1, 1984. Effective January 1, 2002, years of Cumulative Vesting Service shall not include a particular year of service if the Plan benefits no Key Employee or former Key Employee in that year.



(c)

Solely for the purposes of this section, the Participant's average Remuneration from a Participating Company and its Related Companies shall be computed for the testing period consisting of the period of consecutive years (not exceeding five (5)) during which the Participant had the greatest aggregate such Remuneration, except that the following years shall not be taken into account:



(1)

Any year ending in a Plan Year beginning before January 1, 1984;



(2)

Any year beginning after the close of the last year in which the Plan was Top-Heavy with respect to such Participating Company; and



(3)

Any year for which the Participant did not earn a year of Cumulative Vesting Service (determined without regard to subsection (b) of this section) with much Participating Company or any of its Related Companies.




(d)

If a Participant also participates in a defined contribution plan of an Affiliated Company, then the minimum contribution requirement of this Section with respect to such Participant shall be fulfilled in accordance with the floor offset approach under which the defined benefit minimum is provided in this Plan is offset by the benefits provided under the Newhall Land and Farming Company Employee Savings Plan.

        15.04    Vesting.    

(a)

With regard to any Plan Year for which the Plan is Top-Heavy with respect to a particular Participating Company, a Participant whose employment with such Participating Company and all its Related Companies terminates for any reason other than death or retirement in accordance with the provisions of this Plan and who would not be entitled to benefits under Section 3.05(a) shall, notwithstanding any other Plan provision, be entitled to a proportion of

48

the benefit set forth in Section 3.05(c) which corresponds to his years of Cumulative Vesting Service at the time of such termination as follows:

Years of Cumulative Vesting Service	Vested Percentage of Benefit
Less than 2	0%
2	20%
3	40%
4	60%
5	80%
6 or more	100%

(b)

Notwithstanding subsection (a):



(1)

The schedule set forth in subsection (a) shall not apply to any Participant who does not render an Hour of Service for such Participating Company or any of its Related Companies after the Plan becomes Top-Heavy with respect to such Participating Company, nor shall it apply to benefits not required to be taken into account by reason of a Rule of Parity Break beginning before the Plan becomes Top-Heavy with respect to such Participating Company; and



(2)

In no case shall the schedule set forth in subsection (a) be used to compute the nonforfeitable percentage of a Participant's benefits under a particular Participating Company's portion of this Plan unless it produces a result at least as favorable to the Participant as would be obtained under Section 3.05.




(c)

In the event that, following a Plan Year in which the vesting schedule in subsection (a) is applicable with respect to a Participating Company, the Plan should cease to be Top-Heavy with respect to such Participating Company, such schedule shall cease to be applicable, except that:



(1)

Any Participant who has become entitled to a percentage of his accrued benefit under a particular Participating Company's portion of this Plan by virtue of such schedule shall remain entitled to such percentage in the event his employment terminates, notwithstanding Section 3.05(a).



(2)

Any Participant having at least five (5) years of Cumulative Vesting Service with the Participating Company or any Related Company shall remain subject to such schedule regardless of the Plan's Top-Heavy status.

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ARTICLE XVI
EXECUTION

        To record the adoption of this amendment and restatement, Newhall Management Corporation, a California corporation, managing general partner of Newhall Management Limited Partnership, a California limited partnership, managing general partner of The Newhall Land and Farming Company, a California limited partnership, has caused this Plan to be executed on behalf of such partnership by its duly authorized officer this 16th day of July, 2002.

THE NEWHALL LAND & FARMING COMPANY (A CALIFORNIA LIMITED PARTNERSHIP)
By:	NEWHALL MANAGEMENT LIMITED PARTNERSHIP, MANAGING GENERAL PARTNER
By:	NEWHALL MANAGEMENT CORPORATION, MANAGING GENERAL PARTNER
By	/s/  DAVID E. PETERSON
Its	Assistant Secretary

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EX-10.B

Exhibit 10.b

THE NEWHALL LAND AND FARMING COMPANY
2002 EQUITY COMPENSATION PLAN

        This Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan") is implemented as of September 1, 2002 (the "Effective Date"), to enable The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership"), to offer Options, appreciation rights, restricted units and unit rights ("Awards") to employees of the Partnership and any affiliates thereof as an incentive for them to remain in the service of the Partnership (or its affiliated entities). In addition, this Plan provides for automatic grants to non-employee members of the Board of Directors of the managing general partner or its managing general partner ("Board").

        The Plan will become effective and will supercede The Newhall Land and Farming Company 1995 Option/Award Plan, as amended (the "1995 Plan") on the Effective Date. Awards granted under the 1995 Plan and The Newhall Land and Farming Company Option, Appreciation Rights and Restricted Units Plan, as amended and restated (together with the 1995 Plan, the "Prior Plans") will continue in accordance with the terms of the agreements evidencing such Awards and the Prior Plans. No further awards will be granted under the Prior Plans.

ARTICLE I.

DEFINITIONS

        "1933 Act" shall mean the Securities Act of 1933.

        "1934 Act" shall have the meaning set forth in Paragraph 2.1.

        "1995 Plan" shall have the meaning set forth in the Preamble.

        "Affiliate" shall have the meaning set forth in Rule 12b-2 of the 1933 Act, reading the term "registrant" to mean the Partnership.

        "Associate" shall have the meaning set forth in Rule 12b-2 under the 1933 Act, reading the term "registrant" to mean the Partnership, except that "Associate", as used herein, shall not include any relative or spouse of such Person, or any relative of such spouse, who is also a director or officer of the managing general partner or its managing general partner, merely because of such directorship or officership).

        "Automatic Option" shall have the meaning set forth in Paragraph 4.1.

        "Awards" shall have the meaning set forth in the Preamble.

        "Beneficial Owner" shall mean, with respect to any Person, any Partnership interest or other ownership interest (i) which such Person or any of its Affiliates or Associates beneficially owns, directly or indirectly; (ii) with regard to which such Person or any of its Affiliates or Associates, has, directly or indirectly, (A) the right to acquire (whether such right is exercisable immediately or subject only to the passage of time) pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (B) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which is beneficially owned, directly or indirectly, by any other Person with which such Person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any Partnership interest.

        "Black-Scholes Value" shall mean an amount, as of any date, equal to the estimated value of an Option to purchase one depositary unit with an exercise price equal to the Fair Market Value of a depositary unit as of such date and a term of ten years, determined using the Black-Scholes option

1

pricing formula in a manner consistent with the methodology employed in the Partnership's annual report to partners.

        "Board" shall have the meaning set forth in the Preamble.

        "Change in Control" shall occur when (i) any Person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Partnership or an entity owned directly or indirectly by the holders of depositary units of the Partnership in substantially the same proportions as their ownership of depositary units of the Partnership, becomes the Beneficial Owner, directly or indirectly, of securities representing 25% or more of the total voting power represented by the Partnership's then outstanding voting securities, which has not been approved by the Continuing Managing General Partner; or (ii) the Continuing Managing General Partner is removed.

        "Committee" shall have the meaning set forth in Paragraph 2.1.

        "Continuing Managing General Partner" means (i) the managing general partner that was serving as managing general partner prior to the Change in Control, or (ii) any successor of the managing general partner that is recommended to succeed the managing general partner by the managing general partner in clause (i).

        "Director" shall mean any Person that is a member of the Board of Directors of Newhall Management Corporation, the managing general partner of the Partnership's managing general partner.

        "Effective Date" shall have the meaning set forth in the Preamble.

        "Exercise Date" shall mean the date on which written notice of the exercise of an Option is delivered to the Partnership for purposes of Paragraph 1.3.C(2). In all other cases, the Exercise Date is the date on which written notice and actual payment is received by the Partnership.

        "Expiration Date" shall have the meaning set forth in Paragraph 4.1.C(2).

        "Fair Market Value" shall mean with respect to a depositary unit:

        (i)    If the depositary units are at the time listed or admitted to trading on any stock exchange, the "Fair Market Value" of the depositary unit will be its closing selling price, as quoted on the New York Stock Exchange Composite Tape, on the date in question. If there is no quotation available for such day, then the Fair Market Value shall be the closing selling price on the next preceding day for which such quotation exists.

        (ii)  If the depositary units are not at the time listed or admitted to trading on any stock exchange but are traded on the NASDAQ National Market System, the Fair Market Value shall be the closing selling price per depositary unit on the date in question, as such price is reported by the National Association of Securities Dealers through the NASDAQ National Market System or any successor system. If there is no closing selling price for the depositary units on the date in question, then the Fair Market Value shall be closing selling price on the next preceding day for which such quotation exists.

        (iii)  If the depositary units are at the time neither listed nor admitted to trading on any stock exchange nor traded on the NASDAQ National Market System, then the Fair Market Value will be determined by the Committee after taking into account such factors as the Committee deems appropriate; provided, however, that if the depositary units are to be issued to a Director, then the Fair Market Value will be determined by an independent third party and the Committee shall have no authority to determine the Fair Market Value in accordance with the next sentence.

        If the Committee determines that the above methods of calculation do not accurately reflect the Fair Market Value of a depositary unit on a relevant day, it may determine the Fair Market Value on any relevant day in accordance with such method of valuation as it determines to be reasonable and appropriate.

2

        "Independent Director" shall have the meaning set forth in Paragraph 3.1.

        "Option" shall have the meaning set forth in Paragraph 3.2.A.

        "Partnership" shall have the meaning set forth in the Preamble.

        "Person" shall mean any individual, firm, company or other entity and shall include any group comprised of any Person and any other Person with whom such Person or an Affiliate or Associate of such Person has any agreement, arrangement or understanding, directly or indirectly, for the purposes of acquiring, holding, voting or disposing of Partnership interests.

        "Plan" shall have the meaning set forth in the Preamble.

        "Prior Plans" shall have the meaning set forth in the Preamble.

        "Retirement", with respect to all Automatic Option Grants, shall occur on the first day an Independent Director ceases to serve as an Independent Director after serving as an Independent Director for at least five (5) years.

        "Structural Transaction" shall mean any of the following transactions to which the Partnership is a party: (i) a merger or consolidation in which the Partnership is not the surviving entity; (ii) any other merger or consolidation of the Partnership with any other entity, approved by the holders of the voting securities of the Partnership, other than a merger or consolidation which would result in the voting securities of the Partnership outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least 75% of the total voting power represented by the voting securities of the Partnership or such surviving entity outstanding immediately after such merger or consolidation; (iii) a sale, transfer or other disposition of all or substantially all of the Partnership's assets (in one transaction or a series of transactions); or (iv) the complete liquidation or dissolution of the Partnership.

        "Taxes" shall mean all Federal, state and local employment and income taxes and any other tax the Partnership may be obligated to withhold with respect to any Award.

ARTICLE II.

GENERAL PROVISIONS

        2.1    ADMINISTRATION OF THE PLAN.    The Plan will be administered by a committee or committees (which term includes subcommittees) appointed by, and consisting of three or more members of, the Board (the "Committee"). The composition of any Committee responsible for administration of the Plan with respect to Persons who are subject to the restrictions of Section 16(b) of the Securities Exchange Act of 1934 ("1934 Act") shall comply with the applicable requirements of Rule 16b-3 of the 1934 Act (or a successor provision) with respect to securities of the Partnership. The Board may delegate the responsibility for administration of the Plan with respect to designated classes of grantees to different Committees, subject to such limitations as the Board deems appropriate. The members of a Committee will serve for such term as the Board may determine, and are subject to removal by the Board at any time. Any Committee appointed by the Board shall have full authority to administer the Plan within the scope of its delegated responsibilities, including authority to interpret and construe any relevant provision of the Plan and to adopt such rules and regulations, as it may deem necessary. Decisions of a Committee made within the discretionary authority delegated to it by the Board are final and binding on all Persons who have an interest in the Plan. With respect to any matter, the term "Committee" refers to the Committee that has been delegated authority with respect to such matter, or the Board if no Committee has been appointed.

3

        2.2    DEPOSITARY UNITS.

        A.    Number of Depositary Units.    The equity securities to be subject to Awards under the Plan shall be limited partnership interests in the Partnership represented by transferable depositary units. The aggregate number of depositary units that may be issued under the Plan will not exceed 1,720,000, subject to adjustment in accordance with the terms of the Plan.

        B.    Expired Grants and Awards.    If any outstanding Award under the Plan or the Prior Plans expires, is terminated, is cancelled or is forfeited for any reason before the full number of depositary units governed by the Award are issued, those remaining depositary units will not be charged against the limit in Paragraph 2.2.A above and will become available for subsequent Awards under the Plan. Notwithstanding the foregoing, depositary units for which a cash payment is made in lieu of payment in depositary units as provided under this Plan and restricted units forfeited to or repurchased by the Partnership pursuant to its forfeiture and repurchase rights under this Plan will not be available for subsequent Awards under this Plan.

        C.    Adjustments.    If any change is made to the depositary units issuable under the Plan (whether by reason of merger, consolidation, reorganization, recapitalization, depositary unit distribution, depositary unit split, combination of depositary units, exchange of depositary units, or other change in partnership or capital structure of the Partnership), or if the Partnership makes a distribution to holders of depositary units which results from the sale or disposition of a major asset or separate operating division of the Partnership, which would materially dilute the rights of Award holders', then the Committee shall made appropriate adjustments to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and price per depositary unit in effect under each outstanding Award under the Plan and (iii) the maximum number of depositary units issuable to one individual pursuant to Paragraph 2.2.D. The purpose of these adjustments will be to preclude the enlargement or dilution of rights and benefits under the Awards.

        D.    Individual Limit.    No individual may be granted Options, appreciation rights, restricted units, unit rights or any combination thereof under the Plan covering or related to more than twenty-five percent (25%) of the number of depositary units initially authorized for issuance under the Plan, plus twenty-five percent (25%) of any additional depositary units subsequently authorized for issuance under the Plan (subject, in each case, to adjustment as provided in Paragraph 2.2.C.

        E.    Restrictions.    Depositary units issued under the Plan may be subject to such restrictions on transfer, repurchase rights, or other restrictions as shall be determined by the Committee and as set forth in this Plan.

ARTICLE III.

DISCRETIONARY AWARDS

        3.1    ELIGIBILITY.    Awards may be granted under this Article III to those employees (including officers, whether or not they are Directors) who provide services to the Partnership and its affiliated entities as the Committee from time to time selects. However, in no event shall an Award be made under this Article III to an individual who is a non-employee Board member ("Independent Director").

        3.2    OPTIONS.

        A.    Type and Term.    Options granted pursuant to the Plan shall be authorized by the Committee and shall be nonstatutory options ("Options") not intended to meet the requirements of Section 422 of the Internal Revenue Code of 1986, as amended. The Committee has full authority to determine the time or times at which Options become exercisable, and the maximum term for which Options remain outstanding.

4

        B.    Price.    The Option price per depositary unit will be not less than 100% of the Fair Market Value of a depositary unit on the date of grant.

        C.    Exercise and Payment.    After any Option, which has been granted under the Plan, becomes exercisable, it may be exercised by a written notice to the Partnership at any time before termination of the Option. The Option price will be immediately due upon exercise and shall be payable in the Committee's discretion, and subject to such restrictions as the Committee shall determine, in one or more of the following alternative forms:

        (1)  in cash or cash equivalents made payable to the Partnership;

        (2)  in depositary units valued at their Fair Market Value as of the Exercise Date and held for the requisite period in order to avoid a charge to earnings;

        (3)  through a sale and remittance procedure under which the optionee delivers a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver depositary units with a Fair Market Value equal to the Option price to the Partnership; or

        (4)  such other lawful consideration as the Committee shall determine.

        D.    Depositary Unit Holder Rights.    An optionee will have no depositary unit holder rights with respect to any depositary units covered by an Option before the optionee exercises the Option and is issued depositary units for those exercised Options.

        E.    Separation from Service.    The Committee will determine and set forth in each Option whether the Option will continue to be exercisable, and the terms of such exercise, on and after the date that an optionee ceases to be employed by or to provide services to the Partnership or an affiliate. The date of termination of an optionee's employment or services will be determined by the Committee, which determination will be final.

        3.3    APPRECIATION RIGHTS.    Upon such terms, conditions and restrictions as the Committee shall determine in its discretion, an appreciation right shall consist of the right to receive an appreciation distribution in an amount equal to the difference between (1) the Fair Market Value of one depositary unit on the date of the exercise of the right and (2) an amount not less than the Fair Market Value of one depositary unit on the date that the right is granted (or, in the case of an appreciation right granted in tandem with or in substitution for a previously granted Option, an amount not less than the Fair Market Value of a depositary unit on the date that the Option was granted). The appreciation distribution may be made in the form of depositary units, cash or a combination thereof. An appreciation right may provide for the payment, either currently or at the time of exercise, of distribution equivalents for the period the right is held before exercise, subject to such requirements and limits as the Committee may specify. Appreciation rights will be evidenced by instruments in such form as the Committee may from time to time approve. No appreciation right shall have a maximum term in excess of ten years.

        3.4    RESTRICTED UNITS.    Restricted units granted under the Plan consist of depositary units (together with cash distributions if so determined by the Committee), the retention and transfer of which are subject to such terms, conditions and restrictions (whether based on performance standards or periods of service or otherwise and including repurchase and/or forfeiture rights in favor of the Partnership) as the Committee shall determine in its discretion. The terms, conditions and restrictions to which restricted units are subject will be evidenced by such instructions as the Committee may from time to time approve and may vary from grant to grant. The Committee has the absolute discretion to determine whether any consideration (other than the services of the potential grantee) is to be received by the Partnership or its affiliates as a condition precedent to the issuance of restricted units.

5

        The Committee may require a grantee to receive a portion of the total value, or the total value of the depositary units subject to restricted units in the form of a cash payment, subject to such terms, conditions and restrictions as the Committee may specify.

        3.5    UNIT RIGHTS.    Unit rights granted under the Plan consist of the right, subject to such terms, conditions and restrictions as the Committee may determine (including, but not limited to performance standards) to receive a depositary unit. Unit rights will be evidenced by such instruments as the Committee may from time to time approve. The Committee has the absolute discretion to determine whether any consideration (other than the services of the potential grantee) is to be received by the Partnership as a condition precedent to the issuance of depositary units pursuant to unit rights. The terms, conditions and restrictions to which unit rights are subject may vary from grant to grant.

        The Committee may require a grantee to receive a portion of the total value, or the total value of the depositary units subject to unit rights in the form of a cash payment, subject to such terms, conditions and restrictions as the Committee may specify.

        3.6    REPURCHASE RIGHTS.    The Committee may in its discretion determine that it shall be a term and condition of one or more Awards exercised under the Plan that the Partnership or its assigns will have the right, exercisable upon the grantee's separation from service with the Partnership and/or its affiliates, to repurchase any or all of the depositary units previously acquired by the grantee upon the exercise of that Award. Any such repurchase right will be exercisable on such terms and conditions (including the establishment of the appropriate vesting schedule and other provisions for the expiration of the repurchase right in one or more installments) as the Committee may specify in the instrument evidencing the right. The Committee will also have full power and authority to provide for the automatic termination of repurchase rights, in whole or in part.

        3.7    ADJUSTMENTS UPON CHANGES IN PARTNERSHIP STRUCTURE OR CONTROL.

        A.    Acceleration of Awards.    In the event of a Structural Transaction or Change in Control, the vesting of each Award will be automatically accelerated so that (1) each Option, appreciation right or unit right outstanding under the Plan at the time of the Structural Transaction or Change in Control and not then otherwise fully vested shall become fully vested for the total number of depositary units purchasable or issuable thereunder and each Option may be exercised for all or any portion of the depositary units for which the Option is so accelerated (or surrendered for such payment in depositary units and/or cash as the appreciation right or unit right may provide) and (2) all depositary units and cash payments to which the grantee of a restricted unit is entitled under any restricted unit granted under this Plan shall be delivered to the grantee and all of the Partnership's rights to the return or repurchase of depositary units awarded pursuant to any restricted unit shall terminate.

        B.    No Acceleration of Awards.    In no event shall any such acceleration or termination of repurchase rights in connection with a Structural Transaction or Change in Control occur if and to the extent (i) such Award is, in connection with the Structural Transaction or Change in Control, either to be assumed by the successor entity or affiliate thereof or to be replaced with a comparable Option, appreciation right, restricted unit or unit right to purchase or receive securities of the successor entity or affiliate thereof, (ii) such Award is to be replaced with a cash incentive program of the successor entity which preserves the depositary unit spread existing at the time of the Structural Transaction or Change in Control and provides for subsequent payout in accordance with the same vesting schedule applicable to such Award, or (iii) the acceleration of such Award is subject to other limitations imposed by the Committee at the time of the Award grant. The determination of Award comparability under clause (i) above shall be made by the Committee and its determination shall be final, binding and conclusive. Upon consummation of a Structural Transaction or Change in Control, all outstanding Options, appreciation rights, restricted units and

6

unit rights under the Plan shall, to the extent not previously exercised or paid in full or assumed by the successor entity or an affiliate, terminate.

        C.    Cancellation of Awards.    Notwithstanding the above, in the event of any Structural Transaction or Change in Control, the Committee shall have the discretion to cancel vested and outstanding Options, vested restricted units, or vested unit rights for which depositary units have not been issued, in whole or in part, subject to such conditions as the Committee may determine, upon payment to (1) optionees with respect to each cancelled Option, an amount in cash not less than the difference between (i) the Fair Market Value (as of the effective date of such Structural Transaction or Change in Control) of the consideration the optionee would have received if the Option had been exercised immediately prior to the effective date of such Structural Transaction or Change in Control and (ii) the exercise price of such Option, (2) holders of restricted units and unit rights, with respect to all cancelled restricted units and unit rights, an amount in cash equal to the Fair Market Value of the depositary units and unit rights (as of the effective date of the Structural Transaction or Change in Control) subject to the restricted unit or unit right.

        D.    Adjustment.    In the event of any Structural Transaction or Change in Control that does not result in the complete termination of all outstanding Options, appreciation rights and units rights and complete termination of all repurchase rights and forfeiture provisions with respect to restricted units, the Committee shall adjust the maximum number of depositary units issuable under the Plan, the number of depositary units subject to Awards and the Option price, as provided in Paragraph 2.2.C.

        E.    Partnership Structure.    The grant of Awards under the Plan shall in no way affect the Partnership's right to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer any part of its business or assets.

        3.8    ELECTIVE AND TANDEM AWARDS.    The Committee may grant Awards independently of other compensation or in lieu of other compensation whether at the election of the potential grantee or otherwise. The number of depositary units subject to Options, appreciation rights, restricted units or unit rights to be awarded in lieu of other compensation will be determined by the Committee in its sole discretion and need not be equal to the foregone compensation's Fair Market Value. In addition, Awards may be granted in tandem, so that a portion of the Award becomes payable or becomes free of restrictions only if and to the extent that the tandem Award is not exercised or is forfeited, subject to such terms and conditions as the Committee may specify.

        3.9    WITHHOLDING.    The Committee may require or permit, in its discretion and upon such terms and conditions as it may deem appropriate (including the applicable safe-harbor provisions of Rule 16b-3) to have the Partnership withhold, from the depositary units otherwise issuable pursuant to such Award, one or more of such depositary units with an aggregate Fair Market Value equal to the Taxes incurred in connection with the acquisition of such depositary units. All Award grantees shall be deemed to have consented to such withholding upon acceptance of an Award. Grantees under the Plan may also be granted the right to deliver previously acquired depositary units held for the requisite period to avoid a charge to earnings in satisfaction of such Taxes. The withheld or delivered depositary units will be valued at Fair Market Value determined at the time of withholding.

        3.10    CANCELLATION AND NEW GRANT OF AWARDS.    The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected grantees, the cancellation of any or all outstanding Awards under this Article III and to grant in substitution therefore new Awards under the Plan covering the same or different number and class of depositary units but (if the Award is an Option) having a price per depositary unit not less than the Fair Market Value on the new grant date.

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ARTICLE IV.

GRANTS TO INDEPENDENT DIRECTORS

        4.1    AUTOMATIC OPTION GRANTS.    Independent Directors who are serving on the Board will automatically be granted an Option ("Automatic Option") for the number of depositary units set forth below (subject to adjustment under Paragraphs 2.2.C and 3.7 of this Plan) on the dates and terms set forth below.

        A.    New Independent Directors.    Each Person who becomes a newly appointed or elected Independent Director shall, on the date such Person becomes an Independent Director (or, if later, the next trading day), automatically receive an Automatic Option to purchase 1,500 depositary units.

        B.    Annual Grants.    On the third Tuesday of July of each fiscal year of the Partnership that occurs after the Plan Effective Date, each continuing Independent Director shall automatically receive an Automatic Option to purchase 500 depositary units.

        C.    Terms and Conditions.    The terms and conditions applicable to each Automatic Option shall be as follows:

        (1)  Price. The Option price per depositary unit will be equal to 100% of the Fair Market Value of one depositary unit on the date of grant.

        (2)  Term. Each Automatic Option will terminate and cease to be outstanding on the date ten years from the date of grant ("Expiration Date"). Each Automatic Option will be immediately exercisable.

        (3)  Payment. Upon exercise of the Option, the Option price for the purchased depositary units will become payable immediately in cash or cash equivalents made payable to the Partnership or in depositary units valued as of the Exercise Date that the optionee has held for the requisite period to avoid a charge to earnings. Payment may also be made by delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver depositary units with a Fair Market Value equal to the Option price to the Partnership.

        (4)  Cessation. In the event the optionee ceases to serve as an Independent Director for any reason other than death or Retirement, any outstanding Automatic Options may be exercised within a period of three months after the date of such cessation. In no event, however, shall this Automatic Option be exercisable after the Expiration Date of the Option.

        (i)    In the case of death either during the Independent Director's period of service or within three months following cessation of service as an Independent Director, any outstanding Automatic Options may be exercised within 12 months of the date of death by the designated beneficiary, or, if no beneficiary is designated, the estate or heirs of the optionee. In no event, however, shall this Automatic Option be exercisable after the Expiration Date of the Option.

        (ii)  In the case of Retirement while this Automatic Option is outstanding, any outstanding Automatic Options may be exercised within 36 months of the date of Retirement, but in no event shall this Option be exercisable after the Expiration Date of the Automatic Option.

        4.2    UNIT FEE PROGRAM.

        A.    Eligibility.    Each Independent Director shall be eligible to elect to apply all or any portion of the annual retainer fee otherwise payable to such individual in cash to the acquisition of depositary units upon the terms and conditions of this unit fee program.

8

        B.    Election.    The election to apply all or any portion of the Independent Director's annual retainer fee otherwise payable to the Independent Director in cash to the acquisition of depositary units under the unit fee program must be made before the start of the calendar year for which the election is to be effective. The election must be made on the form provided by the Committee and must specify the percentage or dollar amount of his annual retainer fee to be applied to the acquisition of the depositary units. The election, once filed, shall be irrevocable. The first calendar year for which any such election may be filed shall be for the 2003 calendar year. The Independent Director may file a standing election to be in effect for one or more consecutive calendar years or to remain in effect indefinitely until revoked by written notice filed with the Committee prior to the start of the first calendar year for which such standing election is no longer to remain in effect.

        C.    Unit Fee Issuance.    On the first trading day of each calendar quarter during the year for which the election is effective, one-quarter of the portion of the annual retainer fee subject to such election shall automatically be applied to the acquisition of depositary units by dividing the elected portion of the fee by the Fair Market Value per depositary unit on that day (and rounding down to the next whole depositary unit).

        4.3    OPTION FEE PROGRAM.

        A.    Eligibility.    Each Independent Director shall be eligible to receive, in lieu of receiving all or any portion of the annual retainer fee otherwise payable to such individual, Options with terms and conditions substantially similar to those set forth in Paragraph 4.1.C of this Plan.

        B.    Election.    The election to receive options in lieu of all or any portion of the Independent Director's annual retainer fee otherwise payable to the Independent Director in cash under this option fee program must be made before the start of the calendar year for which the election is to be effective. The election must be made on the form provided by the Committee and must specify the percentage or dollar amount of his or her annual retainer fee to be applied to this option fee program. The election, once filed, shall be irrevocable. The Independent Director may file a standing election to be in effect for more than one consecutive calendar year or to remain in effect indefinitely until revoked by written notice file with the Committee at least six months prior to the start of the first calendar year for which such standing election is no longer in effect.

        C.    Option Issuance.    On the first trading day of each calendar quarter during a year for which the election to receive options is effective, an option shall be issued to such Independent Director to purchase a number of depositary units equal to (1) one-quarter, multiplied by (2) the amount of annual retainer fee for such year which the Independent Director elects to receive in the form of Options, divided by (3) the Black-Scholes Value as of such date. The exercise price of such Option shall be equal to the Fair Market Value of one depositary unit on the date of grant.

ARTICLE V.

MISCELLANEOUS

        5.1    AMENDMENT AND TERMINATION.

        A.    Amendment and Termination of the Plan.    The managing general partner or its managing general partner may amend, suspend or discontinue the Plan in whole or in part at any time; provided, however, that (1) such action shall not adversely affect a grantee's rights and obligations with respect to Awards at the time outstanding under the Plan and (2) the substantive provisions of Article IV may not be amended at intervals more frequently than once every six months, other than to the extent necessary to comply with applicable Federal income tax laws and regulations.

        B.    Modification of Awards.    The Committee has full power and authority to modify or waive any or all of the terms, conditions or restrictions applicable to any outstanding Award under the

9

Plan (other than an Award pursuant to Article III), to the extent not inconsistent with the Plan; provided, however, that no such modification or waiver shall, without the consent of the grantee, adversely affect the grantee's rights thereunder.

        5.2    EFFECTIVE DATE AND TERM.

        A.    Term of Plan.    Unless the Plan is sooner terminated in accordance with Paragraph 2.7, or by the managing general partner or its managing general partner, the Plan will terminate upon the earlier of (i) August 31, 2012, or (ii) the date on which all depositary units available for issuance under the Plan have been issued or their availability cancelled by the exercise of Awards granted hereunder.

        B.    Term of Awards.    No Award shall have a term exceeding ten years from the date of grant.

        5.3    10% OWNER.    Notwithstanding any other provision of this Plan, in the event the recipient of an Award is the owner of interests representing more than 10% of the total combined voting power of all classes of securities of the Partnership, then the exercise price or purchase price with respect to such Award, as the case may be, shall be no less than 110% of the Fair Market Value of a depositary unit multiplied by the relevant number of units.

        5.4    TAX WITHHOLDING.    The Partnership's obligation to deliver depositary units or cash upon the exercise of Awards under the Plan is subject to the satisfaction of all applicable Federal, state and local income and employment tax withholding requirements.

        5.5    TRANSFERABILITY.    During the lifetime of the grantee, Awards will be exercisable only by the grantee and will not be assignable or transferable by the grantee otherwise than by will or by the laws of descent and distribution following the grantee's death. However, an Award may permit the grantee to designate a beneficiary or beneficiaries, who may exercise the Award and/or receive compensation under the Award after the grantee's death.

        5.6    USE OF PROCEEDS.    Any cash proceeds received by the Partnership from the sale of depositary units pursuant to Awards under the Plan will be useful for general Partnership purposes.

        5.7    REGULATORY APPROVALS.    The implementation of the Plan, any Awards under the Plan, and the issuance of depositary units pursuant to any Award is subject to the procurement by the Partnership of all approvals and permits required by regulatory authorities having jurisdiction over the Plan, Awards made under the Plan, and depositary units issued pursuant to the Plan.

        5.8    NO EMPLOYMENT/SERVICE RIGHTS.    Neither the establishment of this Plan, nor any action taken under the terms of this Plan, nor any provision of this Plan will be construed to grant any individual the right to remain in the employ or service of the Partnership (or any parent, subsidiary or affiliated entity) for any period of specific duration, and the Partnership (or any parent, subsidiary or affiliated entity retaining the services of such individual) may terminate such individual's employment or service at any time and for any reason, with or without cause. Nothing contained in this Plan or in any Award under this Plan will affect any contractual rights of an employee pursuant to a written employment agreement.

        5.9    GOVERNING LAW.    To the extent not otherwise governed by federal law, the Plan and its implementation shall be governed by and construed in accordance with the laws of the State of California.

        5.10    GENDER.    Whenever the masculine gender is used in this Plan it shall include the feminine and neutral genders and vice versa.

        5.11    PARTICIPATION AND ELIGIBILITY.    All of the full-time employees (including officers) of the Partnership who are "exempt employees," as defined under the Fair Labor Standards Act of 1939, and Directors are eligible to receive Awards under the Plan. More than 50% of the depositary units underlying Awards granted pursuant to the Plan during any three-year period will be granted to eligible persons other than officers (as defined in Rule 16a-1(f) of the 1934 Act Rules) or Directors.

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DEFERRED BONUS

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF DEFERRAL OF PARTNERSHIP UNITS
RECEIVED IN LIEU OF CASH BONUS AND GRANT OF UNIT RIGHTS

        Notice is hereby given of the following grant of a right to receive The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership") Partnership Units ("Unit Rights") pursuant to the terms of The Newhall Land and Farming Company Management Unit Ownership Program, as amended ("MUOP") and The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Grantee:    _________________________________________________________________________________

Grant Date:    _______________________________________________________________________________

Number of Unit Rights:    _____________________________________________________________________

A.    Deferral of units in lieu of cash bonus

B.    Unit Rights Pursuant to Paragraph 6 of the MUOP ("MUOP Unit Rights")

C.    Total Unit Rights Granted

Receipt of Partnership Unit Certificate:    Grantee has elected to receive Partnership Units with respect to his or her vested Unit Rights as follows:

D.    Unit Rights received in lieu of cash bonus (fully-vested) and vested MUOP Unit Rights (331/3% a year)—
E.    January 1, 2004____  January 1, 2006____	January 1, 2008____
F.    January 1, 2005____  January 1, 2007____

        If the date you selected is less than three years from the Grant Date, then the unvested MUOP Unit Rights will be distributed when they vest as follows (select one):

G.    ____ the date Grantee becomes fully vested in the remaining MUOP Unit Rights granted pursuant to this Notice of Grant; or

H.    ____ at the end of any quarter in which Grantee is vested in 100 or more MUOP Unit Rights.

        Upon termination, Grantee will receive 100% of the Depositary Units for vested Unit Rights granted by this Notice. If upon termination of employment, Grantee is bested in fewer than 100 Unit Rights, Grantee will receive cash equal to the Fair Market Value, as defined in the Plan, of the Depositary Units underlying vested Unit Rights.

Vesting Schedule:    Unit Rights granted for Depositary Units received in lieu of cash bonus are 100% vested.

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        Grantee is entitled to receive an additional Unit Right for every five Depositary Units acquired through bonus payments. So long as Grantee remains employed by the Partnership or its affiliated entities, Grantee shall vest in these units in equal successive annual installments over three years at a rate of 33¹/3% of the granted Unit Rights per year of Service measured from the Grant Date, provided that the Unit Rights have not been terminated or cancelled before such date in accordance with the terms set forth in the MUOP, the Plan and the Unit Right Agreement.

        If Unit Rights for which Depositary Units have not yet been issued are outstanding as of the record date of a cash distribution by the Partnership with respect to Depositary Units, Grantee will be credited with an additional number of Unit Rights. The number of additional Unit Rights shall be equal to one hundred twenty percent (120%) of the aggregate cash distribution that would have been made with respect to such outstanding Unit Rights had they been Depositary Units on such record date, divided by the Fair Market Value, as defined in the Plan, of one depositary unit on such record date. Grantee shall vest in such additional Unit Rights as in the underlying Unit Rights.

        Grantee understands that the Unit Rights are granted pursuant to and in accordance with the express terms and conditions of the Plan. By signing below, Grantee agrees to be bound by the terms and conditions of the MUOP, the Plan and the Unit Rights Agreement dated                        .

        All terms used but not defined herein shall have the meaning set forth in the MUOP.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	OPTIONEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

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Exhibit A

THE NEWHALL LAND AND FARMING COMPANY

UNIT RIGHTS AGREEMENT

DATED:

        The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership") has adopted The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan") for the purpose of attracting and retaining the services of employees (including officers) of the Partnership and affiliated entities, and non-employee Board members of the Partnership or its managing general partner.

        Grantee is an individual who is to render valuable services to the Partnership or its affiliates and is entitled to a grant of Unit Rights, and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the Partnership's grant of Unit Rights to Grantee.

        Except as indicated otherwise, all capitalized terms shall have the meaning assigned to those terms in the Plan.

        I.    Grant of Unit Rights.    Subject to and upon the terms and conditions set forth in this Agreement, the Partnership hereby grants to Grantee, as of the grant date, (the "Grant Date") specified in the accompanying Notice of Grant Unit Rights (the "Grant Notice"), Unit Rights in the number as is specified in the Grant Notice.

        J.    Unit Rights and Vesting.    Grantee shall be entitled to receive one Partnership depositary unit for each vested Unit Right. Such depositary units shall be issued pursuant to Grantee's election in the Grant Notice. Unit Rights shall vest in accordance with the schedule specified in the Grant Notice, subject to acceleration in accordance with the remaining terms of this Agreement.

        K.    Phantom Partnership Distributions.    If Unit rights for which depositary units have not yet been issued are outstanding as of the record date of a cash distribution by the Partnership with respect to depositary units, Grantee will be credited with an additional number of Unit Rights. The number of additional Unit Rights shall be equal to one hundred twenty percent (120%) of the aggregate cash distribution that would have been made with respect to such outstanding Unit Rights had they been depositary units on such record date, divided by the Fair Market Value of one depositary unit on such record date. Grantee shall vest in such additional Unit Rights as in the underlying Unit Rights.

        L.    Ownership Target.    Grantee will continue to be eligible to receive Unit Rights under this Agreement even after attaining the unit ownership target established by the Partnership for Grantee.

        M.    Effect of Termination of Employment.    If Grantee ceases to be employed by or provide services to the Partnership or any of its affiliates for any reason, any Unit Rights that have not yet vested as of the date of termination shall be cancelled automatically and no depositary units shall be issued pursuant to such cancelled Unit Rights.

        N.    Acceleration of Awards.    In the event of a Structural Transaction or Change in Control, each Unit Right will be automatically accelerated so that all depositary units and cash payments to which Grantee is entitled under any Unit Right granted under this Plan shall be delivered to Grantee and all of the Partnership's rights to the return or cancellation of unvested Unit Rights shall terminate.

        O.    No Acceleration of Awards.    In no event shall any such acceleration or termination of any unvested Unit Rights in connection with a Structural Transaction or Change in Control occur if and to the extent (i) such Unit Right is, in connection with the Structural Transaction or Change in Control, either to be assumed by the successor entity or affiliate thereof or to be replaced with a comparable Unit Right to purchase or receive securities of the successor entity or affiliate thereof, (ii) such Unit

13

Right is to be replaced with a cash incentive program of the successor entity which preserves the depositary unit spread existing at the time of the Structural Transaction or Change in Control and provides for subsequent payout in accordance with the same vesting schedule applicable to such Unit Right, or (iii) the acceleration of such Unit Right is subject to other limitations imposed by the Committee at the time of the Unit Right grant. The determination of Unit Right comparability under clause (i) above shall be made by the committee and its determination shall be final, binding and conclusive. Upon consummation of a Structural Transaction or Change in Control, all outstanding Unit Rights under the Plan shall, to the extent not previously exercised or paid in full or assumed by the successor entity or an affiliate, terminate.

        P.    Cancellation of Awards.    Notwithstanding the above, in the event of any Structural Transaction or Change in Control, the Committee shall have the discretion to cancel outstanding Unit Rights, in whole or in part, subject to such conditions as the Committee may determine, upon payment to Grantee with respect to all cancelled Unit Rights, an amount in cash equal to the Fair Market Value of the depositary units subject to the Unit Rights.

        Q.    Adjustment.    If any change is made to the depositary units issuable under the Plan by reason of a Structural Transaction or a Change in Control that does not result in the termination of all outstanding rights of the Partnership to the return or cancellation of unvested Unit Rights, the Committee may adjust the maximum number of depositary units subject to Unit Rights, as provided in Paragraph 2.2.C. of the Plan.

        R.    Cancellation and New Grant of Awards.    The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected Unit Right holders, the cancellation of any or all outstanding Unit Rights covered by this Agreement and to grant in substitution therefore new Unit Rights under the Plan covering the same or different number and class of depositary units.

        S.    Partnership Structure.    The grant of Awards under the Plan shall in no way affect the Partnership's right to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer any part of its business or assets.

        T.    Withholding.    No depositary units shall be issued hereunder unless and until all applicable Federal, state and local income and employment tax withholding obligations have been satisfied.

        U.    Nontransferability.    A Grantee's Unit Rights hereunder are not assignable or transferable in any manner other than by will or the laws of descent and distribution. In the event of Grantee's death prior to the issuance of depositary units hereunder, Grantee's beneficiary, for purposes hereof, shall be the designated beneficiary or, if no beneficiary has been designated, the person to whom Grantee's rights hereunder pass pursuant to Grantee's will or by the laws of descent and distribution.

        V.    Privilege of Unitholder Rights.    Subject to Paragraph 14, neither Grantee nor Grantee's beneficiary shall have any unitholder rights with respect to the depositary units issuable hereunder until Grantee or Grantee's beneficiary has been issued a certificate for such depositary units.

        W.    Modifications.    The Committee, as defined in the Plan, may, in its discretion, modify or waive any or all of the terms, conditions or restrictions hereof, provided, however, that no such modification or waiver may, without Grantee or, if applicable, Grantee's beneficiary's consent, adversely affect the rights of Grantee or Grantee's beneficiary hereunder.

        X.    No Employment or Service Rights.    Except to the extent the terms or any written employment contract with Grantee may expressly provide otherwise, neither the Partnership nor any of its affiliates, is under any obligation to continue the employee status of Grantee for any period of specific duration and may terminate such employee status at any time, with or without cause.

        Y.    Grantee Undertaking.    Grantee hereby agrees to take whatever additional action and execute whatever additional documents the Partnership may in its judgment deem necessary or advisable in

14

order to carry out or effect one or more of the obligations or restrictions imposed on either Grantee or the depositary units pursuant to the express provisions of this Agreement.

        Z.    Governing Law.    This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.

        AA.    Counterparts.    The Grant Notice may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

        BB.    Successors and Assigns.    The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Partnership and its successors and assigns and Grantee and Grantee's legal representatives, heirs, legatees, distributes, assigns and transferees by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof.

        CC.    Notices.    Any notice required to be given or delivered to the Partnership under the terms of this Agreement shall be in writing and addressed to the Partnership in care of the Corporate Secretary at Newhall Management Corporation, 23823 Valencia Boulevard, Valencia, California 91355. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Grant Notice. All notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, by registered or certified mail, postage prepaid and properly addressed to the party to be notified.

        DD.    Construction.    This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms provisions of the Plan. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

15

SUBSEQUENT GRANT

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF GRANT OF UNIT RIGHTS

        Notice is hereby given of the following grant of a right to receive The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership") depositary units ("Unit Rights") pursuant to the terms of The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Grantee:    _________________________________________________________________________________

Grant Date:    _______________________________________________________________________________

Number of Unit Rights:    _____________________________________________________________________

Receipt of Depositary Unit Certificate:    Grantee elects to receive depositary units of the Partnership with respect to his or her vested Unit Rights as soon as practical following:

        ______ the date Grantee becomes fully vested in all Unit Rights granted pursuant to this Notice of Grant; or

        ______ at the end of any quarter in which Grantee is vested in 100 or more Unit Rights.

        If upon termination of employment, Grantee is vested in fewer than 100 Unit Rights, Grantee will receive cash equal to the Fair Market Value of the depositary units underlying vested Unit Rights.

Vesting Schedule:    Grantee will receive one Unit Right for every five depositary units acquired through open market purchases, exercise of options, or bonus payments. So long as Grantee remains employed by Partnership or its affiliated entities, and Grantee continues to own the depositary units on which this Unit Right Grant is made, Grantee shall vest in equal successive annual installments over three years at a rate of 33¹/3% of the granted Unit Rights per year of Service measured from the Grant Date, provided that the Unit Rights have not been terminated or canceled before such date in accordance with the terms set forth in the Plan and the Unit Rights Agreement.

        If Unit Rights for which depositary units have not yet been issued are outstanding as of the record date of a cash distribution by the Partnership with respect to depositary units, Grantee will be credited with an additional number of Unit Rights. The number of additional Unit Rights shall be equal to one hundred twenty per cent (120%) of the aggregate cash distribution that would have been made with respect to such outstanding Unit Rights had they been depositary units on such record date, divided by the Fair Market Value of one depositary unit on such record date. Grantee shall vest in such additional Unit Rights as in the underlying Unit Rights.

        Grantee understands that the Unit Rights are granted pursuant to and in accordance with the express terms and conditions of Plan. By signing below, Grantee agrees to be bound by the terms and

16

conditions of the Plan and the terms and conditions of the Unit Rights Agreement dated                        , distributed with the Initial Notice of Grant.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	GRANTEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

17

INITIAL GRANT

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF GRANT OF AUTOMATIC OPTION

        Notice is hereby given of the following option (the "Option") to purchase depositary units of The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership"), which has been granted pursuant to the automatic option grant program in effect under The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Optionee:    _________________________________________________________________________________

Grant Date:    _______________________________________________________________________________

Number of Optioned Depositary Units:    __________________________________________________________

Exercise Price Per Depositary Unit:    ____________________________________________________________

Expiration Date:    ___________________________________________________________________________

Exercise Schedule:    The Option is exercisable immediately.

        Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Plan governing automatic option grants to Board members. Optionee further agrees to be bound by the terms and conditions of the Plan and the terms and conditions of the Option as set forth in the Automatic Option Agreement (the "Agreement") dated                         ,            , attached hereto as Exhibit A. Optionee should keep a copy of the attached Agreement for reference, since no new Agreement will be distributed with subsequent Notices of Grant of Automatic Option unless the material terms of the Plan change.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	OPTIONEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

18

THE NEWHALL LAND AND FARMING COMPANY

AUTOMATIC OPTION AGREEMENT

DATED:

        The Newhall Land and Farming Company (the "Partnership") has implemented an automatic option grant program under The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"), pursuant to which special option grants are to be made to eligible members of the Board of Directors of the managing general partner and its managing general partner, at periodic intervals over their period of Board service in order to encourage such individuals to remain in the Partnership's Service.

        Optionee is an eligible member of the Board and this Agreement is executed pursuant to, and is intended to carry out the purposes of, the Plan in connection with the automatic grant of an option to purchase depositary units of the Partnership.

        The granted option is intended to be a nonstatutory option which does not meet the requirements of Section 422 of the Internal Revenue Code and is designed to provide Optionee with a meaningful incentive to continue to serve as a member of the Board.

        Except as indicated otherwise, all capitalized terms shall have the meaning assigned to those terms in the Plan.

        1.    Grant of Option.    Subject to and upon the terms and conditions set forth in this Agreement, the Partnership hereby grants to Optionee, as of the date of grant (the "Grant Date") specified in the accompanying Notice of Grant of Automatic Option (the "Grant Notice"), an option to purchase up to that number of depositary units as is specified in the Grant Notice. The option shall be exercisable and the depositary units purchasable from time to time during the option term at the price per depositary unit (the "Exercise Price") specified in the Grant Notice.

        2.    Option Term.    This option shall have a term of ten years measured from the Grant Date and shall expire at the close of business on the Expiration Date specified in the Grant Notice, unless sooner terminated under Paragraph 5.

        3.    Limited Transferability.    During the lifetime of Optionee, this option will be exercisable only by Optionee and will not be assignable or transferable by Optionee otherwise than by will or by the laws of descent and distribution following Optionee's death. However, an option may permit Optionee to designate a beneficiary who may exercise the option or receive compensation under the option after Optionee's death.

        4.    Date of Exercise.    This option is exercisable immediately upon grant.

        5.    Cessation of Board Service.    Should Optionee's service as a Board member cease while this option remains outstanding, then the option term specified in Paragraph 2 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance with the following provisions:

        a.    Should Optionee cease to serve as a Board member for any reason (other than retirement or death) while holding this option, then the option shall be exercisable for a three month period commencing with the date of such cessation of Board service, but in no event shall this option be exercisable after the Expiration Date. Upon the earlier of (i) the expiration of such three-month period of (ii) the specified Expiration Date, the option shall terminate and cease to be exercisable.

        b.    Should Optionee die while serving as a Board member (or within the three month period following cessation of Board service) while holding this option, then the designated beneficiary, or, if no beneficiary is designated, Optionee's estate or heirs shall have the right to exercise this

19

option for any or all of the depositary units for which the option is exercisable at the time of Optionee's death. Such right of exercise shall terminate, and this option shall accordingly cease to be exercisable for such depositary units, upon the earlier of (i) the expiration of the 12-month period measured from the date of Optionee's death or (ii) the specified Expiration Date.

        c.    Should Optionee retire after serving as a Board member while holding this option, the option may be exercised within 36-months of the date of "retirement." For purposes of this section, Optionee's date of "retirement" will be the first day Optionee ceases to serve as an Independent Director after serving as an Independent Director for at least five years.

        6.    Manner of Exercising Option.

        a.    In order to exercise this option with respect to all or any part of the depositary units for which this option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's designated beneficiary, executor, administrator, heir or legatee, as the case may be) must take the following actions:

        (i)    Deliver to the Secretary of Newhall Management Corporation an executed notice of exercise in substantially the form of Exhibit I to this Agreement (the "Exercise Notice") in which there is specified the number of depositary units which are to be purchased under the exercised option.

        (ii)  Pay the aggregate Exercise Price for the purchased depositary units in cash or in depositary units that the Optionee has held for the requisite period to avoid a charge to earnings. Payment may also be made by delivery of a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver depositary units with a Fair Market Value equal to the Exercise Price.

        (iii)  Furnish to the Partnership appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

        b.    Except to the extent the sale and remittance procedure specified above is utilized in connection with the option exercise, payment of the Exercise Price for the purchased depositary units must accompany the Exercise Notice.

        c.    As soon as practical after receipt of the Exercise Notice, the Partnership shall mail or deliver to or on behalf of Optionee (or any other person or persons exercising this option in accordance herewith) a depositary receipt representing the purchased depositary units.

        d.    In no event may this option be exercised for any fractional depositary units.

        7.    Unitholder Rights.    Optionee shall not have any of the rights of a unitholder with respect to the depositary units until Optionee shall have exercised this option and paid the Exercise Price for the purchased depositary units.

        8.    No Impairment of Rights.    This Agreement shall not in any way affect the right of the Partnership to adjust, reclassify, reorganize or otherwise make changes in its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets. Nor shall this Agreement in any way be construed or interpreted so as to affect adversely or otherwise impair the right of the Partnership or the unitholders to remove Optionee from the Board at any time in accordance with the provisions of applicable law.

        9.    Compliance With Laws and Regulations.    The exercise of this option and the issuance of the depositary units upon such exercise shall be subject to the compliance by the Partnership and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Partnership's depositary units may be listed at the time of such exercise and issuance.

20

        10.    Successors and Assigns.    Except to the extent otherwise provided in Paragraph 3, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of Optionee and the Partnership's successors and assigns.

        11.    Discharge of Liability.    The inability of the Partnership to obtain approval from any regulatory body having authority deemed by the Partnership to be necessary to the lawful issuance and sale of any depositary units pursuant to this option shall relieve the Partnership of any liability with respect to the non-issuance or sale of the depositary units as to which such approval shall not have been obtained. However, the Partnership shall use its best efforts to obtain all such applicable approvals.

        12.    Notices.    Any notice required to be given or delivered to the Partnership under the terms of this Agreement shall be in writing and addressed to the Partnership in care of the Corporate Secretary of Newhall Management Corporation, 23823 Valencia Boulevard, Valencia, California 91355. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated below Optionee's signature line on the Grant Notice. All notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, by registered or certified mail, postage prepaid and properly addressed to the party to be notified.

        13.    Construction.    This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan, including the automatic option grant provisions of Article Three of the Plan. The interpretation, performance and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-interest rules.

        14.    Successors and Assigns.    The provisions of this Agreement shall inure to the benefit of, and be binding upon, the Partnership and its successors and assigns and Optionee and Optionee's legal representatives, heirs, legatees, distributes, assigns and transferees by operation of law, whether or not any such person shall have become a party to this Agreement and have agreed in writing to join herein and be bound by the terms and conditions hereof.

        15.    Plan.    This option is subject to all the terms of the Plan whether or not referenced or incorporated herein.

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EXHIBIT I

NOTICE OF EXERCISE OF OPTION

        I hereby notify The Newhall Land and Farming Company (a California limited Partnership) (the "Partnership") that I elect to purchase            depositary units of the Partnership (the "Purchased Depositary Units") at the option exercise price of $                        per depositary unit (the "Exercise Price") pursuant to that certain option (the "Option") granted to me under The Newhall Land and Farming Company 2002 Equity Compensation Plan on                        ,             .

        Concurrently with the delivery of this Exercise Notice to the Secretary of Newhall Management Corporation, I shall hereby pay to the Partnership the Exercise Price for the Purchase Depositary Units in accordance with the provisions of my agreement with the Partnership evidencing the Option and shall deliver whatever additional documents may be required by such agreement as a condition for exercise. Alternatively, I may utilize the special broker-dealer sale and remittance procedure specified in my agreement to effect the payment of the Exercise Price for the Purchased Depositary Units.

Date: _______________, _______

Optionee

Address:

Print name in exact manner it is to appear on the depositary receipt:

________________________________________________

________________________________________________

Social Security Number:

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SUBSEQUENT GRANT

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF GRANT OF AUTOMATIC OPTION

        Notice is hereby given of the following option (the "Option") to purchase depositary units of The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership"), which has been granted pursuant to the automatic option grant program in effect under The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Optionee:    _________________________________________________________________________________

Grant Date:    _______________________________________________________________________________

Number of Optioned Depositary Units:    __________________________________________________________

Exercise Price Per Depositary Unit:    ____________________________________________________________

Expiration Date:    ___________________________________________________________________________

Exercise Schedule:    The Option is exercisable immediately.

        Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Plan governing automatic option grants to Board members. Optionee further agrees to be bound by the terms and conditions of the Plan and the terms and conditions of the Option as set forth in the Automatic Option Agreement dated                        , which as distributed with the Initial Notice of Grant of Automatic Option.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	OPTIONEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

23

INITIAL GRANT

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF GRANT OF OPTION

        Notice is hereby given of the following option (the "Option") to purchase depositary units of The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership") which has been granted pursuant to The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Optionee:    _________________________________________________________________________________
Grant Date:    _______________________________________________________________________________
Number of Optioned Depositary Units:    __________________________________________________________
Exercise Price Per Depositary Unit:    ____________________________________________________________
Expiration Date:    ___________________________________________________________________________
Tandem Option/Appreciation Right:	Yes ______
	No ______

Exercise Schedule:    The Option shall become exercisable in four equal and successive annual installments for twenty-five percent (25%) of the Optioned Depositary Units upon Optionee's completion of each year of Service (as defined in the attached Option Agreement dated                         ) measured from the Grant Date. In no event shall the Option become exercisable for any additional Optioned Depositary Units following Optionee's cessation of Service.

Optionee understands and agrees that the Option is granted subject to and in accordance with the terms and conditions of the Plan. Optionee further agrees to be bound by the terms and conditions of the Option as set forth in the Option Agreement dated                        attached hereto as Exhibit A and the Plan. Optionee should keep a copy of the attached Option Agreement for reference, since no new Option Agreement will be distributed with subsequent Notices of Grant of Option unless the material terms of the Plan change.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	OPTIONEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

24

EXHIBIT A

THE NEWHALL LAND AND FARMING COMPANY

OPTION AGREEMENT

DATED:

        A.    The Newhall Land and Farming Company ("Partnership") has implemented The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan") for the purpose of attracting and retaining the services of key employees (including officers) of the Partnership and any affiliated entities thereof, and non-employee Board members of the managing general partner of the Partnership, and its managing general partner.

        B.    Optionee is an individual who is to render valuable services to the Partnership or one or more affiliated entities thereof, and this Agreement is executed pursuant to, and is intended to carry out the purposes of the Plan in connection with the Partnership's grant of an option to Optionee.

        C.    All capitalized terms shall have the meaning as those terms are defined in the Plan unless otherwise indicated. "Fair Market Value" shall have the meaning assigned to that term in Article I of the Plan.

        1.    Grant of Option.    Subject to and upon the terms and conditions set forth in this Agreement, the Partnership hereby grants to Optionee, as of the date of grant (the "Grant Date") specified in the accompanying Notice of Grant of Option (the "Grant Notice"), an option to purchase up to that number of the Partnership's depositary units as is specified in the Grant Notice. Such depositary units shall be purchasable from the Partnership from time to time during the option term at the option price (the "Exercise Price") specified in the Grant Notice.

        2.    Tandem Option/Appreciation Rights.    The Grant Notice may reflect that the option is granted in tandem with an appreciation right, which means that either the option or the appreciation right may be exercised, but not both. If this option is granted in tandem with an appreciation right, you will also receive a Notice of Grant of Appreciation Right and an Appreciation Right Agreement.

        3.    Option Term.    This option shall expire at the close of business on the expiration date (the "Expiration Date") specified in the Grant Notice, unless sooner terminated in accordance with Paragraph 6, 9, or 10.

        4.    Limited Transferability.    This option shall be exercisable only by Optionee during Optionee's lifetime and shall not be transferable or assignable by Optionee other than by will or by the laws of descent and distribution following Optionee's death. However, Optionee may designate a beneficiary who may exercise the option or receive compensation under the option after Optionee's death.

        5.    Dates of Exercise.    This option shall be exercisable for the depositary units in accordance with the Exercise Schedule specified in the Grant Notice. The option shall remain exercisable for the accumulated installments until the Expiration Date or sooner termination of the option term under Paragraph 6. In no event shall this option become exercisable for any additional depositary units following Optionee's cessation of Service.

        6.    Cessation of Service.    The option term specified in Paragraph 3 shall terminate (and this option shall cease to be outstanding) prior to the Expiration Date in accordance, with the following provisions:

        a.    This option shall immediately terminate and cease to be outstanding for any depositary units for which it is not exercisable at the time of Optionee's cessation of Service.

        b.    Should Optionee cease Service for any reason other than death or retirement while this option is outstanding, then this option shall be exercisable for all of the depositary units for which this option is exercisable at the time of such cessation of Service. Such right shall lapse, and this option shall terminate and cease to remain outstanding, upon the earlier of (i) the expiration of

25

the three (3)-month period measured from the date of Optionee's cessation of Service, or (ii) the Expiration Date.

        c.    Should Optionee die while this option is outstanding, or within three (3) months after Optionee ceases Service, then Optionee's designated beneficiary, or, if no beneficiary has been designated, Optionee's estate or heirs shall have the right to exercise the option for any or all of the depositary units for which this option is exercisable at the time of Optionee's death. Such right shall lapse, and this option shall terminate and cease to remain outstanding, upon the earlier of (1) the expiration of the twelve (12)-month period measured from the date of Optionee's death, or (ii) the Expiration Date.

        d.    Should Optionee retire while this option is outstanding, then this option shall be exercisable for all of the depositary units for which this option is exercisable at the time of such "retirement." Such right shall lapse, and this option shall terminate and cease to remain outstanding, upon the earlier of (i) the expiration of the thirty-six (36)-month period measured from the date of Optionee's retirement, or (ii) the Expiration Date. For purposes of this Paragraph 5, "retirement" shall mean the Optionee's cessation of Service on or after either of the following:

        (i)    the first day of the month coinciding with or next following Optionee's sixty-fifth (65) birthday.

        (ii)  the first day of a calendar month after meeting the age and service requirements for early retirement, which are: Optionee's years of service for the Partnership or an affiliated entity meet or exceed ten (10) years of service, and Optionee has attained age 55.

        e.    Should (i) Optionee's Service be terminated for misconduct (including, but not limited to, any act of dishonesty, willful misconduct, fraud or embezzlement) or (ii) Optionee make any unauthorized use or disclosure of confidential information or trade secrets of the Partnership or any parent or subsidiary, then in any such event this option shall terminate immediately and cease to be outstanding.

        f.      For purposes of this Agreement, the following definitional provisions shall be in effect:

        (i)    Optionee shall be deemed to remain in Service for so long as such individual renders services on a periodic basis to the Partnership (or any subsidiary or other affiliated entity) in the capacity of an employee or a non-employee member of the Board.

        (ii)  An entity shall be considered to be a subsidiary of the Partnership if it is a member of an unbroken chain of entities beginning with the Partnership, provided each such entity in the chain (other than the last entity) owns, at the time of determination, securities possessing fifty percent (50%) or more of the total combined voting power of all classes of securities in one of the other entities in such chain.

        (iii)  An entity shall be considered to be a parent of the Partnership if it is a member of an unbroken chain ending with the Partnership, provided each such entity in the chain (other than the Partnership) owns, at the time of determination, securities possessing fifty percent (50%) or more of the total combined voting power of all classes of securities in one of the other entities in such chain.

        7.    Adjustment in Depositary Units.

        a.    If any change is made to the depositary units issuable under the Plan (whether by reason of merger, consolidation, reorganization, recapitalization, depositary unit distribution, depositary unit split, combination of depositary units, exchange of depositary units, or other change in partnership or capital structure of the Partnership), or if the Partnership makes a distribution to

26

holders of depositary units which results from the sale or disposition of a major asset or separate operating division of the Partnership, which would materially dilute the rights of option holders, then the Committee shall make appropriate adjustments to (i) the maximum number and/or class of securities issuable under the Plan, (ii) the number and/or class of securities and price per depositary unit in effect under each outstanding option under the Plan and (iii) the maximum number of depositary units issuable to one individual pursuant to Paragraph 1.3.D of the Plan. The purpose of these adjustments will be to preclude the enlargement or dilution of rights and benefits under the options.

        b.    If any change is made to the depositary units issuable under the Plan by reason of a Structural Transaction or a Change in Control that does not result in the termination of all outstanding options, the Committee may adjust the maximum number of depositary units issuable under the Plan, the number of depositary units subject to options, and the option price, as provided in Paragraph 1.3.C. of the plan.

        8.    Acceleration of Options.    In the event of a Structural Transaction or Change in Control, each option will be automatically accelerated so that each option at the time outstanding under the Plan and not then otherwise fully exercisable shall become fully exercisable for up to the total number of depositary units purchasable or issuable thereunder and may be exercised for all or any portion of the depositary units for which the option is so accelerated.

        9.    No Acceleration of Options.    In no event shall any such acceleration or termination of repurchase rights in connection with a Structural Transaction occur if and to the extent (i) such option is, in connection with the Structural Transaction, either to be assumed by the successor entity or affiliate thereof or to be replaced with a comparable option to purchase or receive securities of the successor entity or affiliate thereof, (ii) such option is to be replaced with a cash incentive program of the successor entity which preserves the depositary unit spread existing at the time of the Structural Transaction and provides for subsequent payout in accordance with the same vesting schedule applicable to such option, or (iii) the acceleration of such option is subject to other limitations imposed by the Committee at the time of the option grant. The determination of option comparability under clause (i) above shall be made by the Committee and its determination shall be final, binding and conclusive. Upon consummation of a Structural Transaction, all outstanding options under the Plan shall, to the extent not previously exercised or paid in full or assumed by the successor entity or an affiliate, terminate.

        10.    Cancellation of Options.    Notwithstanding the above, in the event of any Structural Transaction, the Committee shall have the discretion to cancel outstanding options in whole or in part, subject to such conditions as the Committee may determine, upon payment to optionees with respect to each cancelled option, an amount in cash not less than the difference between (i) the Fair Market Value (at the effective date of such Structural Transaction) of the consideration the optionee would have received if the option had been exercised immediately prior to the effective date of such Structural Transaction and:(ii) the exercise price of such option.

        11.    Partnership Structure.    The grant of options under the Plan shall in no way affect the Partnership's right to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate, or sell or transfer any part of its business or assets.

        12.    Privilege of Unitholder Rights.    The holder of this option shall not have any of the rights of a unitholder with respect to the depositary units until such individual shall have exercised the option and paid the Exercise Price for the purchased depositary units.

        13.    Withholding.    Grantee may elect to have the Partnership withhold, from the depositary units otherwise issuable pursuant to such option, one or more of such depositary units with an aggregate Fair Market Value equal to the Federal, state and local employment and income taxes ("Taxes") incurred in

27

connection with the acquisition of such depositary units. Grantee may also deliver previously acquired depositary units held for the requisite period to avoid a charge to earnings in satisfaction of such Taxes. The withheld or delivered depositary units will be valued at Fair Market Value on the applicable determination date for such Taxes.

        14.    Manner of Exercising Option.    In order to exercise this option with respect to all or any part of the depositary units for which this option is at the time exercisable, Optionee (or in the case of exercise after Optionee's death, Optionee's designated beneficiary, executor, administrator, heir or legatee, as the case may be) must take the following actions:

        a.    Deliver to the Secretary of the Partnership an executed notice of exercise in substantially the form of Exhibit I to this Agreement (the "Exercise Notice") in which there is specified the number of depositary units which are to be purchased under the exercised option.

        b.    Pay the aggregate Exercise Price for the purchased depositary units through one or more of the following alternatives:

        (i)    in cash or cash equivalents made payable to the Partnership;

        (ii)  in depositary units valued at their Fair Market Value as of the Exercise Date (defined below) and held for the requisite period in order to avoid a charge to earnings (currently six (6) months, but subject to change);

        (iii)  through a sale and remittance procedure under which the optionee delivers a properly executed exercise notice together with irrevocable instructions to a broker to promptly deliver to the Partnership the amount of sale proceeds to pay the option price; or

        (iv)  such other lawful consideration as the Committee shall determine.

        For purposes of clause (ii) immediately above, the "Exercise Date" is the date on which written notice of the exercise of the option is delivered to the Partnership. In all other cases, the Exercise Date is the date on which written notice and actual payment is received by the Partnership.

        Except to the extent the sale and remittance procedure specified above is utilized in connection with the option exercise, payment of the Exercise Price for the purchased depositary units must accompany the Exercise Notice.

        c.    Furnish to the Partnership appropriate documentation that the person or persons exercising the option (if other than Optionee) have the right to exercise this option.

        d.    As soon as practical after receipt of the Exercise Notice, the Partnership shall mail or deliver to or on behalf of Optionee (or any other person or persons exercising this option in accordance herewith) a depositary receipt representing the purchased depositary units.

        e.    In no event may this option be exercised for any fractional depositary units.

        15.    Governing Law.    The interpretation, performance, and enforcement of this Agreement shall be governed by the laws of the State of California without resort to that State's conflict-of-laws rules.

        16.    Counterparts.    The Grant Notice may be executed in counterparts each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument.

        17.    Compliance with Law and Regulations.    The exercise of this option and the issuance of depositary units upon such exercise shall be subject to compliance by the Partnership and Optionee with all applicable requirements of law relating thereto and with all applicable regulations of any stock exchange on which the Partnership's depositary units may be listed at the time of such exercise and issuance.

28

        18.    Successors and Assigns.    Except to the extent otherwise provided in Paragraph 4, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the designated beneficiaries, successors, administrators, heirs and legal representatives of Optionee and the successors and assigns of the Partnership.

        19.    Liability of Partnership.    The inability of the Partnership to obtain approval from any regulatory body having authority deemed by the Partnership to be necessary to the lawful issuance and sale of any depositary units pursuant to this option shall relieve the Partnership of any liability with respect to the non-issuance or sale of the depositary units as to which such approval shall not have been obtained. The Partnership shall, however, use its best efforts to obtain such approvals.

        20.    No Employment/Service Contract.    Nothing in this Agreement or in the Plan shall confer upon Optionee any right to continue in the Service of the Partnership (or any subsidiary or other affiliated entity employing or retaining Optionee) for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Partnership (or any affiliated entity) or Optionee, which rights are hereby expressly reserved by each party, to terminate Optionee's Service at any time for any reason whatsoever, with or without cause.

        21.    Notices.    Any notice required to be given or delivered to the Partnership under the terms of this Agreement shall be in writing and addressed to the Partnership in care of the Corporate Secretary at Newhall Management Corporation, 23823 Valencia Boulevard, Valencia, CA 91355. Any notice required to be given or delivered to Optionee shall be in writing and addressed to Optionee at the address indicated on the Grant Notice. All notices shall be deemed to have been given or delivered upon personal delivery or upon deposit in the U.S. mail, by registered or certified mail, postage prepaid and properly addressed to the party to be notified,

        22.    Construction.    This Agreement and the option evidenced hereby are made and granted pursuant to the Plan and are in all respects limited by and subject to the express terms and provisions of the Plan. All decisions of the Committee with respect to any question or issue arising under the Plan or this Agreement shall be conclusive and binding on all persons having an interest in this option.

        23.    Payroll Tax Withholding.    Optionee shall make appropriate arrangements with the Partnership or any parent, subsidiary or affiliated entity employing Optionee for the satisfaction of all Federal, state or local income and employment tax withholding requirements applicable to the exercise of this option.

        24.    Cancellation and New Grant of Awards.    The Committee shall have the authority to effect, at any time and from time to time, with the consent of the affected Optionees, the cancellation of any or all outstanding options and to grant in substitution therefore, new options under the Plan covering the same or different number and class of depositary units having a price per depositary unit not less than the Fair Market Value on the new grant date.

29

SUBSEQUENT GRANT

THE NEWHALL LAND AND FARMING COMPANY

NOTICE OF GRANT OF OPTION

        Notice is hereby given of the following option (the "Option") to purchase depositary units of The Newhall Land and Farming Company (a California Limited Partnership) (the "Partnership") which has been granted pursuant to The Newhall Land and Farming Company 2002 Equity Compensation Plan (the "Plan"):

Optionee:    _________________________________________________________________________________
Grant Date:    _______________________________________________________________________________
Number of Optioned Depositary Units:    __________________________________________________________
Exercise Price Per Depositary Unit:    ____________________________________________________________
Expiration Date:    ___________________________________________________________________________
Tandem Option/Appreciation Right:	Yes ______
	No ______

Exercise Schedule:    The Option shall become exercisable in four equal and successive annual installments for twenty-five percent (25%) of the Optioned Depositary Units upon Optionee's completion of each year of Service (as defined in the Option Agreement dated                        ) measured from the Grant Date. In no event shall the Option become exercisable for any additional Optioned Depositary Units following Optionee's cessation of Service.

        Optionee understands and agrees that the Option is granted subject to and in accordance with the express terms and conditions of the Plan. Optionee further agrees to be bound by the terms and conditions of the Option as set forth in the Option Agreement dated                        ,             which was distributed with the Initial Notice of Grant of Option and the Plan.

Dated: _______________________	THE NEWHALL LAND AND FARMING COMPANY (a California Limited Partnership)
	By:
	Title:	Secretary
	OPTIONEE
	Address:

I designate the following beneficiary(ies):

	Relationship:
Address:

30

EX-99.A

Exhibit 99-a

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

        In connection with the accompanying Quarterly Report on Form 10-Q of The Newhall Land and Farming Company for the quarter ended June 30, 2002, I, Gary M. Cusumano, President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer), hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1)

such Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in such Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of The Newhall Land and Farming Company.

Dated: August 12, 2002	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
	By:	/s/  GARY M. CUSUMANO President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer)

EX-99.B

Exhibit 99-b

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350

        In connection with the accompanying Quarterly Report on Form 10-Q of The Newhall Land and Farming Company for the quarter ended June 30, 2002, I, Stuart R. Mork, Senior Vice President and Chief Financial Officer of Newhall Management Corporation, (Principal Financial Officer), hereby certify pursuant to 18 U.S.C. §1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that:

(1)

such Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and



(2)

the information contained in such Quarterly Report on Form 10-Q for the quarter ended June 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of The Newhall Land and Farming Company.

Dated: August 12, 2002	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
	By:	/s/  STUART R. MORK Senior Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer)