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 September 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

23,992,293 partnership units outstanding at October 31, 2002

Part I. Financial Information
Item 1. Financial Statements

Consolidated Statements of Income
(Unaudited)

In thousands except per unit			Three Months Ended September 30,						Nine Months Ended September 30,
			2002			2001			2002			2001
Revenues
Real estate
	Residential land sales		$	37,761		$	25		$	82,536		$	204
	Industrial and commercial sales			3,331			19,725			34,894			117,437
	Commercial operations
		Income-producing properties		9,700			10,097			29,171			32,074
		Valencia Water Company		4,427			4,480			10,706			10,012
				55,219			34,327			157,307			159,727
Agriculture operations				2,971			2,889			4,902			5,200
	Total revenues		$	58,190		$	37,216		$	162,209		$	164,927
Contribution to income
Real estate
	Residential land sales		$	12,338		$	(1,522	)	$	26,403		$	(3,286	)
	Industrial and commercial sales			121			3,652			14,857			88,569
	Community development			(5,933	)		(2,222	)		(13,652	)		(7,996	)
	Commercial operations
		Income-producing properties		3,121			2,897			9,300			10,298
		Valencia Water Company		981			1,433			2,157			2,444
				10,628			4,238			39,065			90,029
Agriculture operations				(296	)		(197	)		(29	)		404
General and administrative expense				(2,980	)		(2,423	)		(9,329	)		(8,775	)
Operating income				7,352			1,618			29,707			81,658
Interest and other, net				(685	)		(1,132	)		(2,542	)		(4,796	)
Net income			$	6,667		$	486		$	27,165		$	76,862
Net income per unit			$	0.28		$	0.02		$	1.13		$	3.01
Net income per unit—diluted			$	0.27		$	0.02		$	1.11		$	2.97
Weighted average number of units used in computing per unit amounts:
	Net income per unit			24,013			24,691			24,100			25,552
	Net income per unit—diluted			24,286			25,053			24,486			25,842
Cash distributions per unit:
	Regular		$	0.10		$	0.10		$	0.30		$	0.30
	Special									0.13			0.10

See notes to consolidated financial statements

2

Consolidated Balance Sheets

In thousands			September 30, 2002		December 31, 2001
			(Unaudited)
ASSETS
	Cash and cash equivalents		$	11,319	$	3,050
	Accounts and notes receivable			14,204		17,310
	Land under development			75,558		77,885
	Land held for future development			20,291		22,029
	Income-producing properties held for sale, net			2,322		2,322
	Income-producing properties, net			154,899		148,610
	Property and equipment, net			76,612		72,763
	Investment in joint venture			1,252		743
	Other assets and deferred charges			14,088		13,607
			$	370,545	$	358,319
LIABILITIES AND PARTNERS' CAPITAL
	Accounts payable		$	35,164	$	21,544
	Accrued expenses			42,232		45,386
	Deferred revenues			34,200		13,681
	Mortgage and other debt			58,881		85,511
	Advances and contributions from developers for utility construction			38,385		34,200
	Other liabilities			22,258		22,786
		Total liabilities		231,120		223,108
	Partners' capital
23,992 units outstanding, excluding 12,780 units in treasury (cost-$316,888), at September 30, 2002 and 24,374 units outstanding, excluding 12,398 units in treasury (cost-$304,335), at December 31, 2001				139,425		135,211
			$	370,545	$	358,319

See notes to consolidated financial statements

3

Consolidated Statements of Cash Flow
(Unaudited)

			Nine Months Ended September 30,
In thousands
			2002			2001
CASH FLOWS FROM OPERATING ACTIVITIES:
	Net income		$	27,165		$	76,862
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization		8,561			8,651
		Increase in land under development		(68,412	)		(48,686	)
		Cost of sales and other inventory changes		72,477			16,268
		Decrease in accounts and notes receivable		3,106			11,284
		Increase (decrease) in accounts payable, accrued expenses and deferred revenues		30,985			(10,289	)
		Cost of property sold		127			8,127
		Other adjustments, net		(1,065	)		(2,981	)
	Net cash provided by operating activities			72,944			59,236
CASH FLOWS FROM INVESTING ACTIVITIES:
	Development of income-producing properties			(11,968	)		(7,666	)
	Purchase of property and equipment			(6,802	)		(8,577	)
	Investment in joint venture			(509	)		(229	)
	Net cash used in investing activities			(19,279	)		(16,472	)
CASH FLOWS FROM FINANCING ACTIVITIES:
	Distributions paid			(10,398	)		(10,299	)
	(Decrease) increase in mortgage and other debt, net			(26,630	)		21,194
	Increase in advances and contributions from developers for utility construction			4,185			1,879
	Purchase of partnership units			(14,959	)		(59,619	)
	Issuance of partnership units			2,406			3,624
	Net cash used in financing activities			(45,396	)		(43,221	)
Net increase (decrease) in cash and cash equivalents				8,269			(457	)
Cash and cash equivalents, beginning of period				3,050			3,717
Cash and cash equivalents, end of period			$	11,319		$	3,260
Supplemental Disclosure of Cash Flow Information:
	Interest paid (net of amount capitalized)		$	2,538		$	3,983

See notes to consolidated financial statements

4

Notes to Consolidated Financial Statements (unaudited)

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 nine months ended September 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)		September 30, 2002		December 31, 2001
Residential land development		$	44,469	$	44,911
Industrial and commercial land development			30,900		32,687
Agriculture			189		287
	Total land under development	$	75,558	$	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 September 30, 2002
Net income per unit
	Net income available to unitholders	$	6,667	24,013	$	.28
Effect of dilutive securities
	Unit options		—	273		(.01	)
Net income per unit—diluted		$	6,667	24,286	$	.27
For three months ended September 30, 2001
Net income per unit
	Net income available to unitholders	$	486	24,691	$	.02
Effect of dilutive securities
	Unit options		—	362		—
Net income per unit—diluted		$	486	25,053	$	.02
For nine months ended September 30, 2002
Net income per unit
	Net income available to unitholders	$	27,165	24,100	$	1.13
Effect of dilutive securities
	Unit options		—	386		(.02	)
Net income per unit—diluted		$	27,165	24,486	$	1.11
For nine months ended September 30, 2001
Net income per unit
	Net income available to unitholders	$	76,862	25,552	$	3.01
Effect of dilutive securities
	Unit options		—	290		(.04	)
Net income per unit—diluted		$	76,862	25,842	$	2.97

6

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

(In $000s)		September 30, 2002			December 31, 2001
Income-producing properties
	Land	$	36,600		$	36,600
	Buildings		133,173			132,432
	Other		9,486			8,754
	Properties under development		17,878			7,614
			197,137			185,400
	Accumulated depreciation		(42,238	)		(36,790	)
		$	154,899		$	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		10,292			9,770
	Water supply systems, orchards and other		91,783			87,462
	Construction in progress		6,559			5,115
			118,427			112,129
	Accumulated depreciation		(41,815	)		(39,366	)
		$	76,612		$	72,763

Note 5. Disclosure about Certain Financial Statement Captions

Cash and cash equivalents—Cash and cash equivalents increased $8.3 million at September 30, 2002 compared to December 31, 2001. Cash generated from operations totaled $72.9 million for the nine months ended September 30, 2002. This included collection of a total of $11.7 million in notes receivable. At September 30, 2002, the Company had no outstanding balances on its available lines of credit. Due to prepayment penalties, the Company invested its excess cash in short-term investments rather than pay down its fixed rate debt. The Company had $11.3 million in cash and short-term investments at September 30, 2002. (See the Consolidated Statements of Cash Flows and further discussion in Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations.)

Deferred revenues—The $20.5 million net increase in deferred revenues for the nine months ended September 30, 2002 was primarily attributable to $32.1 million in deferred revenues for certain commercial land and residential lot sales recorded under percentage of completion accounting in 2002, including $8.7 million recorded in the 2002 third 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 $11.8 million of deferred revenues earned in 2002 to date, including $5.1 million of deferred revenues recognized in the 2002 third quarter.

7

Mortgage and Other Debt—The $26.6 million decrease in mortgage and other debt for the nine months ended September 30, 2002 was primarily due to no outstanding borrowings on the Company's available line of credit at September 30, 2002 versus $23.7 million outstanding at December 31, 2001. The Company's lines of credit are available to fund recurring operations, distributions and repurchases of partnership units. The reduced borrowings on the credit line were primarily due to reduced repurchases of partnership units during the nine months ended September 30, 2002 as detailed in Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations. In addition, in May 2002 a $2.6 million promissory note for the acquisition of water rights for the development of Newhall Ranch matured and was paid by the Company.

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 September 30, 2002
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	37,761	$	12,410		$	32,018
	Industrial and commercial		3,331		270			53,932
	Community development		—		(5,763	)		35,069
	Income-producing properties		9,700		3,146			149,101
	Valencia Water Company		4,427		1,015			77,967
Agriculture			2,971		(282	)		6,025
Central administration			—		(2,619	)		16,433
All other			—		(825	)		—
			58,190		7,352			370,545
Interest and other, net			—		(685	)		—
		$	58,190	$	6,667		$	370,545

		Three months ended September 30, 2001
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	25	$	(1,498	)	$	28,760
	Industrial and commercial		19,725		3,742			48,824
	Community development		—		(2,135	)		35,144
	Income-producing properties		10,097		2,909			159,372
	Valencia Water Company		4,480		1,445			72,942
Agriculture			2,889		(196	)		6,668
Central administration			—		(2,249	)		11,496
All other			—		(400	)		—
			37,216		1,618			363,206
Interest and other, net			—		(1,132	)		—
		$	37,216	$	486		$	363,206

8

		Nine months ended September 30, 2002
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	82,536	$	26,696		$	32,018
	Industrial and commercial		34,894		15,403			53,932
	Community development		—		(13,022	)		35,069
	Income-producing properties		29,171		9,395			149,101
	Valencia Water Company		10,706		2,293			77,967
Agriculture			4,902		33			6,025
Central administration			—		(7,916	)		16,433
All other			—		(3,175	)		—
			162,209		29,707			370,545
Interest and other, net			—		(2,542	)		—
		$	162,209	$	27,165		$	370,545

		Nine months ended September 30, 2001
(In $000s)		Revenues		Contribution to Income			Assets
Real Estate
	Residential	$	204	$	(3,013	)	$	28,760
	Industrial and commercial		117,437		89,294			48,824
	Community development		—		(7,288	)		35,144
	Income-producing properties		32,074		10,418			159,372
	Valencia Water Company		10,012		2,629			72,942
Agriculture			5,200		501			6,668
Central administration			—		(6,883	)		11,496
All other			—		(4,000	)		—
			164,927		81,658			363,206
Interest and other, net			—		(4,796	)		—
		$	164,927	$	76,862		$	363,206

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 Third Quarter and Nine Months of 2002 to Third Quarter and Nine Months of 2001
Unaudited

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

				Third Quarter Increase (Decrease)					Nine Months Increase (Decrease)
				Amount			%		Amount			%
Revenues
	Real estate
		Residential land sales		$	37,736		150944	%	$	82,332		40359	%
		Industrial and commercial sales			(16,394	)	-83	%		(82,543	)	-70	%
		Commercial operations
			Income-producing properties		(397	)	-4	%		(2,903	)	-9	%
			Valencia Water Company		(53	)	-1	%		694		7	%
					20,892		61	%		(2,420	)	-2	%
	Agriculture Operations				82		3	%		(298	)	-6	%
Total revenues				$	20,974		56	%	$	(2,718	)	-2	%
Contribution to Income
	Real estate
		Residential land sales		$	13,860		911	%	$	29,689		903	%
		Industrial and commercial sales			(3,531	)	-97	%		(73,712	)	-83	%
		Community development			(3,711	)	-167	%		(5,656	)	-71	%
		Commercial operations
			Income-producing properties		224		8	%		(998	)	-10	%
			Valencia Water Company		(452	)	-32	%		(287	)	-12	%
					6,390		151	%		(50,964	)	-57	%
Agriculture operations					(99	)	50	%		(433	)	-107	%
General and administrative expense					(557	)	- -23	%		(554	)	- -6	%
Operating income					5,734		354	%		(51,951	)	-64	%
Interest and other, net					447		39	%		2,254		47	%
Net income				$	6,181		1272	%	$	(49,697	)	-65	%
Net income per unit				$	0.26		1311	%	($	1.88	)	-63	%
Net income per unit—diluted				$	0.25		1264	%	($	1.86	)	-63	%
Weighted average number of units used in computing per unit amounts:
Net income per unit					(678	)	-3	%		(1,452	)	-6	%
Net income per unit—diluted					(767	)	-3	%		(1,356	)	-5	%

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

        For the three months ended September 30, 2002, revenues totaled $58.2 million and net income totaled $6.7 million. This compares with revenues of $37.2 million and net income of $486,000 for the three months ended September 30, 2001. Revenues for the nine months ended September 30, 2002

12

totaled $162.2 million and net income totaled $27.2 million compared to revenues of $164.9 million and net income of $76.9 million for the same period in 2001.

        Residential land sales were the major contributor to 2002 third quarter results with 217 residential lots closing escrow, contributing $34.8 million to revenues and $13.0 million to income. Major contributors to 2002 nine-month results were the sales of 949 residential lots and 57.1 acres of commercial land, contributing $110.5 million to revenues and $45.7 million to income.

        The primary contributors to the 2001 third quarter were the sales of four commercial parcels totaling 11.5 net acres, including a 208-unit apartment complex site on 9.6 net acres in the Alta Vista community, and two asset sales which combined contributed $18.4 million to revenues and $5.5 million to income. In addition, major contributors to 2001 nine-month results were the sales of the Company's Chiquita Canyon Landfill and its option to purchase approximately 1,800 acres in Broomfield, Colorado and the sale of a 7.9 acre commercial parcel, which combined contributed a total of $88.1 million to revenues and $84.6 million to income. No residential land sales closed escrow in the first nine months of 2001.

        As previously reported, the Company's earnings estimate for the full year ending December 31, 2002 ranges from approximately $1.50 to $1.60 per unit. This estimate includes the sale of 1,330 residential lots in the communities of Westridge (726 lots), Alta Vista (329 lots) and Hidden Creek (275 lots); approximately 69 acres of commercial and industrial land; and income from the Company's portfolio of income-producing properties of approximately $12 million after administration, depreciation and interest expenses. The estimate for 2002 includes the sale of a small office building in the Valencia Commerce Center. During the 2002 fourth quarter, the Company expects to close escrows on an additional 381 residential lots and about 12 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, reaching agreement with the buyers on definitive terms, the successful completion of the due diligence work by buyers, the availability of financing to suitable buyers, satisfactory resolution of regulatory and legal issues, and market and other conditions, many of which are beyond the control of the Company.

Residential Land Sales

        A total of 217 residential lots in Valencia Westridge closed escrow in the 2002 third quarter, contributing $34.8 million to revenues and $13.0 million to income under percentage of completion accounting. For the nine months ended September 30, 2002, a total of 949 residential lots closed escrow, contributing $77.9 million to revenues and $27.4 million to income. Included in the 949 lots sold were the entire inventory of 329 entitled, unimproved residential lots in the community of Alta Vista and 620 entitled, improved lots in the Westridge golf course community.

        No residential lots closed escrow during the 2001 third quarter or the nine-month period ended September 30, 2001 resulting in net losses of $1.5 million and $3.3 million, respectively. For the three-and nine-month periods ended September 30, 2001 revenues of $25,000 and $204,000, respectively, were primarily due to amounts received from merchant builders under price and profit participation agreements.

        At September 30, 2002, the entire 275 residential lots in the community of Hidden Creek and 106 residential lots in Valencia Westridge were in escrow for a combined sales price of approximately $36.0 million with closings scheduled in the 2002 fourth quarter. In addition, a total of 750 residential lots was in escrow for approximately $53 million in the community of Creekside with closings expected in 2003. The ability to close escrows is dependent upon a variety of factors including, but not limited to, availability of financing to suitable buyers, market and other conditions which may be beyond the control of the Company. There were no residential lots in escrow at the end of the 2001 third quarter.

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        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 review of 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.

        Home sales continued strong as merchant builders sold 153 new homes in the 2002 third quarter on lots previously purchased from the Company compared to 234 new homes sold during the same period in 2001. For the nine months ended September 30, 2002, merchant builders sold a total of 849 new homes compared to a total of 682 new homes sold during the same period in 2001. In October 2002, new home sales in 2002 by merchant builders exceeded the record 873 new home sales achieved in the year ended December 31, 2001. The Company expects that 2002 new home sales by merchant builders will reach approximately 975 by year end.

        At September 30, 2002, merchant builders had 406 homes in escrow, compared to 349 homes in escrow at September 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.

Industrial and Commercial Sales

Industrial Land Sales

        Demand for industrial land in Valencia's business parks remains at low levels and prices remain flat partly as a result of high 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 September 30, 2002, the combined vacancy rate in both Valencia Industrial Center and Valencia Commerce Center was approximately 12% compared to 14% at the end of the 2002 second quarter and 9.6% at September 30, 2001.

        No industrial land was sold or in escrow during the three or nine months ended September 30, 2002. A 3-acre parcel of industrial land is expected to be sold in the 2002 fourth quarter. 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, satisfactory resolution of regulatory and legal issues, and market and other conditions which may be beyond the control of the Company. The Company has approximately 370 net acres of industrial land remaining in Valencia.

        No industrial land was sold in the quarter ended September 30, 2001. Results for the nine months ended September 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. One 1.9 acres industrial parcel was in escrow at September 30, 2001.

Commercial Land Sales

        During the 2002 third quarter, two commercial parcels totaling 1.6 acres closed escrow, contributing $1.1 million to revenues and $.5 million to income. In addition, $1.0 million in revenues and $.6 million in income were recognized under the percentage of completion method of accounting

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on sales closed earlier in 2002, and $1.2 million in revenues and $.6 million in income were recognized from prior year sales. For the nine months ended September 30, 2002, nine commercial parcels totaling 57.1 acres closed escrow, contributing $32.7 million to revenues and $18.3 million to income under percentage of completion accounting.

        Four commercial parcels totaling 11.5 acres closed escrow during the 2001 third quarter, contributing $11.2 million to revenues and $5.0 million to income. The parcels that closed escrow in the 2001 third quarter included a 208-unit apartment complex site on 9.6 net acres in the Alta Vista residential planning area contributing $9.4 million to revenues and $3.8 million to income. For the nine months ended September 30, 2001, eight commercial parcels totaling 23.5 acres closed escrow, contributing $24.4 million to revenues and $14.9 million to income. The 2001 nine-month period included close of escrow on a 7.9-acre parcel for a 341-unit apartment complex with 10,000 square feet of ground floor retail space contributing $10.1 million to revenues and $7.7 million to income.

        At September 30, 2002, a total of 8.6 acres of commercial land was in escrow for approximately $7 million, with closings scheduled for the fourth quarter. Included in the 8.6 acres in escrow for 2002 is a 7.5-acre parcel for a 226-home senior community in Creekside. In addition, the Company has 10 acres in escrow for approximately $7 million that are expected to close in 2003. The ability to close escrows is dependent upon a variety of factors including, but not limited to, availability of financing to suitable buyers, market and other conditions which may be beyond the control of the Company. At September 30, 2001, a total of 11.4 acres of commercial land was in escrow.

Income Property and Other Sales

        There were no income property or other asset sales during the 2002 third quarter or the nine months ended September 30, 2002. The Company expects to sell a small office building in Valencia Commerce Center in the 2002 fourth quarter for approximately the carrying value of the asset plus closing costs.

        During the 2001 third quarter, the Bank of America building and a smaller office building closed escrow, contributing $7.2 million to revenues and $.5 million to income. Also during the 2001 third quarter, an easement was sold contributing $.6 million to revenues and income. Results for the 2001 nine-month period also included the sales of the Company's Chiquita Canyon Landfill and its option in Broomfield, Colorado, which combined contributed $78.0 million to revenues and $76.9 million to income.

Community Development

        Community development expenses increased by more than 100% for the three-month period and by 71% for the nine-month period ended September 30, 2002 compared to the same 2001 periods primarily due to an increase in legal expense incurred responding to third-party challenges. Community development expenses for the year are expected to increase about 60% 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.

        On October 9, 2002, attorneys for the Company appeared in California Superior Court to answer a misdemeanor charge of illegally altering a stream bed, which was filed on behalf of the California Department of Fish and Game (Fish and Game). The Company pled not guilty and is pursuing all appropriate courses of action. A trial on the matter has been set for November 20, 2002.

        In late May 2002, Fish and Game conducted a search on certain areas of Newhall Ranch. The investigation was to determine if an endangered plant, the San Fernando Valley Spineflower (Spineflower), had been taken, even though the routine farming operations being conducted on the

15

Ranch are exempt from certain endangered species regulations. During the search, Fish and Game found the plant in several locations in the eastern area of Newhall Ranch. Existence of the plant, which, until 2000, was thought to be extinct, may affect development plans for the part of Newhall Ranch where the plant was discovered. The Company has completed surveying other portions of Newhall Ranch and found Spineflower on one other location. Fish and Game is continuing its investigation.

        As part of the Company's ongoing surveys to locate protected species, the Company discovered what appears to be the Los Angeles Sunflower, a native plant thought to be extinct for 65 years. The Company immediately began preparing a petition to recommend that the Department of Fish and Game add the Los Angeles Sunflower to the State list of endangered and threatened plants. The discovery of this plant is expected to have no impact on the Company's development plans.

        The Company previously 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 had been delayed. This delay resulted from the de-certification of an environmental impact report prepared in connection with the acquisition and importation of 41,000 acre feet per year of State Project Water by Castaic Lake Water Agency (CLWA), the water wholesaler that serves the Santa Clarita Valley. On September 24, 2002, CLWA obtained a court ruling that allowed use of the 41,000 acre feet of water, provided that CLWA must prepare and certify a new environmental impact report.

        The Company will not be relying on any of the 41,000 acre feet of State Project Water from CLWA. The Company has entered into an agreement to acquire a separate water supply source for its potable water needs that it believes will satisfy the requirements of the Los Angeles County Board of Supervisors. Hearings before the Board of Supervisors are scheduled to start on January 28, 2003.

        Based on the current schedule, the Company expects to return to the Kern County Superior Court late next year for resolution of the six issues that were identified by the court as requiring further environmental review. The target date for commencement of initial development of Newhall Ranch remains 2005; however, the length of time necessary to obtain completion of governmental review and approvals necessary for the project, and the timing of any judicial processes that may result, are difficult to predict. In addition, it is not known whether or not the Fish and Game investigation noted above will affect the schedule for hearings at the Los Angeles County Board of Supervisors. Delays in these processes would likely adversely affect the timing of the Company's 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 then filed a California Environmental Quality Act (CEQA) lawsuit challenging the Board of Supervisors' approval. In November 2001, the Superior Court dismissed opponents' claims, and that decision was appealed by the opponents to the California Court of Appeal. A November 13, 2002 Appellate Court date has been set for oral argument. The outcome of the appeal is difficult to predict and an adverse decision would likely affect the timing and costs of the project.

Income-Producing Properties

        For the three- and nine-month periods ended September 30, 2002, revenues were down 4% and 9%, respectively, from the same periods in 2001. The decreases were primarily due to the loss of revenues generated from sold income-producing properties that closed escrow in the second and third quarters of 2001, and the closing of the Edwards movies theaters in the Valencia Town Center regional shopping mall late in the 2001 third quarter. Income for the most recent three-month period was 8% higher than the same period in 2001 primarily due to improved operating efficiencies at the Company's

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two hotels. Income for the nine-month period ended September 30, 2002 was down 10% over the same period in 2001 primarily due to the sale of income-producing properties.

        Income for the current and prior year third quarters includes the favorable effects of the cessation of depreciation on Properties Held for Sale and Sold Properties of $19,000 and $81,000, respectively, and for the current and prior nine-month periods of $58,000 and $300,000, respectively.

        Retained income-producing properties produced slightly higher net operating income (before administration, depreciation and interest expenses) in the three and nine months ended September 30, 2002 versus the same period in 2001 primarily due to higher room rates in the hotels, and increased rents in other retained properties. Net operating income for 2002 from the Company's portfolio of income-producing properties is expected to be approximately $22 million, and income (after administration, depreciation and interest expenses) is expected to be approximately $12 million.

Income-Producing Properties

	Three Months Ended September 30,						Nine Months Ended September 30,
Net Operating Income (Dollars in thousands)
	2002			2001			2002			2001
Retained Properties(1)	$	5,491		$	5,269		$	16,638		$	16,232
Properties Held for Sale(2)		—			—			—			13
Sold Properties(3)		1			154			4			1,880
Net Operating Income(4)		5,492			5,423			16,642			18,132
Admin/Depreciation		(2,371	)		(2,526	)		(7,342	)		(7,834	)
Total Contribution to Income	$	3,121		$	2,897		$	9,300		$	10,298

(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)

Includes a 35,310 square foot building in Valencia Commerce Center.

(3)

Includes in 2001, the Chiquita Canyon landfill (sold in second quarter), the Bank of America building and a small office building (sold in third quarter) and the Town Center Plaza mixed-use building (sold in fourth quarter).

(4)

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

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

	September 30, 2002		September 30, 2001
Occupancy Rates:(a)
Valencia Town Center Mall(b)	80	%	83	%
Entertainment Center(c)	97	%	96	%
Valencia Town Center Master Lease(d)	94	%	71	%
NorthPark/River Oaks Shopping Centers	99	%	100	%
Hotels	76	%	79	%

(a)

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

(b)

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

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(c)

Includes 129,103 square feet of leasable space.

(d)

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

        Valencia Town Center regional shopping mall was 80% leased at the end of the 2002 third quarter. Remodeling of the west end of the shopping mall where the Edwards movie theaters were located is expected to be completed in early 2003. Plans call for relocating an expanded food court into the remodeled space. Based on current plans, the existing food court space also will be remodeled to provide for enhanced retail space that is scheduled to be available for rent by the 2003 holiday season.

        The occupancy rates at the Company's Hyatt Valencia and Hilton Garden Inn hotels were 71% and 83%, respectively, for the nine month period ended September 30, 2002. This compares to occupancy rates of 73% for the Hyatt Valencia and 83% for the Hilton Garden Inn for the nine months ended September 30, 2001. While higher daily room rates were a factor in the slightly lower occupancy rates at the Hyatt Valencia, they did result in increased revenues compared to the same period last year.

Valencia Water Company

        Valencia Water Company is a regulated utility and a wholly-owned subsidiary of the Company serving approximately 24,000 metered connections. Third quarter 2002 revenues decreased 1% and income decreased 32% from the same period in the prior year. For the first nine months of 2002, Valencia Water Company recorded an increase of 7% in revenues and a 12% decrease in income over the nine-month period ended September 30, 2001. The decrease in revenues for the 2002 third quarter was primarily due to a February 2002 California Public Utilities Commission (CPUC) mandated water rate reduction of 4.85%, which was nearly offset by increased revenue from new metered connections. The increase in revenues for the nine months ended September 30, 2002 was primarily the result of a 5% increase in the water company's metered connections and increased water usage due to drier weather conditions, partially offset by the CPUC rate reduction. The decrease in income for the three- and nine-month periods ended September 30, 2002 was primarily due to higher administrative expenses and expenses relating to legal proceedings in which Valencia Water Company is involved.

Agricultural Operations and Ranch Sales

        For the three-month period ended September 30, 2002, revenues from agriculture operations, including the Company's energy operations, increased 3% over the year earlier period primarily due to higher yields on tomatoes, while revenues for the 2002 nine-month period decreased 6% primarily as a result of lower prices for oil and gas. Net income for the three- and nine-month periods ended September 30, 2002 decreased 50% and 107%, respectively, primarily due to costs associated with the Spineflower warrant (See "Community Development" section above) and decreased oil and gas prices compared to 2001.

General and Administrative Expense

        General and adminstrative expenses for the 2002 third quarter and for the nine months ended September 30, 2002 increased 23% and 6%, repectively. The 2002 third quarter increase was primarily due to higher levels of accrued incentive-based compensation resulting from higher earnings for the 2002 third quarter, and increased legal and consulting expenses. For the nine months ended September 30, 2002, the increase is primarily due to an increase in expense for unit ownership plans, and increased legal and consulting expenses, partially offset by a reduction in accrued incentive-based compensation due to lower earnings for the nine-months ended September 30, 2002 compared to the same period in 2001. General and administrative expenses for all of 2002 are expected to increase approximately 4% over 2001 levels.

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Interest and Other

        Interest and other, net decreased 39% and 47% for the 2002 third quarter and the nine months ended September 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 approximately 42% lower than 2001 due to lower interest rates and lower outstanding balances on the Company's bank line borrowings, an increase in interest income from notes receivable and an increase in capitalized interest on active real estate projects.

FINANCIAL CONDITION

Liquidity and Capital Resources

        At September 30, 2002, the Company had $11.3 million of cash and cash equivalents and $160.1 million available under bank lines, net of $23.9 million in letters of credit. There were no borrowings outstanding on unsecured lines of credit or a revolving mortgage facility. The Company had fixed rate debt totaling $58.9 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 ongoing 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 total debt not to exceed 60% of the appraised value of the income portfolio. The Company ended the 2002 third quarter with a conservative debt to income portfolio value ratio of 22%, which provides adequate debt capacity to fund operations. At September 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. In accordance with the program, 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 generally funded from cash flow generated from normal business operations. As of September 30, 2002, a total of 1,471,985 units, or approximately 58%, of the total number of units authorized for repurchase had been repurchased for $42.6 million, or an average price of $28.94 per unit. A total of 1,048,015 units remained to be repurchased under this program at September 30, 2002. 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. In the second quarter 2002, the Company 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 would reduce significantly the pace of unit repurchases and likely will not complete the current program during 2002.

        For the nine months ended September 30, 2002, the Company invested approximately $16.9 million in major roads and freeway improvements to benefit the projects, which amounts are included in land under development on the accompanying balance sheet. In addition, the Company invested approximately $3.7 million (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 shopping mall for relocation of the existing food court and creation of new retail space, and approximately $6.3 million on the construction of Tournament Players Club® at Valencia

19

championship golf course, in the Company's Westridge community, which are included in income-producing properties on the accompanying balance sheet. In the 2002 fourth quarter, the Company expects to invest approximately $5.9 million in major roads and freeway improvements to enable the Company to continue its land sales program in Valencia. Another approximately $1.9 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 and 2004, for a total of approximately $20 million for the project. Additionally, the Company expects to invest another approximately $5.3 million in 2002 and $6.9 million in 2003 on the completion of the golf course and clubhouse. As of September 30, 2002, there were no other material commitments for capital expenditures.

The following discussion relates to principal items on the Consolidated Statement of Cash Flows:

Operating Activities

        Net cash provided by operating activities totaled $72.9 million for the first nine months of 2002 versus $59.2 million for the nine months ended September 30, 2001. For the nine months ended September 30, 2002, revenues generated from operating activities included revenues from the sale of 949 residential lots, the sale of approximately 57.1 commercial acres and revenue from the Company's portfolio of income-producing properties, combined for a total of $139.7 million. In addition, $11.7 million of notes receivables outstanding at December 31, 2001 were collected in the nine months ended September 30, 2002. This was offset by the Company's acceptance in the 2002 first quarter of $8.3 million promissory note in conjunction with the terms of a commercial land sale. The term of the note is less than one year and it is expected to be collected prior to December 31, 2002. Cash used in operating activities also included the use of approximately $68.4 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 nine months ended September 30, 2001, net cash provided by operating activities included revenues from the sale of 33.0 commercial and industrial acres, the sale of the Company's Chiquita Canyon Landfill and two office buildings, the sale of an option on 1,800 acres in Broomfield, Colorado, the sale of an easement and revenues from the portfolio of income-producing properties, which, combined, generated a total of $147.9 million. In addition, $10.5 million in promissory notes accepted in 2000 in conjunction with the terms of certain commercial land sales were collected during the nine-month period. Cash used by operating activities included $48.7 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, community development and interest expenses.

Investing Activities

        Expenditures for the development of income-producing properties for the nine months ended September 30, 2002 totaled $12.0 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, which is located in the Company's Westridge community. Expenditures for the development of income-producing properties for the nine-month period ended September 30, 2001 totaled $7.7 million and were primarily for the completion of two office buildings sold in December 2000. Purchase of property and equipment totaled $6.8 million for the nine-month period ended September 30, 2002 compared to $8.6 million for the same 2001 period and was primarily for water utility construction.

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Financing Activities

        Distributions of $10.4 million for the nine months ended September 30, 2002 consisted of three regular quarterly distributions of $.10 per unit and a $.13 per unit special distribution made in March 2002. For the nine-month period ended September 30, 2001, three quarterly distributions of $.10 per unit each and a $.10 per unit special distribution made in March 2001 were paid for a total of $10.3 million. The Company has also declared a fourth quarter 2002 regular distribution of $.10 per unit, payable December 9, 2002 to unitholders of record on November 1, 2002. The Company's usual practice is to provide sufficient distributions, including special distributions, to pay the taxes associated with Company earnings. The declaration of distributions, and the amount declared, is determined by the Board of Directors on a quarterly basis taking into account the Company's earnings, financial condition and prospects.

        At September 30, 2002, the Company had balances in mortgage and other debt of $58.9 million versus $95.8 million at September 30, 2001. The $36.9 million decrease was primarily due to the absence of any outstanding borrowings on the Company's available lines of credit at September 30, 2002 versus $32.8 million outstanding at September 30, 2001. The Company's lines of credit are available to fund recurring operations, distributions and repurchases of partnership units. The reduced borrowings on the credit line were primarily due to reduced repurchases of partnership units during the nine months ended September 30, 2002. (See further discussion in the "Liquidity and Capital Resources" section above and in the paragraph that follows.)

        During the nine months ended September 30, 2002, 501,835 partnership units were repurchased for a total of $15.0 million, or an average price of $29.81. For the nine-month period ended September 30, 2001, a total of 2,221,462 units were repurchased for the aggregate amount of $59.6 million, or an average price of $26.84 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, the availability of financing to suitable buyers, reaching agreement with buyers on definitive terms, satisfactory resolution of regulatory and legal issues, and the successful completion of due diligence work by buyers. 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:    Development of residential, industrial and commercial real estate 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 and defense industries and certain other business segments. Consequently, all sectors of the Company's real estate operations tend to be cyclical. The regional economy, like that of the state and nation, has slowed into a recession. There can be no assurance 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. However, there can be no assurance that the Company will continue to be able to offset the impacts of inflation through increases in the selling prices of its properties in future periods.

        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

22

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 Angeles County's new home sales. However, there is no assurance that this trend will continue. The industrial market in Valencia is experiencing limited demand and vacancy rates remain high since the national and regional economies have 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 entitlement activities. 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 and Endangered Species:    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

23

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. Additionally, the presence of endangered species on the Company's property could delay and increase the cost of development, and, in limited circumstances, could prevent the development of some properties.

Part 1. 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 September 30, 2002, the Company had no variable rate debt outstanding and $58.9 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 September 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	$	1,162		$	10,970		$	1,509		$	1,657		$	23,525		$	20,058		$	58,881		$	64,758	(2)
	Weighted Average Interest Rate		7.58	%		8.32	%		7.38	%		7.35	%		7.43	%		7.70	%		7.69	%
Variable Rate Debt(1)																				$	—		$	—
Weighted Average Interest Rate

(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 September 30, 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 no borrowings were outstanding, respectively at September 30, 2002.

(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 5.00% to 5.90%.

        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 December 31, 2001 by expected maturity dates:

Dollars in thousands		2002			2003			2004			2005			2006			Thereafter			Total			Fair Value
Mortgage and Other Debt
	Fixed Rate Debt	$	4,097		$	10,970		$	1,509		$	1,657		$	23,525		$	20,053		$	61,811		$	66,085
	Weighted Average Interest Rate		7.36	%		8.32	%		7.38	%		7.35	%		7.43	%		7.70	%		7.67	%
	Variable Rate Debt(1)	$	2,000					$	21,700											$	23,700		$	23,700
	Weighted Average Interest Rate		3.39	%					3.29	%											3.30	%

        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 September 30, 2002, the Company's debt to income portfolio value ratio was 22%.

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Part 1. Financial Information
Item 4. Controls and Procedures.

        Within 90 days prior to the date of this report, an evaluation was performed under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company's disclosure controls and procedures. Based on that evaluation, the Company's management, including the Chief Executive Officer and Chief Financial Officer, concluded that the Company's disclosure controls and procedures were effective. There have been no significant changes in the Company's internal controls or in other factors that could significantly affect internal controls subsequent to the date of their evaluation.

Part 2. 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	The Newhall Land and Farming Company Employee Savings Plan (Restated Effective January 1, 2002)
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 third quarter ended September 30, 2002.

25

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

26

Certification of Quarterly Report By Principal Executive Officer Pursuant to
Exchange Act Rules 13a-14 and 15d-14

I, Gary M. Cusumano, President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer), certify that:

1.    I have reviewed this quarterly report on Form 10-Q of The Newhall Land and Farming Company;

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect

27

internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 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
		/s/  GARY M. CUSUMANO Gary M. Cusumano, President and Chief Executive Officer of Newhall Management Corporation (Principal Executive Officer)

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Certification of Quarterly Report By Principal Financial Officer Pursuant to
Exchange Act Rules 13a-14 and 15d-14

I, Stuart R. Mork, Senior Vice President and Chief Financial Officer of Newhall Management Corporation, (Principal Financial Officer), certify that:

1.    I have reviewed this quarterly report on Form 10-Q of The Newhall Land and Farming Company;

2.    Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.    Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.    The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a)    designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)    evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)    presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.    The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):

a)    all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.    The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect

29

internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: November 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
		/s/  STUART R. MORK Stuart R. Mork, Senior Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer)

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THE NEWHALL LAND AND FARMING COMPANY

INDEX TO EXHIBITS

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

31

EX-10

Exhibit 10

THE NEWHALL LAND AND FARMING COMPANY
EMPLOYEE SAVINGS PLAN

(Restated Effective January 1, 2002)

THE NEWHALL LAND AND FARMING COMPANY
EMPLOYEE SAVINGS PLAN

TABLE OF CONTENTS

		Page
ARTICLE I	ESTABLISHMENT OF THE PLAN	1
1.01	ESTABLISHMENT AND RESTATEMENT OF THE PLAN	1
1.02	PURPOSE	1
1.03	INTENTION	1
1.04	RIGHTS OF PREVIOUS EMPLOYEES	1
ARTICLE II	DEFINITIONS	1
2.01	ACCOUNTING DATE	1
2.02	ACCOUNTS	1
2.03	AFFILIATED COMPANY	1
2.04	ANNIVERSARY DATE	1
2.05	BENEFICIARY	2
2.06	BOARD	2
2.07	BREAK IN SERVICE	2
2.08	CODE	2
2.09	COMMITTEE	2
2.10	COMPANY	2
2.11	EARNINGS	2
2.12	ELIGIBLE EMPLOYEE	2
2.13	EMPLOYEE	3
2.14	ERISA	3
2.15	ESOP	3
2.16	ESOP ACCOUNT	3
2.17	FIDUCIARY	3
2.18	FIVE PERCENT OWNER	3
2.19	HIGHLY PAID EMPLOYEE	3
2.20	HIGHLY PAID PARTICIPANT	4
2.21	HOUR OF SERVICE	4
2.22	LEASED EMPLOYEE	5
2.23	MANAGING GENERAL PARTNER	5
2.24	ONE PERCENT OWNER	5
2.25	PARTICIPANT	6
2.26	PARTICIPATING COMPANY	6
2.27	PERIOD OF SERVICE	6
2.28	PERIOD OF SEVERANCE	6
2.29	PLAN	6
2.30	PLAN ADMINISTRATOR	6
2.31	PLAN YEAR	6
2.32	REGULATIONS	6
2.33	RELATED COMPANY	6
2.34	RESERVED	6
2.35	REMUNERATION	6
2.36	RETIREMENT PLAN	7
2.37	SEASONAL AGRICULTURAL EMPLOYEE	7
2.38	SENIORITY SERVICE	7
2.39	SEPARATION DATE	7
2.40	SUSPENDED PARTICIPANT	7
2.41	TOTALLY DISABLED PARTICIPANT	8
2.42	TRUST	8
2.43	TRUSTEE	8
2.44	VESTED VALUE	8
2.45	VESTED SERVICE	8
2.46	VOLUNTARY EMPLOYEE CONTRIBUTIONS	8
2.47	YEAR OF SERVICE	8
2.48	OTHER DEFINITIONS	9

ARTICLE III	PARTICIPATION	10
3.01	ELIGIBILITY	10
3.02	APPLICATION TO PARTICIPATE	10
3.03	PARTICIPATION AFTER REEMPLOYMENT OR BREAK IN SERVICE	10
3.04	TRANSITION RULE	10
ARTICLE IV	PARTICIPANT DEFERRALS	10
4.01	DEFERRAL ELECTION.	10
4.02	DOLLAR LIMITATION	11
4.03	EMPLOYEE ELECTION OF CONTRIBUTION RATE	12
4.02	SUSPENSION OF BASIC EMPLOYER CONTRIBUTIONS	12
ARTICLE V	EMPLOYER CONTRIBUTIONS	12
5.01	BASIC EMPLOYER CONTRIBUTIONS	12
5.02	MATCHING EMPLOYER CONTRIBUTIONS	13
5.03	LIMITATION ON ANNUAL ADDITIONS	13
5.04	COMPLIANCE WITH THE LIMITATION	14
5.05	RETURN OF CONTRIBUTIONS	15
5.06	ROLLOVER CONTRIBUTIONS	15
ARTICLE VI	NONDISCRIMINATION REQUIREMENTS FOR BASIC EMPLOYER CONTRIBUTIONS AND MATCHING EMPLOYER CONTRIBUTIONS	16
6.01	LIMITATION ON BASIC EMPLOYER CONTRIBUTIONS	16
6.02	REMEDIAL DISTRIBUTIONS OF BASIC EMPLOYER CONTRIBUTIONS	18
6.03	LIMITATION ON MATCHING CONTRIBUTIONS	18
6.04	REMEDIAL DISTRIBUTIONS OF MATCHING CONTRIBUTIONS	20
6.05	RESERVED	20
6.06	FURTHER DISCRIMINATION TEST REQUIREMENTS	20
6.07	MULTIPLE USE LIMITATION	21
6.08	SPECIAL CONTRIBUTION	22
ARTICLE VII	INVESTMENT FUNDS	23
7.01	INVESTMENT OF CONTRIBUTIONS	23
7.02	NEWHALL FUND	23
7.03	INVESTMENT DESIGNATION	23
7.04	TRANSFER OF ACCOUNT BALANCES BETWEEN FUNDS	23
7.05	PURCHASE PRICE	23
7.06	VOTING AND TENDER OFFERS	24
7.07	AGREEMENTS RELATING TO TRUST	24
7.08	ESTABLISHMENT OF TRUST AGREEMENT	24
7.09	APPOINTMENT OF INVESTMENT MANAGER	25
7.10	INSURANCE OR ANNUITY CONTRACTS	25
7.11	EXPENSES OF TRUST	25
7.12	VOTING OF SECURITIES IN TRUST	25
ARTICLE VIII	ACCOUNTS AND VALUATION	26
8.01	PARTICIPANT ACCOUNTS	26
8.02	CREDITING OF CONTRIBUTIONS	26
8.03	ADJUSTMENT OF ACCOUNTS	26
8.04	STATEMENTS	26
8.05	VALUE OF ACCOUNTS	26
ARTICLE IX	WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT	27
9.01	WITHDRAWALS FROM EMPLOYEE CONTRIBUTION ACCOUNT	27
9.02	WITHDRAWALS FROM BASIC EMPLOYER CONTRIBUTION ACCOUNT	27
9.03	WITHDRAWALS BY CERTAIN PARTICIPANTS	28
9.04	LOANS TO PARTICIPANTS	28

9.05	SUSPENSION	30
ARTICLE X	VESTING	30
10.01	VESTING	30
ARTICLE XI	DISTRIBUTIONS	31
11.01	GENERAL	31
11.02	FORM OF DISTRIBUTION	31
11.03	DEATH OF PARTICIPANT	31
11.04	REQUIRED DISTRIBUTIONS TO CERTAIN PARTICIPANTS	32
11.05	PROOF OF DEATH AND RIGHT OF BENEFICIARY	32
ARTICLE XII	ADMINISTRATION OF THE PLAN	32
12.01	THE BOARD AND THE COMMITTEE	32
12.02	ORGANIZATION OF COMMITTEE	32
12.03	POWERS AND DUTIES	33
12.04	UNIFORM ADMINISTRATION	33
12.05	BENEFIT CLAIMS PROCEDURES	33
12.06	LIABILITY OF COMMITTEE MEMBERS	34
12.07	INDEMNITY	34
12.08	RELIANCE ON REPORTS AND CERTIFICATES	34
12.09	MEMBER'S OWN PARTICIPATION	35
12.10	DELEGATION OF RESPONSIBILITY	35
12.11	EXPENSES	35
ARTICLE XIII	AMENDMENT AND TERMINATION	35
13.01	AMENDMENT	35
13.02	TERMINATION	35
13.03	SUCCESSORS	36
13.04	MERGER OR TRANSFER OF PLAN ASSETS	36
13.05	EFFECT OF AMENDMENTS BY PARTICIPATING COMPANIES	36
ARTICLE XIV	MISCELLANEOUS	36
14.01	SOURCE OF PAYMENT	36
14.02	INALIENABILITY OF BENEFITS	36
14.03	NO RIGHT TO EMPLOYMENT	37
14.04	PAYMENTS TO MINORS OR INCOMPETENTS	37
14.05	RETURN OF CONTRIBUTIONS	37
14.06	ELIGIBLE ROLLOVER DISTRIBUTION	37
14.07	APPLICABLE LAW	38
14.08	USERRA COMPLIANCE	38
14.09	LOST PARTICIPANTS	38
ARTICLE XV	TOP-HEAVY RULES	38
15.01	DEFINITIONS	38
15.02	TOP-HEAVY STATUS	41
15.03	MINIMUM BENEFIT	41
15.04	EARNINGS LIMIT	42
15.05	LIMITATION ON ANNUAL ADDITIONS	42
ARTICLE XVI	EXECUTION	43

ARTICLE I

ESTABLISHMENT OF THE PLAN

        1.01     Establishment and Restatement of the Plan.    The Newhall Land and Farming Company Employee Savings Plan (the "Plan"), established effective January 1, 1980 and restated in its entirety effective March 1, 1983, January 1, 1984, January 1, 1987, and January 1, 1989, is hereby restated effective January 1, 2002 or as otherwise indicated. The January 1, 2002 restatement incorporates the amendment requested by the Internal Revenue Service in connection with the favorable determination letter issued on the Plan dated September 17, 2002.

        1.02     Purpose.    The purpose of this Plan is to encourage and assist employees of the Participating Companies to invest in their future with the Participating Companies by providing a means by which certain compensation which employees elect to defer and certain matching Participating Company contributions are invested to provide additional security to Participating Company employees at retirement.

        1.03     Intention.    It is the intention of the Participating Companies that the Plan hereinafter set forth (a) shall constitute a single profit sharing plan; (b) shall meet all applicable requirements of the Employee Retirement Income Security Act of 1974 (ERISA), as amended; and (c) shall be qualified under Sections 401(a) and 401(k) of the Internal Revenue Code of 1986, as amended from time to time, and comply with requirements of the Tax Reform Act of 1986, the Omnibus Budget Reconciliation Act of 1986, the Revenue Act of 1987, the Technical and Miscellaneous Revenue Act of 1988, the Omnibus Budget Reconciliation Act of 1990 and other applicable laws, regulations, and administrative authority.

        1.04     Rights of Previous Employees.    The rights and benefits of a Plan Participant who ceased to be an Employee on or prior to December 31, 1988 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.

ARTICLE II

DEFINITIONS

        Unless otherwise required by the context, the terms used herein shall have the meanings set forth in the remaining paragraphs of this Article II. 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.

        2.01     Accounting Date shall mean the last regular business day of March, June, September and December, and any other date as specified by the Committee as of which the assets of the Trust are valued for determining the value of each Participant's interest in the Plan.

        2.02     Accounts shall mean, with respect to each Participant, his Employee Contribution Account, his Matching Employer Contribution Account, his Rollover Account and his Basic Employer Contribution Account, as described in Section 8.01(a).

        With respect to each Participant who was a participant in the ESOP prior to its merger into the Plan, the term "Account" shall also include such Participant's ESOP Account, as described in Section 8.01(b).

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

        2.04     Anniversary Date shall mean January 1 of each year subsequent to the effective date of the Plan on January 1, 1980 and each other date or dates as may be established by the Committee.

1

        2.05     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 11.03.

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

        2.07     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 and who 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 and who does not complete more than 300 Hours of Service.

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

        2.09     Committee shall mean the Employee Benefit Committee appointed by the Board in accordance with Article XII and shall include, where appropriate, any party to whom responsibility has been properly delegated under Section 12.10.

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

        2.11     Earnings shall mean the compensation reportable for Federal Income Tax purposes (including, for Plan Years beginning after December 31, 1998, any amounts payable to a Participant as general partner income from Newhall General Partnership or as fees for serving as a director of any subsidiary of the Company) that would have been paid to an Employee if such Employee had made no (i) Deferral Election, (ii) election under any plan described in Section 125 of the Code or (iii), for Plan Years beginning after December 31, 1998, deferral of salary or bonus (whether in the form of cash or employer securities) under a non-qualified deferral plan, but excluding (A) 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) or other similar amounts as determined by the Company, (B) deferred compensation at the time of payment if attributable to amounts that were taken into account at the time of deferral; provided, however, that: for Plan Years beginning after 1988 and before 1994, the annual Earnings taken into account for a Plan Year shall not exceed $200,000; (ii) for Plan Years beginning after 1993 and before 2002, the annual Earnings taken into account for a Plan Year shall not exceed $150,000 adjusted for cost-of-living increases as described in Code Section 401(a)(17)(B); and (iii) for Plan Years beginning after 2001, the annual Earnings taken into account for a Plan Year shall not exceed $200,000 adjusted for cost-of-living increases as described in Code Section 401(a)(17)(B).

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

        (a)   any individual who performs services for a Participating Company solely as a Leased Employee, independent contractor, consultant or employee of a third-party employment agency or is classified as such by the Participating Company for whom such services are performed (whether or not such classification is upheld upon governmental or judicial review); and

        (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

2

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 Treas. Reg. 1.410(b)-9(g).

        2.13     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 Affiliated 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.

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

        2.15     ESOP shall mean The Newhall Land and Farming Company Employee Stock Ownership Plan, which was merged into this Plan effective December 1, 1985.

        2.16     ESOP Account shall mean the Account in the Plan into which a Participant's interest in the ESOP was transferred upon the merger of the ESOP into this Plan.

        2.17     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.

        2.18     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).

        2.19     Highly Paid Employee means, effective for Plan Years commencing after January 1, 1996, and in determining whether an Employee is a Highly Compensated Employee for the Plan Year beginning in 1997, an Employee who:

        (a)   was a Five Percent Owner at any time during the year or the preceding year, or

        (b)   for the preceding year received aggregate Remuneration from the Employer in excess of $80,000 (or such greater amount as the Internal Revenue Service may determine pursuant to Section 414(q)(1) of the Code) and was in the group of Employees consisting of the top 20% of Employees when ranked on the basis of Remuneration paid during the preceding year.

For purposes of identifying Highly Paid Employees, the following rules shall apply:

        (I)  For purposes of determining the number of Employees in the top 20% of Employees by Remuneration under subsection (b) above, the Committee shall exclude Employees who: (i) have not completed six (6) months of service; (ii) normally work less than 17¹/2 hours per week; (iii) normally work during not more than six (6) months during any year; (iv) have not attained age 21; (v) are included in a unit of employees covered by a collective bargaining agreement (except to the extent provided in Treasury Regulations); or (vi) rendered no services to any Affiliated Company during such year.

3

        (II)  A former Employee who separates from service (whether actually or constructively) shall continue to be treated as a Highly Paid Employee if such Employee was a Highly Paid Employee (i) at any time during the Plan Year in which his/her Severance Date occurs or (ii) at any time after attainment of age fifty-five(55).

        (III) For purposes of this Paragraph, notwithstanding Section 2.13, the term "Employee" shall exclude any individual who is, at all times during a Plan Year, a nonresident alien and who receives no earned income (within the meaning of Section 911(d)(2) of the Code) from an Affiliated Company which constitutes income from sources within the United States within the meaning of Section 861(a)(3) of the Code.

        (IV) In determining whether an Employee is a Highly Paid Employee for the 1997 Plan Year, the amendments to Section 414(q) of the Code stated above are treated as having been in effect for years beginning in 1996.

        2.20     Highly Paid Participant means, with respect to a particular Plan Year, an individual who is both a Highly Paid Employee and a Participant; provided, however, that for purposes of the foregoing:

        (a)   An Eligible Employee who has otherwise met the eligibility requirements of Article III shall be deemed a Participant notwithstanding a failure to complete a Deferral Election under Section 4.01(a);

        (b)   No individual who is not at any time during the Plan Year eligible to have a Basic Employer Contribution made on his behalf shall be deemed a Participant; and

        (c)   No individual ineligible to receive Matching Employer Contributions because his employment terminates during the Plan Year shall be deemed a Participant for purposes of Section 6.03.

        2.21     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.

        (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.

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        (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 (i) through (iv) 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 information as the Committee may reasonably require to establish that the absence from work is for reasons set forth in paragraphs (1) through (4) above and the total number of days for which there was such an absence.

        2.22     Leased Employee means any person, other than an a common law employee of an Affiliated Company, who pursuant to an agreement between an Affiliated Company and any other person 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, and such services are performed under the primary direction or control of the Affiliated Company.

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

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

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        2.25     Participant shall mean any Employee who becomes a Participant in the Plan in accordance with Article III. Once an Employee becomes a Participant he will remain a Participant until his Separation Date.

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

        2.27     Period of Service shall mean, for any person, the period beginning on the date he first renders an Hour of Service for an Affiliated Company (or the date he returns to service with an Affiliated Company following a Period of Severance) and ending on his Separation Date. A Period of Service shall be determined by taking into account any period for which a person would have been a Leased Employee but for the requirement that the Leased Employee have provided services for an Affiliated Company (or the Affiliated Company and related persons) on a substantially full-time basis for a period of at least one year.

        2.28     Period of Severance shall mean, for any person, that period which commences with his Separation Date and ends with the first date thereafter on which he next performs an Hour of Service for an Affiliated Company.

        2.29     Plan shall mean The Newhall Land and Farming Company Employee Savings Plan, as set forth in this document and as amended from time to time.

        2.30     Plan Administrator shall mean the Managing General Partner.

        2.31     Plan Year shall mean the period from any January 1st to the following December 31st.

        2.32     Regulations shall mean the Federal Income Tax Regulations, as amended.

        2.33     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, (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 5.03, 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).

        2.34     Reserved.

        2.35     Remuneration shall mean a Participant's wages, salaries, and fees for personal services actually rendered in the course of employment with an Affiliated 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 a Participant who has not attained age of 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 Participant), and (vi) amounts included in gross income by reason of elections made under Section 83(b) of the Code. Remuneration does not, however, include

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        (a)   Basic Employer and Matching Employer Contributions to this Plan and employer contributions to any other plan of deferred compensation, to the extent deductible by, or not includable in taxable income of, the Participant for the taxable year of contribution (including employer contributions to a simplified employee pension plan), and distributions from any funded plan not qualified under Section 401 of the Code;

        (b)   Amounts realized from the exercise of an employee option to purchase securities of the employer or a Related Company or the disposition of securities acquired upon exercise of such an option;

        (c)   Amounts realized upon the vesting of restricted property; and

        (d)   All other amounts which receive special tax benefits under the Code.

Notwithstanding the foregoing, for purposes of Paragraphs 2.11(b)(ii) (applicable for Plan Years prior to 1997), 2.19, 5.03 (applicable for Plan Years after 1997), 15.01(b), and Article VI:

        (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(e)(3); 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); and, effective January 1, 2001, elective salary reductions not includible in gross income as a qualified transportation fringe under Code Section 132(f)(4).

        (II)  An Employee's Remuneration shall not exceed the limitation amount contained in Section 2.11(a).

        2.36     Retirement Plan shall mean The Newhall Land and Farming Company Retirement Plan.

        2.37     Seasonal Agricultural Employee shall mean any 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.

        2.38     Seniority Service shall mean, for any person, the aggregate of all Periods of Service.

        2.39     Separation Date shall mean:

        (a)   In general: (i) the date an Employee quits, retires, dies, is discharged; or (ii) the first anniversary of the first date of a period in which an Employee remains absent from service (with or without pay) for any reason other than those specified in clause (i), including but not limited to vacation, holiday, sickness, disability, leave of absence, or layoff.

        (b)   Notwithstanding subsection (a):

        (1)  If an Employee quits, retires, or is discharged and then returns to employment of an Affiliated Company prior to the first anniversary of the date of such quit, retirement, or discharge, he shall not be deemed to have a Separation Date by reason of such quit, retirement, or discharge.

        (2)  With respect to an Employee absent from service for any reason other than quit, discharge or retirement, if during such absence such Employee quits, retires, or is discharged, he shall not have a Separation Date if he returns to service on or before the first anniversary of his initial absence from service.

        2.40     Suspended Participant shall mean:

        (a)   A Participant who has ceased to be an Eligible Employee but remains an Employee; or

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        (b)   A Participant whose status is determined pursuant to Sections 9.01 or 9.04.

        2.41     Totally Disabled Participant shall mean a Participant who is permanently disabled as a result of sickness or injury so that he has been incapable of performing any services for the Participating Company which is (or was immediately prior to such sickness or injury) his employer for which he is qualified by education, training, or experience for a period of at least six (6) months and is likely to continue to be so disabled in the future. Medical evidence of disability satisfactory to the Committee shall be required.

        2.42     Trust shall mean the aggregate of all the assets of the Plan, including (1) assets held pursuant to a trust agreement entered into between the Company and the Trustee, pursuant to Section 7.08, and (2) assets held pursuant to a contract with an Insurance Company, pursuant to Section 7.10.

        2.43     Trustee shall mean any trustee appointed by the Committee.

        2.44     Vested Value shall mean the sum of: (i) a Participant's Employee Contribution Account; (ii) his Basic Employer Contribution Account; (iii) his ESOP Account; and (iv) the vested portion (determined in accordance with Article X) of his Matching Employer Contribution Account on the Accounting Date immediately preceding or coincident with the date as of which such value is to be determined, adjusted by the Committee, pursuant to its discretionary authority to administer and interpret the Plan and to determine eligibility for benefits under the Plan. Adjustments will include increases due to contributions to the Accounts since the relevant Accounting Date; decreases due to Plan expenses, distributions, loans, or withdrawals paid from the Accounts since the relevant Accounting Date; and adjustments for income or loss.

        2.45     Vested Service shall mean, for any person, the aggregate of all Periods of Service.

        2.46     Voluntary Employee Contributions shall mean those after-tax contributions made to the Plan by Participants prior to January 1, 1987, pursuant to the provisions of the Plan then in effect.

        2.47     Year of Service shall mean, with respect to any Employee, a consecutive twelve-month period during which he completes at least 1,000 Hours of Service (or, if he is at any time during such period a Seasonal Agricultural Employee, at least 300 Hours of Service) and which is: (i) the period beginning on the date he renders his first Hour of Service with any Affiliated Company; or (ii) any Plan Year beginning after such date. In the case of an Employee who has incurred a Break in Service, the preceding sentence shall be applied as if the date of his return to service with any Affiliated Company were the date he rendered his first Hour of Service with any Affiliated Company. Years of Service shall include any period for which the Employee would have been a Leased Employee but for the requirement that the Leased Employee have provided services for an Affiliated Company (or the Affiliated Company and related persons) on a substantially full-time basis for a period of at least one year.

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        2.48     Other Definitions.    The following terms have the meaning described in the sections listed:

Term	Section
Actual Deferral Percentage	6.01(b)
Annual Addition	5.03(a)
Basic Employer Contributions	5.01
Basic Employer Contribution Account	8.01
Contribution Percentage	6.03(b)
Deferral Election	4.01
Direct Rollover	14.06
Distributee	14.06
Dollar Limitation	4.02(a)
Elective Deferrals	4.02(a)
Eligible Retirement Plan	14.06
Eligible Rollover Distribution	14.06
Employee Contribution Account	8.01
Excess Deferrals	4.02(a)
Insurance Company	7.10
Investment Manager	7.09
Matching Employer Contribution	5.02
Matching Employer Contribution Account	8.01

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ARTICLE III

PARTICIPATION

        3.01     Eligibility.

        (a)   Every Eligible Employee who was a Participant on December 31, 1988 shall continue to be a Participant.

        (b)   Each other Eligible Employee shall be eligible to become a Participant on the first day of the first pay period coinciding with or next following the date on which he has attained age 19 and completed one Year of Service.

        (c)   An Employee who is not an Eligible Employee on the date he would otherwise be eligible to become a Participant under subsection (b) shall be eligible to become a Participant on the first day of the payroll period coincident with or next following the date on which he thereafter becomes an Eligible Employee.

        3.02     Application to Participate.    Each Eligible Employee meeting the requirements of Section 3.01 may become a Participant by completing an enrollment form, as provided by the Committee, indicating the amount of his Basic Employer Contribution as specified in Section 4.01 and his authorization to his employer to withhold such amounts from his Earnings and pay the same into the Trust as soon as practicable following the end of the pay period in which they are withheld. Such Eligible Employee may also make an investment designation at the same time, in accordance with Section 7.03.

        3.03     Participation after Reemployment or Break in Service.

        When a Participant or any other Eligible Employee who has met the requirements of Section 3.01 and would become a Participant upon complying with Section 3.02 terminates employment and is subsequently reemployed by a Participating Company, he shall be eligible to become a Participant by complying with Section 3.02 on the first day of the first pay period next beginning after the later of: (i) his date of rehire; or (ii) the date he becomes an Eligible Employee.

        3.04     Transition Rule.    For purposes of Section 3.01(c), each Employee shall receive credit for service prior to January 1, 1986 as follows:

        (a)   An Employee credited with one full year of Vesting Service prior to January 1, 1986 shall be deemed thereby to have met the service requirement of Section 3.01(c).

        (b)   An Employee credited with a fraction of a year of Vesting Service shall be entitled to a number of Hours of Service determined by crediting forty-five (45) Hours of Service to each 7/365 of a year of Vesting Service credited to such Employee. Such Hours of Service shall be credited to the Plan Year beginning January 1, 1986.

ARTICLE IV

PARTICIPANT DEFERRALS

        4.01     Deferral Election.

        (a)   Effective January 1, 1987 through December 31, 1993, subject to subsections (c) and (d), each Participant may execute a Deferral Election and thereby elect to have the Participating Company which is his employer reduce the amount of Earnings for each pay period by an amount equal to: (i) a multiple of 1% of such Earnings before reduction, rounded to the next higher whole dollar, but not more than 6% of such unreduced Earnings; plus (ii) if the percentage elected under clause (i) is 6%, an additional specified dollar amount which in the aggregate does not exceed $2,000 annually and contribute an equal amount to the Plan pursuant to Section 5.01 as a Basic Employer Contribution on such Participant's behalf.

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        (b)   Effective January 1, 1994, subject to subsections (c) and (d), each Participant may execute a Deferral Election and thereby elect to have the Participating Company which is his employer reduce the amount of Earnings for each pay period by an amount equal to a multiple of 1% of such Earnings before reduction, rounded to the next higher whole dollar.

        (c)   No Participant may defer for a Plan Year an amount greater than the smallest of:

        (1)  The applicable Dollar Limitation as defined in Section 4.02(a);

        (2)  In the case of a Participant who received a withdrawal under Section 9.02 in the prior year, the reduced dollar limitation described in Section 9.02(b)(5); or

        (3)  In the case of a Highly Paid Participant, such amount as the Committee determines during the course of such Plan Year, on the basis of reasonable estimates as to the Basic Employer Contributions of all Participants, will enable the Plan to comply with Section 6.01.

        Notwithstanding any other provision of the Plan, effective for Plan Years beginning on and after January 1, 2002, the portion of a Qualified Participant's Basic Employer Contributions for a Plan Year that is attributable to the Code Section 414(v) Adjustment, determined on a Plan Year basis, is not taken into account in determining compliance with (i) the percentage limitation on Earnings described in Section 4.01(a), (ii) the Dollar Limit described in Section 4.02(a), (iii) the Annual Additions limitation described in Section 5.03(a), or (iv) the nondiscrimination test applicable to Basic Employer Contributions described in Section 6.01. For purposes of this Section 4.01(c), a "Qualified Participant" refers to an Employee who attains age 50 before the close of the Plan Year to which his or her Basic Employer Contributions relate. The Code Section 414(v) Adjustment refers to the applicable dollar amount described in Code Section 414(v)(2)(B) by which limitations otherwise applicable to a Participant's Deferral Election are increased so that the Plan is not treated as failing to satisfy its provisions implementing Code Section 401(k)(3), 401(k)(11), 401(k)(12), 410(b) or 416, as applicable, solely on account of contributions made consistent with such adjustment. Notwithstanding any other provision of the Plan, no Deferral Election that takes into account the Code Section 414(v) Adjustment will become effective prior to the first payroll period ending in April 2002.

        (d)   The election made by a Participant under this section will be automatically suspended during such time as a Participant is a Suspended Participant. At such time as a Participant ceases to be a Suspended Participant, the Participant may make a new Deferral Election under this Section and a new investment designation under Section 7.01.

        4.02     Dollar Limitation.

        (a)   For purposes of this Section:

        (1)  "Dollar Limitation" means the sum of $7,000, or such greater amount as may be specified by the Internal Revenue Service pursuant to Section 402(g)(5) of the Code.

        (2)  "Elective Deferrals" means such contributions under a qualified cash or deferred arrangement (including Basic Employer Contributions to this Plan), a simplified employee pension plan, or an annuity contract as are described in Section 402(g)(3) of the Code.

        (3)  "Excess Deferrals" means, with respect to a particular calendar year, the amount by which a Participant's Elective Deferrals exceed the applicable Dollar Limitation. Any Basic Employer Contributions for the Plan Year beginning with or within such taxable year previously distributed to the Participant under Section 6.02(a) shall reduce the amount of such Participant's Excess Deferrals.

        (b)   The total amount of Elective Deferrals for a Participant for any Plan Year shall not exceed the Dollar Limitation for such year.

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        (c)   To the extent that a Participant has made Excess Deferrals to this Plan for a calendar year the amount of such Excess Deferrals (together with income thereon) shall be distributed to the Participant no later than the April 15 following the end of the Plan Year during which such Excess Deferral is made.

        (d)   If a Participant notifies the Committee in writing no later than the first March 1 following the close of the Participant's taxable year that such Participant's aggregate Elective Deferrals (to all plans maintained by all employers, whether or not Affiliated Companies) for such taxable year exceeded the Dollar Limitation and specifies the portion of such excess allocated to his Participant's Pre-Tax Account, the portion of the excess so allocated shall be treated as an Excess Deferral and shall be distributed to the Participant (together with income thereon) no later than the April 15 following the end of his taxable year during which such excess elective deferrals were made. The Committee may require satisfactory proof that excess elective deferrals were made before distributing any amount to the Participant under this subparagraph.

        (e)   For purposes of this Section, income on distributed Excess Deferrals shall be determined as follows:

        (1)  Divide: (i) the amount of Excess Deferrals being distributed to the Participant by (ii) the balance of the Participant's Pre-Tax Account as of the end of the Plan Year adjusted to exclude the year's investment experience by reducing such balance by the gain allocable to such amount for the year and increasing such balance by the loss allocable to such amount for the year; then

        (2)  Multiply the result found in (1) by the following percentage:

Date of Distribution	Percentage
Before January 15	100%
January 16 to February 15	110%
February 16 to March 15	120%
March 16 to April 15	130%

        4.03     Employee Election of Contribution Rate.    Subject to Section 4.02, each Participant may elect to change his Basic Employer Contribution rate as of: (i) the first pay period following an Accounting Date; or (ii) such other pay period as the Committee may permit, by giving prior written notice of such change to his employer no later than 10 days prior to the beginning of such pay period.

        4.04     Suspension of Basic Employer Contributions.    A Participant may terminate his Basic Employer Contribution election as of the first pay period in any month by giving written notice to his employer no later than 10 days prior to the beginning of such pay period. Such termination and suspension may last indefinitely or may be revoked at any time. A Participant having so terminated and suspended may make a new Basic Employer Contribution election effective with any pay period by giving written notice to his employer at least 10 days prior to the beginning of such pay period.

ARTICLE V

EMPLOYER CONTRIBUTIONS

        5.01     Basic Employer Contributions.    A Participating Company shall contribute to the Plan on behalf of each Participant who is employed by it at any time during a payroll period an amount equal to the Basic Employer Contribution elected by such Participant with respect to his or her Earnings for such payroll period that are attributable to service for such Participating Company.

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        5.02     Matching Employer Contributions.

        (a)   Subject to subsections (b), (c) and (d), Section 5.03, and Article VI, each Participating Company shall, with respect to each Participant employed by it during a payroll period, contribute to the Trust in cash a Matching Employer Contribution in an amount determined by multiplying (i) the aggregate amount of Basic Employer Contributions (other than any such contributions attributable to the Code Section 414(v) Adjustment) not in excess of 6% of a Participant's Earnings actually allocated to such Participant's Basic Employer Contribution account for such payroll period by reason of employment with such Participating Company by (ii) a percentage determined by reference to such Participant's years of Seniority Service as of the end of such Plan Year as follows:

Seniority Service	Percentage
1-4 years	25%
5-9 years	50%
10 years or more	75%

        (b)   With respect to Participants employed by the Company and its Related Companies, the Board may, at its option, suspend the Matching Employer Contributions if it determines that good business reasons for such suspension exist. With respect to any Participating Company not subject to the preceding sentence, the board of directors or managing general partner of such Participating Company may, in its discretion, suspend Matching Employer Contributions if it determines that good business reasons for such suspension exist.

        (c)   Notwithstanding subsection (a), in the event that Basic Employer Contributions initially allocated to a Participant's Basic Employer Contribution Account are distributed pursuant to Section 4.02 or 6.02 prior to any allocation of Matching Employer Contributions with respect thereto, then no Matching Employer Contributions shall be contributed with respect to such Basic Employer Contributions. Any Matching Employer Contributions paid to the Trustee with respect to such Basic Employer Contributions shall be returned to the contributing Employer.

        5.03     Limitation on Annual Additions.

        (a)   For purposes of this Section 5.03, the term "Annual Addition" shall mean for any Plan Year: (i) the aggregate amount credited to the Participant's Matching Employer Contribution and Basic Employer Contribution Accounts under this Plan (and the Participant's accounts under any other defined contribution plan of the Participating Company employing such Participant or any Related Company) by reason of employer contributions (including any Special Contribution described in Section 6.08) and forfeitures; (ii) the Participant's voluntary contributions to any other defined contribution plan of the Participating Company or any of its Related Companies; (iii) contributions to an individual medical account (as defined in Section 415(l) of the Code) for a Participant as part of a defined benefit plan; and (iv) for purposes of the application of the dollar limit of clause (i) of subsection (b) to a Participant who is a Key Employee, as defined in Section 416(i) of the Code, 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. No amounts contributed by reason of rollover from another qualified plan shall be included in the Annual Addition.

Notwithstanding the preceding sentence:

        (I)  In determining the Annual Addition for any Plan Year prior to 1987 for purposes of Section 5.03(a), a Participant's own after-tax contributions shall be taken into account only to the extent of the lesser of: (i) such contributions in excess of six percent (6%) of such Participant's Remuneration for such Plan Year; or (ii) one-half (¹/2) of such contributions;

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        (II)  Basic Employer Contributions distributed to a Participant pursuant to Section 4.02 or 6.02 shall be disregarded in determining such Participant's Annual Additions; and

        For limitation years beginning on and after January 1, 2002, any amount attributable to a Code Section 414(v) Adjustment described in Section 4.01(c) is not taken into account as an Annual Addition.

        (b)   Effective for Plan Years beginning on and after January 1, 2002, the total Annual Addition to the Accounts of a Participant employed by any Participating Company or any of its Related Companies, under this Plan and any other defined contribution plan of such Participating Company or any of its Related Companies, shall not for any such Plan Year exceed the lesser of forty thousand dollars ($40,000) indexed as described in Code Section 415(d) or one hundred percent (100%) of a Participant's Remuneration from such Participating Company and Related Companies for such Plan Year. For Plan Years beginning prior to 2002, the total Annual Addition to the Accounts of a Participant employed by any Participating Company or any of its Related Companies, under this Plan and any other defined contribution plan of such Participating Company or any of its Related Companies shall not for any such Plan Year exceed the lesser of (i) or (ii) where (i) is thirty thousand dollars ($30,000) indexed as described in Code Section 415(d) or, for limitation years beginning before 1995, one-fourth (¹/4) of the dollar limitation in effect under Section 415(b)(1)(A) of the Code for such Plan Year, if greater than $30,000, and (ii) is twenty-five percent (25%) of the Participant's total Remuneration from such Participating Company and Related Companies for such Plan Year.

        (c)   For purposes of this Section, an amount shall be credited to a Participant's Account under this Plan and to a Participant's accounts under any other defined contribution plan of an Affiliated Company for a Plan Year if, with respect to employer contributions (including salary deferral contributions), such contributions are made during the Plan Year or no later than 30 days following the end of the taxable year (including extensions) with or within which the Plan Year ends.

        (d)   For purposes of this Section, an amount shall be credited to a Participant's Account under this Plan and to a Participant's accounts under any other defined contribution plan of an Affiliated Company for a Plan Year if, with respect to the Participant's own contributions, such contributions are made during the Plan Year or no later than 30 days following the end of such Plan Year.

        5.04     Compliance with the Limitation.    In the event that the Annual Addition to the Accounts of a Participant would for any Plan Year exceed the limitations of Section 5.03(b), the actions specified below shall be taken in the order listed and only to the extent necessary to satisfy the applicable limitations of Sections 5.03(b):

        (a)   First, the Participant's accrued benefits under the Retirement Plan attributable to service with the Participating Company employing him or any of its Related Companies, or under any other defined benefit plan of such Participating Company or any of its Related Companies, to the extent not already distributed therefrom in the form of an annuity contract or otherwise, shall be limited or reduced.

        (b)   Then, if any Special Contribution made pursuant to Section 6.08 has been allocated to the Basic Employer Contribution Account of the Participant, such Special Contribution shall be allocated pro rata to the Basic Employer Contribution Accounts of other Participants receiving such Special Contributions;

        (c)   Then, the Participant's Basic Employer Contributions for the Plan Year shall be limited, or to the extent already made, distributed to the Participant with gains or earnings thereon as a current cash payment.

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        (d)   Then, if the Participating Company employing such Participant or any Related Company has not made its Matching Employer Contribution to the Plan prior to the time a distribution of the Participant's share of the Basic Employer Contribution is effected (under subsection (c) above), the Matching Employer Contribution of such entity for the Plan Year shall be reduced to take into account such distribution, and no reallocation of the Matching Employer Contribution of such entity shall be required.

        (e)   Then, to the extent that a Matching Employer Contribution was made to such Participant's Matching Employer Account by the Participating Company employing him or any Related Company based on the amount of any Basic Employer Contribution distributed in accordance with subsection (c), such contribution shall be used to reduce the Matching Employer Contributions for other Participants employed by such entity for the Plan Year to the extent possible. Any excess Matching Employer Contributions shall be held unallocated in a suspense account and used to reduce the Matching Employer Contributions of such entity for the next Plan Year (and succeeding Plan Years as necessary). No profits or losses attributable to the assets of the Trust shall be allocated to such a suspense account, nor shall any Employer Contributions be made, while a balance remains in a suspense account, by the entity to which such balance pertains or any of its Related Companies. If the Plan terminates, any unallocable balance remaining in a suspense account shall revert to the Company.

        (f)     Finally, the Annual Addition to the Participant's accounts under any other qualified defined contribution plan maintained by the Participating Company employing him or any Related Company shall be reduced in accordance with the applicable provisions of such plan.

        5.05     Return of Contributions.    Assets held in the Trust Fund shall be held for the exclusive benefit of Participants and their Beneficiaries, and such assets may never revert to or inure to the benefit of any Participating Company except under the following conditions:

        (a)   If the Internal Revenue Service shall deny a deduction for any part of a Basic Employer Contribution or Matching Contribution made by any Participating Company, the amount of the contribution for which no deduction is allowed shall be returned to such Participating Company within one (1) year of such disallowance, whether by agreement with the Internal Revenue Service or by final decision of a court of competent jurisdiction. Earnings of the Plan attributable to such a contribution may not be returned to the Participating Company, but any losses attributable to such a contribution shall reduce the amount returned;

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

        (c)   Any balance remaining in the suspense account described in Section 5.03(e) upon the termination of the Plan shall with respect to the Participating Company contributing such balance and all Related Companies be returned by the Trustee to such Participating Company; and

        (d)   If Basic Employer Contributions are refunded to a Participating Company in accordance with subsections (a) or (b), such contributions, together with the refunded earnings thereon (if any), shall be paid by such Participating Company to the affected Participants on whose behalf they were made, subject to satisfaction of all applicable federal and state withholding requirements.

        5.06     Rollover Contributions.

        (a)   Subject to the nondiscrimination provisions of Sections 401(a)(4) and 401(a)(26) of the Code, the Committee may authorize the Trustee to accept a Rollover Contribution. A Rollover Contribution must be made in cash and must be attributable to a distribution from a plan qualified

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under Code Section 401(a) or Code Section 403(a), excluding after-tax contributions; an annuity contract described in Code Section 403(b), excluding after-tax contributions; or an eligible plan under Code Section 457(b) that is maintained by a state, political subdivision of a state. Prior to accepting a Rollover Contribution, the Committee may require the Eligible Employee to establish, and to provide, at the Eligible Employee's expense, an opinion of counsel satisfactory to the Company that the proposed Rollover Contribution is attributable to a qualified total distribution.

        (b)   A Rollover Contribution shall be held in the Participant's Rollover Account, shall be accounted for separately, shall be fully vested, and shall be treated for all other Plan purposes except for Section 5.03 of the Plan, as though it were attributable to a Company contribution other than a 401(k) contribution.

        (c)   An Eligible Employee who makes a Rollover Contribution shall become a Participant as of the date of such contribution even if he or she had not previously become a Participant. Such an Eligible Employee shall become a Participant only for the purposes of such Rollover Contribution and shall not be eligible to share in any Company contributions until he or she becomes a Participant in accordance with Section 3.01.

ARTICLE VI

NONDISCRIMINATION REQUIREMENTS FOR BASIC EMPLOYER
CONTRIBUTIONS AND MATCHING EMPLOYER CONTRIBUTIONS

        6.01     Limitation on Basic Employer Contributions.

        (a)   With respect to any Plan Year, the Actual Deferral Percentage (as defined in subsection (b)) of the group consisting of all Highly Paid Participants for such Plan Year shall not exceed the greater of:

        (1)  125 percent of the prior year's Actual Deferral Percentage for the group of all non-Highly Paid Participants for the prior Plan Year.

        (2)  The lesser of: (i) 200 percent of the prior year's Actual Deferral Percentage for the group of all non-Highly Paid Participants for the prior Plan Year; or (ii) the prior year's Actual Deferral Percentage for the group of all non-Highly Paid Participants for the prior Plan Year plus two (2) percentage points.

        Notwithstanding the foregoing, the Employer has the right to elect and amend the Plan to use current year data for determining the deferral percentage for all non-Highly Paid Participants.

        (b)   The "Actual Deferral Percentage" for a specified group of Employees for a Plan Year means the average of the ratios (calculated separately for each Employee in such group) of (1) to (2), where:

        (1)  Is the amount of Basic Employer Contributions actually allocated for the Plan Year to the Basic Employer Contribution Account of each Employee in such group, adjusted as follows:

        (i)    Reduced (in the case of any non-Highly Paid Participant) by the amount of any excess Basic Employer Contribution previously distributed to such Employee as described in Section 4.02;

        (ii)  Increased by any amount designated by the Committee pursuant to subsection (c)(1) which is allocated to such Employee's Basic Employer Contribution Account for such Plan Year;

        (iii)  Increased by any qualified nonelective contributions designated by the Committee under subsection (c)(2) and allocated to such Employee's accounts;

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        (iv)  Reduced by the amount of such Employee's Basic Employer Contributions taken into account in determining Contribution Percentages pursuant to Section 6.03(d); and

        (v)  Reduced by any amount distributed to such Employee as described in Section 6.02(a); and

        (2)  Is the Remuneration of such Employee for the Plan Year, provided, however, that with respect to any Plan Year beginning before January 1, 1990, amounts paid to an Employee on account of any period when he is not eligible to make a Deferral Election shall be excluded.

For purposes of the foregoing:

        (I)  For Plan Years after December 31, 1984 and before January 1, 1987, the Actual Deferral Percentage of Participants who are eligible to participate in another cash or deferred arrangement maintained by any Affiliated Company shall be determined by treating all the cash or deferred arrangements in which he is eligible to participate as one arrangement and if the arrangements have different Plan Years, the arrangements shall be treated as a single arrangement with respect to the Plan Years ending with or within the same calendar year.

        (II)  The Committee shall take other plans of the Affiliated Companies into account to the extent provided in Section 6.06(a).

        (III) Amounts shall be treated as allocated for the Plan Year if: (i) they are actually paid to the Trust no later than the end of the twelve-month period immediately following the Plan Year to which they relate; (ii) the allocation of such amounts to an Employee's account is not contingent upon his participation in the Plan or performance of services on any date after the end of such Plan Year; and (iii) such amounts relate to Earnings that either: (A) would have been received by the Employee but for his Deferral Election; or (B) is attributable to services performed by the Employee in the Plan Year and, but for the Employee's Deferral Election, would have been received by the Employee within two and one-half (2¹/2) months after the close of the Plan Year.

        (IV) For Plan Years beginning after December 31, 1988, percentages shall be calculated to the nearest one-hundredth of one percent.

        For Plan Years beginning after December 31, 2001, any amount attributable to a Code Section 414(v) Adjustment for a Qualified Participant (both as defined in Section 4.01(c)) is not taken into account in the Actual Deferral Percentage of a Qualified Participant.

        (c)   For purposes of computing Actual Deferral Percentages for any Plan Year, the Committee may elect to take into account any or all of the following—

        (1)  Any Special Contribution made under Section 6.08 and designated by the Employer to be so taken into account.

        (2)  Any qualified nonelective contributions described in Section 6.06(b), provided that: (i) the amount of such contributions so taken into account is not taken into account for purposes of Section 6.03(b) and satisfies the requirements of Section 401(a)(4) of the Code; and (ii) the use of such contributions for purposes of this Section 6.01 does not have the effect of increasing the difference between the Actual Deferral Percentage for Highly Paid Participants and the Actual Deferral Percentage for non-Highly Paid Participants.

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        6.02     Remedial Distributions of Basic Employer Contributions.

        (a)   To the extent required for compliance with the condition set forth in Section 6.01(a) for a Plan Year, taking into account, to the extent determined by the Committee, amounts described in Section 6.01(c), the Committee shall direct the Trustee to distribute, in cash, such Basic Employer Contributions as determined under subsection (b). Such distribution shall include income calculated as described in Section 6.06(c).

        (b)   For Plan Years commencing on or after January 1, 1997, excess Basic Employer Contributions are allocated to the Highly Paid Participants with the largest dollar amount of Basic Employer Contributions taken into account in Section 6.01(a) above, for the year in which the excess arose, beginning with the Highly Paid Participant with the largest dollar amount of such Basic Employer Contributions and continuing in descending order until the entire excess amount has been allocated. For purposes of the preceding sentence, the "largest dollar amount" is determined after distribution of any Excess Deferrals as described in Section 4.02. Unmatched Basic Employer Contributions will be distributed before matched Basic Employer Contributions. If matched Basic Employer Contributions also must be distributed, they will be accompanied by a proportionate share of Matching Employer Contributions. Excess Basic Employer Contributions are equal to the excess of (i) over (ii) where (i) is the amount of Basic Employer Contributions made on behalf of Highly Paid Participants for the Plan Year and (ii) is the maximum amount of such contributions that could be made on behalf of Highly Paid Participants for the Plan Year determined by hypothetically reducing each Highly Paid Participant's Basic Employer Contributions to the extent necessary to satisfy the test in Section 6.01(a), starting with the Highly Paid Participant with the highest Deferral Percentage.

        (c)   The distribution described in subsection (a) shall be made during the period beginning with the first day after the close of the Plan Year for which such Basic Employer Contributions were made and ending two and one-half (2¹/2) months following the close of such Plan Year; provided, however, that a failure to make such distribution before the end of such period shall not cause the Plan to be treated as failing to satisfy the requirements of Section 401 of the Code if such distribution is made before the end of the Plan Year following the Plan Year for which such Basic Employer Contributions were made.

        6.03     Limitation on Matching Contributions.

        (a)   With respect to any Plan Year, the Contribution Percentage (as defined in subsection (b)) of the group consisting of all Highly Paid Participants for such Plan Year shall not exceed the greater of:

        (1)  125 percent of the prior year's Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year.

        (2)  The lesser of: (i) 200 percent of the prior year's Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year; or (ii) the prior year's Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year plus two (2) percentage points.

        Notwithstanding the foregoing, the Employer has the right to elect and amend the Plan to use current year data for determining the contribution percentage for all non-Highly Paid Participants.

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        (b)   The "Contribution Percentage" for a specified group of Employees for a Plan Year means the average of the ratios (calculated separately for each Employee in such group) of (1) to (2), where:

        (1)  Is the amount of Matching Employer Contributions and forfeitures allocated to the Participant's Matching Employer Contribution Account for such Plan Year, adjusted as follows:

        (i)    Increased by any amount designated by the Committee pursuant to subsection (c)(1) and allocated to the Basic Employer Contribution Account of such Employee for such Plan Year;

        (ii)  Increased by any qualified nonelective contributions designated by the Committee under subsection (c)(2) and allocated to such Employee's account;

        (iii)  Decreased by any amount distributed to such Employee pursuant to Section 6.04(b);

        (2)  Is the Remuneration of such Employee for the Plan Year, provided, however, that with respect to any Plan Year beginning before January 1, 1990, amounts paid to an Employee on account of any period when he is not eligible to make a Deferral Election shall be excluded.

For purposes of the foregoing:

        (I)  The Committee shall take other plans of the Affiliated Companies into account to the extent provided in Section 6.06(a).

        (II)  A Matching Contribution shall be taken into account for a Plan Year only if: (i) it is allocated to the Participant's Matching Employer Contribution Account as of a date within the Plan Year; (ii) it is actually paid to the Trust no later than the end of the twelve-month period immediately following such Plan Year; and (iii) it is made on behalf of an Employee on account of his Basic Employer Contributions for such Plan Year.

        (III) For Plan Years beginning after December 31, 1988, percentages shall be calculated to the nearest one-hundredth of one percent.

        (c)   For purposes of computing Contribution Percentages for any Plan Year, the Committee may elect to take into account either of the following:

        (1)  Any Special Contribution made under Section 6.08 and designated by the Employer to be so taken into account; or

        (2)  Any qualified nonelective contributions described in Section 6.06(b) provided that (i) the amount of such contributions so taken into account is not taken into account for purposes of Section 6.01(b) and satisfies the requirements of Section 401(a)(4) of the Code, and (ii) the use of such contributions for purposes of this Section 6.03 does not have the effect of increasing the difference between the Contribution Percentage for Highly Paid Participants and the Contribution Percentage for non-Highly Paid Participants.

        (d)   For purposes of computing Contribution Percentages for any Plan Year, the Committee may elect to take into account any Basic Employer Contributions (or any elective deferrals under any other qualified cash or deferred arrangement maintained by any Affiliated Company), provided that—

        (1)  Those Basic Employer Contributions (or elective deferrals under another plan), if any, not so taken into account fulfill the condition of Section 6.01(a) without regard to Section 6.01(c), and

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        (2)  The requirements of Section 6.01(a) (without regard to Section 6.01(c)) are met by such Basic Employer Contributions (or elective deferrals under another plan) separately and are met in the aggregate by all Basic Employer Contributions (or elective deferrals under another plan).

        (3)  For Plan Years beginning after December 31, 1988, the plan year of the plan under which such elective deferrals are made is the same as the Plan Year.

        6.04     Remedial Distributions of Matching Contributions.

        (a)   To the extent required for compliance with the condition set forth in Section 6.03(a) for a Plan Year, taking into account, to the extent determined by the Committee, the amounts described in Section 6.03(c), the Committee shall direct the Trustee to distribute, in cash, such Matching Contributions as are determined under subsection (b). Such distribution shall include income calculated as described in Section 6.06(c).

        (b)   For Plan Years commencing on or after January 1, 1997, excess Matching Contributions are allocated to the Highly Paid Participants with the largest dollar amounts of Matching Contributions taken into account in Section 6.03(a) above, for the year in which the excess contributions arose, starting with the Highly Paid Participant with the largest dollar amount of such Matching Contributions and continuing in descending order until the entire excess amount has been allocated. Excess Matching Contributions are equal to the excess of (i) over (ii) where (i) is the amount of Matching Contributions made on behalf of Highly Paid Participants for the Plan Year and (ii) is the maximum amount of such contributions that could be made on behalf of Highly Paid Participants for the Plan Year determined by hypothetically reducing each Highly Paid Participant's Matching Contributions to the extent necessary to satisfy the test in Section 6.03(a), starting the Highly Paid Participant with the highest Contribution Percentage.

        (c)   The distribution described in subsection (a) shall be made during the period beginning with the first day after the close of the Plan Year for which such Matching Contributions were made and ending two and one-half (2¹/2) months following the close of such Plan Year; provided, however, that a failure to make such distribution before the end of such period shall not cause the Plan to be treated as failing to satisfy the requirements of Section 401 of the Code if such distribution is made before the end of the Plan Year following the Plan Year for which such contributions were made.

        6.05     Reserved.

        6.06     Further Discrimination Test Requirements.    For purposes of this Article:

        (a)   Aggregation of Plans.

        (1)  If the Committee so elects and if this Plan and other plan maintained by any Affiliated Company (the "other plan") are treated as a single plan for purposes of Section 401(a)(4) or 410(b) (other than Section 410(b)(2)(A)(ii) as in effect for plan years beginning after 1988) of the Code, then, except as provided in subsection (a)(2):

        (i)    The cash or deferred arrangements under such plans shall be treated as a single arrangement for purposes of Section 6.01(a) of the Plan and Sections 401(a)(4), 401(k), and 410(b) of the Code, and

        (ii)  All employee contributions and matching contributions are to be treated as made under the same plan for purposes of Section 6.03(a) of the Plan and Sections 401(a)(4), 401(m), and 410(b) of the Code.

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        (2)  Notwithstanding subsection (a)(1), for Plan Years beginning after December 31, 1988:

        (i)    Contributions and allocations under an employee stock ownership plan described in Section 4975(e)(7) of the Code shall not be combined with contributions or allocations under any plan not so described; and

        (ii)  Plans may be aggregated under this subsection only if they have the same plan year.

        (b)   Qualified Nonelective Contributions.    The Committee may elect to take into account nonelective employer contributions under any other plan sponsored by any Affiliated Company if all of the following are satisfied:

        (1)  Such contributions are: (i) fully vested; and (ii) are not distributable earlier than the employee's retirement, death, disability, separation from service, an event described in Section 401(k)(10) of the Code, (in the case of a profit-sharing or stock bonus plan) the employee's attainment of age 59¹/2 or (for Plan Years beginning before January 1, 1989) hardship.

        (2)  Such contributions: (i) satisfy the requirements of Section 401(a)(4) of the Code, both with and without including the amount of such contributions taken into account under this subsection; and (ii) are not taken into account in determining whether any other contributions or benefits satisfy Section 401(a)(4) or 401(k)(3) of the Code.

        (3)  Such contributions: (i) are actually paid to the trust under such plan no later than the end of the twelve-month period immediately following the plan year to which the contribution relates; and (ii) are allocated to the accounts of participating employees under the plan without regard to the employee's participation in the plan or performance of services on any date subsequent to the end of the plan year to which such contribution relates; provided that, for plan years beginning after December 31, 1988, the plan year of the plan under which such contributions are made is the same as the Plan Year.

        (c)   Income on Distributed Amounts.    Income on an amount distributed under this Article VI shall be determined by multiplying such amount by a factor computed as follows:

        (1)  Divide the amount distributed by the balance, as of the end of the Plan Year, of the account under the Plan to which such amount was (or would have been) allocated, adjusted to exclude the year's investment experience by reducing such year-end balance by the total gain allocable thereto for the year and increasing such year-end balance by the loss allocable thereto for the year; then

        (2)  Increase the result found in paragraph (1) by ten percent (10%) for each calendar month beginning with the day after the end of the Plan Year for which such amount was distributed and ending with the date of the distribution; provided, however, that a distribution occurring on or before the fifteenth day of the month will be treated as having been made on the last day of the preceding month, and a distribution occurring after such fifteenth day will be treated as having been made on the first day of the next month.

        6.07     Multiple Use Limitation.    The Provisions describing the Multiple Use Limitation in this Section 6.07 are repealed for Plan Years beginning on and after January 1, 2002.

        (a)   If both the Actual Deferral Percentage and the Contribution Percentage do not satisfy the basic limitations set forth in Sections 6.01(a)(1) and 6.03(a)(1) and one or more Highly Paid Participants are eligible to have Basic Employer Contributions made on their behalf and to have Matching Contributions made on their behalf, then the sum of the Actual Deferral Percentages of

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Highly Paid Participants plus the sum of the Contribution Percentages of Highly Paid Participants shall not exceed the greater of:

        (1)  The sum of: (i) 125 percent of the greater of the prior year's Actual Deferral Percentage or Actual Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year, plus (ii) two percentage points plus the lesser of the prior year's Actual Deferral Percentage or Actual Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year.

        (2)  The sum of: (i) 125 percent of the lesser of the prior year's Actual Deferral Percentage or Actual Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year, plus (ii) two percentage points plus the greater of the prior year's Actual Deferral Percentage or Actual Contribution Percentage for the group of all non-Highly Paid Participants for the prior Plan Year.

        Notwithstanding the foregoing, the Employer has the right to elect and amend the Plan to use current year data for determining the deferral or contribution percentage for all non-Highly Paid Participants.

        6.08     Special Contribution.

        (a)   With respect to any Plan Year, a Participating Company may make a Special Contribution to the Plan, in such an amount and on behalf of such Participants as it may specify, provided that:

        (1)  Such contributions shall be allocated to the Basic Employer Contribution Accounts of specified Participants without regard to such Participants' participation in the Plan or performance of services on any date subsequent to the end of such Plan Year.

        (2)  Such contributions shall satisfy the requirements of Section 401(a)(4) of the Code and, except as provided in Section 6.01(b) and 6.03(b), shall not be taken into account in determining whether any other contributions or benefits satisfy Section 401(a)(4), 401(k)(3), or 401(m) of the Code.

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ARTICLE VII

INVESTMENT FUNDS

        7.01     Investment of Contributions.

        (a)   At the direction of the Committee, the Trustee will establish separate funds to which Participants may direct the investment of their Accounts. Investment in these funds will be subject to such restrictions and administrative procedures as are imposed by the Committee, pursuant to its discretionary authority to administer and interpret the Plan, including, but not limited to, procedures for investment of amounts for which no investment direction is given by a Participant.

        (b)   A Participant may indicate his or her investment designation for future Basic Employer Contributions and Matching Employer Contributions by giving prior written notice to the Committee on a form provided by the Committee.

        (c)   A Participant may change his or her investment designation at any time by written notice to the Committee on a form provided by the Committee, provided, however, that such change shall apply only with respect to the investment of Basic Employer Contributions and Matching Employer Contributions made subsequent to the first pay period beginning after receipt of such notice by the Committee.

        7.02     Newhall Fund.    At the discretion of the Committee, the Plan may acquire and hold qualified employer securities as defined in Section 407 of ERISA ("Depositary Units"). Participants may elect to invest amounts held in their Accounts in shares of a fund consisting of cash and Depositary Units ("Newhall Fund"), consistent with the investment policy implemented by the Committee pursuant to its discretionary authority to administer and interpret the Plan. The Newhall Fund shall be established by the Trustee pursuant to Section 7.01 of the Plan and shall be subject to such restrictions and administrative procedures as are imposed by the Committee, pursuant to its discretionary authority to administer and interpret the Plan.

        7.03     Investment Designation.    Effective July 1, 1994:

        (a)   A Participant may designate up to 100% (in 10% increments) of future Matching Employer Contributions and up to 30% (in increments of 10%) of future Basic Employer Contributions be invested in the Newhall Fund. Such designation shall become effective as soon as practicable following receipt of the Participant's election by the Committee or its delegate.

        (b)   As of each Accounting Date, a Participant may elect to transfer a portion of his or her existing funds into the Newhall Fund consistent with the investment policy and procedures implemented by the Committee, provided the aggregate value of his or her Accounts invested in the Newhall Fund does not exceed 30% of the value of his or her Accounts. A transfer that exceeds the percentage limitation shall be reduced pro rata between the originating investment funds. The election provided for in the preceding sentence shall be effective as soon as practicable following receipt of the Participant's election form by the Committee or its delegate.

        7.04     Transfer of Account Balances Between Funds.    Subject to the limitations in Section 7.03, as of each Accounting Date, a Participant may elect to transfer all or a portion (in such percentages as the Committee shall have authorized pursuant to its discretionary authority to administer and interpret the Plan) of the current value of his or her Accounts among investment funds. The election provided for in the preceding sentence shall be made on a form provided by the Committee which shall be filed by the Participant at least 10 days prior to the effective date of the transfer.

        7.05     Purchase Price.    All acquisitions of Depositary Units by the Newhall Fund will be effected quarterly from either the Company or on the open market at the prevailing market price.

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        7.06     Voting and Tender Offers.

        (a)   A Participant may direct voting of the Depositary Units underlying the Participant's interest in the Newhall Fund. The Trustee will vote such Depositary Units in accordance with the directions of Participants, as communicated in writing to the Trustee.

        (1)  A Participant whose Account is invested in the Newhall Fund will be notified by the Trustee (or by Company, pursuant to its normal communications with limited partners) of each occasion for the exercise of voting rights, within a reasonable time before those voting rights are to be exercised. This notification will include all the information distributed by the Company to limited partners generally, regarding the exercise of voting rights.

        (2)  To the extent that a Participant fails to direct the Trustee, in whole or in part, as to the exercise of voting rights with respect to any Depositary Units underlying the Participant's interest in the Newhall Fund, those Depositary Units will not be voted.

        (b)   Subject to (b)(3) below, if the Trustee receives a tender offer to buy Depositary Units held by the Trustee, a Participant may direct tender of the of Depositary Units underlying the Participant's interest in the Newhall Fund. The Trustee will tender such Depositary Units in accordance with the directions of Participants, as communicated in writing to the Trustee.

        (1)  All Participants entitled to tender Depositary Units held by the Newhall Fund will be so notified by the Trustee (or by the Company) within a reasonable time before the right to tender is to be exercised. This notification will include information received by the Trustee as limited partners, or distributed by the Company to limited partners generally, regarding their right to tender.

        (2)  To the extent that a Participant fails to direct the Trustee, in whole or in part, to tender Depositary Units underlying the Participant's interest in the Newhall Fund, those Depositary Units will not be tendered.

        (3)  The Trustee will not permit Participants to direct the tender of Depositary Units, to the extent that the receipt or holding of the property offered in exchange for the Company Securities would violate any applicable law, including ERISA. The Committee will make investment decisions regarding any non-cash property received by the Newhall Fund as a result of a tender.

        (c)   For purposes of this Article VII, the Beneficiary of a deceased Participant will be treated as though he or she were a Participant.

        7.07     Agreements Relating to Trust.    The assets of the Plan shall be held pursuant to one or more written agreements with: (i) Trustees, as described in Section 7.08; (ii) Insurance Companies, as described in Section 7.10; or (iii) a combination.

        7.08     Establishment of Trust Agreement.    Some or all of the assets of the Plan may be held pursuant to trust agreements with one or more of the 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 Trustees 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. To the extent the provisions of the Plan and the trust agreement are inconsistent or otherwise in conflict with respect to the rights, duties or obligations of the Trustee, the provisions of the trust agreement shall control. The Trustee shall be subject to the direction of any Investment Manager appointed pursuant to Section 7.09 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. Each trust agreement shall authorize

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the Trustee to make deposits in the Trustee's commercial banking department (or in any other bank or similar financial institution) provided such deposits bear a reasonable rate of interest.

        7.09     Appointment of Investment Manager.    The Committee, pursuant to its discretionary authority to administer and interpret the Plan, may appoint one or more Investment Managers within the meaning of Section 3(38) of ERISA, and may authorize such Investment Managers to direct the Trustee with respect to acquisition, retention, or disposition of any specified portion of any investment fund designated by the Committee, up to the whole thereof. Each such Investment Manager must be a person (i) who has the power to manage, acquire or dispose of any assets of the Plan, (ii) who (I) is registered as an investment adviser under the Investment Advisers Act of 1940 or any successor statute ("the Act"), (II) is not registered as an investment adviser under the Act by reason of paragraph (1) of Section 203A(2) of the Act, but is registered as an investment advisor under the laws of the state (referred to in paragraph (1) of Section 203A of the Act) in which it maintains its principal office and place of business, and, at the time the fiduciary last filed the registration form most recently filed by the fiduciary with such state in order to maintain the fiduciary's registration under the laws of such state, also filed a copy of such form with the Secretary of Labor, (III) is a bank as defined in that Act, or (IV) is an insurance company qualified to manage, acquire or dispose of any assets of the Plan under the laws of more than one state, and (iii) has acknowledged in writing that he/she is a fiduciary with respect to the Plan. The Committee shall notify the Trustee in writing of the appointment of such Investment Manager and cause such Investment Manager to acknowledge to the Trustee in writing that such Investment Manager is a fiduciary with respect to the Plan. If the foregoing conditions are met, such Investment Manager shall have the power to manage, acquire or dispose of any Trust assets. No Investment Manager shall issue directions in violation of the Plan or prohibited by the fiduciary responsibility rules of ERISA.

        7.10     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 an insurance company under the laws of more than one state. 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 7.10 may be executed and held either by a Trustee described in Section 7.08 or, if the Committee so elects, by the Committee.

        7.11     Expenses of Trust.    The expenses of the Trust, including those relating to reporting obligations, shall be borne by the Participating Companies. The fees and expenses of the Trustee, the Insurance Company, and the Investment Manager, if any, shall be borne by the Participating Companies. 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 as specified in Section 12.11. Taxes incurred as a result of unrelated business taxable income will be charged to the Newhall Fund.

        7.12     Voting of Securities in Trust.    Subject to Section 7.06, each Trustee and Insurance Company shall have the authority to exercise any voting rights relating to stock and securities held in its respective portion of the Trust, except that an Investment Manager may exercise 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 shall determine.

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ARTICLE VIII

ACCOUNTS AND VALUATION

        8.01     Participant Accounts.

        (a)   The Committee shall establish and maintain for each Participant the following Accounts:

        (1)  Matching Employer Contribution Account—this Account shall be credited with the Participant's share of all Matching Employer Contributions.

        (2)  Basic Employer Contribution Account—this Account shall be credited with the Participant's share of all Basic Employer Contributions and any Special Contribution made pursuant to Section 6.08.

        (3)  Employee Contribution Account—this Account shall be credited with the value of the Participant's Voluntary Employee Contributions under the Plan as in effect prior to January 1, 1987.

        (4)  Rollover Account—this Account shall be credited with the Participant's share of any Rollover Contributions accepted by the Plan.

        (b)   The Committee shall establish and maintain an ESOP Account for each Participant who was a participant in the ESOP.

        (c)   In the event that a Participant for whom one or more Accounts are being maintained pursuant to subsection (a) terminates employment and is subsequently employed by a Participating Company which is not a Related Company with respect to such Participant's former employer, the Committee shall establish and maintain separate accounts for such Participant with respect to his participation in the Plan after his transfer of employment.

        8.02     Crediting of Contributions.    Rollover Contributions and Basic Employer Contributions shall be credited to a Participant's Account for the respective Funds as soon as practicable following their receipt by the Trust.

        8.03     Adjustment of Accounts.    As of each Accounting Date, the Committee shall determine the fair market value of trust assets and shall adjust each Participant's Accounts as follows:

        (a)   First, all Basic Employer Contributions, Rollover Contributions and Matching Employer Contributions allocated since the last preceding Accounting Date and not previously credited to Accounts shall be credited to the proper Accounts.

        (b)   Next, all withdrawals or distributions made since the last preceding Accounting Date that have not been charged previously shall be charged to the proper Accounts.

        (c)   Finally, each Participant's Accounts in each Fund (including the Accounts of any Suspended Participant), as adjusted pursuant to subsections (a) and (b), shall be credited with their pro rata share of any increase (or charged with their pro rata share of any decrease) in the value of that Fund as of that Accounting Date as compared with the immediately preceding Accounting Date.

        8.04     Statements.    As soon as practicable after the last Accounting Date in each Plan Year, the Committee shall furnish each Participant with a statement showing his Account balances in the respective Funds as of such Accounting Date.

        8.05     Value of Accounts.    The value of an Account on any date shall be deemed to be the net credit balance of such Account on the Accounting Date immediately preceding or coincident with the date as of which such value is to be determined, increased by any contributions to, and reduced by any distributions or withdrawals from or forfeitures made with respect to, such Account since such Accounting Date.

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ARTICLE IX

WITHDRAWALS PRIOR TO TERMINATION OF EMPLOYMENT

        9.01     Withdrawals from Employee Contribution Account.

        (a)   A Participant who has, at least 30 days prior to an Accounting Date, given written notice in the manner and upon a form provided by the Committee may withdraw from his Employee Contribution Account an amount not exceeding the value of such Account as of such Accounting Date. The amount so requested shall be paid to such Participant as soon as practicable after such Accounting Date.

        (b)   Any Participant who makes a withdrawal pursuant to this Section 9.01 shall become a Suspended Participant for all purposes under the Plan for a period determined as follows:

        (1)  If such Participant elected to suspend Basic Employer Contributions under Section 4.04 at the time notice was given under subsection (a) of this section, a period of 6 months beginning on the date of such election and notice; or

        (2)  In any other case, a period of 6 months beginning on the date 15 days prior to the Accounting Date specified in subsection (a). Provided, however, that the suspension shall terminate only upon such Participant's written notice to his employer that the 6-month suspension period has elapsed.

        9.02     Withdrawals from Basic Employer Contribution Account.

        (a)   A Participant who satisfies the requirements of subsection (b) may withdraw on a specified date an amount determined in accordance with subsection (c), provided, however, that such Participant shall incur the suspension described in Section 9.04.

        (b)   A Participant shall be eligible for an in-service withdrawal if:

        (1)  He certifies to the Committee that the requested withdrawal is on account of one of the following:

        (i)    Medical expenses (described in Section 213(d) of the Code) incurred by such Participant, his spouse, or any of his dependents (as defined in Section 152 of the Code) or necessary for these persons to obtain such medical care;

        (ii)  Purchase (excluding mortgage payments) of a principal residence for the Participant;

        (iii)  Payment of tuition, related educational fees, and room and board expenses, for the next 12 months of post-secondary education for the Participant, or the Participant's spouse, children, or dependents; or

        (iv)  The need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the employee's principal residence.

        (2)  He has not received a withdrawal at any time during the preceding twelve months (or, in the case of a withdrawal for payment of tuition described in item (3) of subsection (a), he has not received more than two withdrawals in the preceding twelve months).

        (3)  He has obtained all other distributions and nontaxable (at the time of the loan) loans available to him under the Plan and any other plan maintained by any Affiliated Company.

        (4)  His participation in this Plan is suspended pursuant to Section 9.04, and his participation in each other plan of deferred compensation maintained by any Affiliated Company is suspended for a 12-month period beginning on the date of the withdrawal.

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        (5)  The dollar amount of his Basic Employer Contributions (and deferrals under any other cash or deferred arrangement maintained by any Affiliated Company) for the Plan Year following the Plan Year in which the withdrawal occurs shall not exceed the Dollar Amount (as defined in Section 4.02(a)(1) for such Plan Year decreased by the amount of his Basic Employer Contributions for the Plan Year in which the withdrawal occurs.

        (c)   The amount withdrawn by a Participant under this Section 9.02 shall not exceed the amount reasonably required for satisfaction of the need specified in subsection (b)(1), and further, shall not exceed his Basic Employer Contribution Account balance as of December 31, 1988, plus the lesser of: (i) the Participant's Basic Employer Contributions made after December 31, 1988, without added earnings; or (ii) the current value of those Basic Employer Contributions made after December 31, 1988 (but not more than the amount of his Basic Employer Contributions not previously withdrawn).

        (d)   All withdrawals from the Plan will be made in a single sum cash payment.

        9.03     Withdrawals by Certain Participants.

        (a)   Totally Disabled Participant.    Notwithstanding Section 9.02, no more than once during a Plan Year, a Totally Disabled Participant who has filed a written request with the Committee at least 30 days prior to an Accounting Date may withdraw: (i) up to one hundred percent (100%) of his Basic Employer Contribution Account; and (ii) provided he has withdrawn or concurrently withdraws the maximum permissible amount from his Employee Contribution Account and his Basic Employer Contribution Account, all or such portion as he shall specify of the Vested Value of his Matching Employer Contribution Account.

        (b)   Participant Over Age 59¹/2.    Notwithstanding Section 9.02, no more than once during a Plan Year, a Participant who has attained age 59¹/2and who has filed a written request with the Committee at least 30 days prior to an Accounting Date may withdraw up to one hundred percent (100%) of his Basic Employer Contribution Account.

        (c)   All withdrawals from the Plan will be made in a single sum cash payment.

        9.04     Loans to Participants.    Upon approval of his or her application by the Committee (in accordance with the procedure and criteria set forth in subsection (a)), a Participant may borrow from the Trust an amount as specified in subsection (b), upon the terms and conditions set forth in subsection (d).

        (a)   Procedure and Criteria for Approving Loans.

        (1)  Loans shall be available pursuant to the procedures of this Section to all Participants who are currently Employees and, to the extent required under ERISA or the Code (but only to such extent), to other Participants and to Beneficiaries of deceased Participants (collectively referred to as "Borrowers").

        (2)  A Borrower requesting a loan shall submit to the Committee a completed form of application supplied by the Committee, containing the following information:

        (i)    The dollar amount of the loan requested;

        (ii)  The term of the loan requested, which shall not exceed 5 years;

        (iii)  In the case of a Borrower who is not then an Employee, such information and/or representations as to the source(s) of funds for repayment of the loan as the Committee may deem appropriate;

        (iv)  In the case of a Borrower whose Basic Employer Contribution Account is invested in more than one investment fund or vehicle, the fund or vehicle from which

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assets are withdrawn to fund such loan, or, if amounts are to be withdrawn from more than one fund or vehicle, allocation of loan amounts between such funds or vehicles; and

        (v)  Such other information as the Committee may specify.

        (b)   Amount of Loan.

        (1)  No loan shall be made for an amount less than $500.

        (2)  No loan shall be made for an amount greater than the smallest of (i), (ii), or (iii) below.

        (i)    50% of the combined balance of the Borrower's Basic Employer Contribution Account and Matching Employer Contribution Account (excluding any unvested portion thereof) as of the preceding Accounting Date, determined after such balance is reduced by: (I) the amount of any subsequent in-service withdrawal under Article IX; and (II) the outstanding balance of any prior loan(s) on the Accounting Date prior to the Funding Date;

        (ii)  The balance of the Borrower's Basic Employer Contributions Account on the most recent Accounting Date, reduced by: (I) any amount withdrawn from such Account pursuant to Article IX following such Accounting Date; and (II) the outstanding balance of any prior loan(s) on such Accounting Date;

        (iii)  $50,000, reduced by the excess, if any, of (I) the Borrower's highest outstanding loan balance under this Plan and the plans of Affiliated Companies during the 12 month period ending on the day before the loan is made, over (II) the Borrower's outstanding loan balance under this Plan and the plans of Affiliated Companies on the date the loan is made.

        In determining the limitations set forth in clauses (i) and (ii) above, the Committee may, in its discretion, substitute a more recent date for the most recent Accounting Date, provided that such substitution shall apply to all loans made from the date of such Committee action to the next Accounting Date.

        (c)   Funding Loans; Accounting for Loans.

        (1)  Within a reasonable time after receipt of a loan application, the Committee or its delegate shall approve or disapprove such application. The Committee shall notify the Borrower of its decision and, if the application is approved, shall instruct the Trustee to make the loan as soon as administrative feasible.

        (2)  Upon receipt of instructions as to a Borrower's loan, the Trustee shall create a Loan Account for such Participant and fund such Loan Account by transferring assets to it from the Participant's Basic Employer Contribution Account, commencing with amounts invested in the fund or vehicle as specified by the Participant.

        (3)  Within a reasonable time after approval of the Participant's loan application, the Trustee shall disburse the cash balance of the Loan Account to the Participant upon receipt of his duly executed promissory note (in the form approved by the Committee). In the case of a Participant with a prior loan outstanding, the proceeds of the new loan shall first be applied to discharge the prior loan in full, including principal and accrued interest, and the balance of the proceeds of the new loan shall then be disbursed to the Participant.

        (4)  Loan payments when received by the Trust shall be credited to the Participant's Loan Account and appropriately allocated to principal and interest and shall be invested in such fund or vehicle as may be designated for all loans by the Committee, unless otherwise

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designated by the Participant. As of each pay period, principal from the Participant's Loan Account, along with interest allocable to such principal, shall be reallocated to his Basic Employer Contribution Account.

        (d)   Terms and Conditions of Loan.

        (1)  Each loan shall bear interest at a reasonable rate determined from time to time by the Committee pursuant to written procedures.

        (2)  No loan shall be made for a term in excess of five (5) years.

        (3)  Each loan shall be repaid by periodic payments representing substantially level amortization of such loan over its term. During any period in which the Participant is an Employee, the loan shall be repaid by level payroll deductions. During any period in which the Participant is not an Employee, the loan shall be repaid by check, with level payments due at the end of each calendar month. Payment amounts shall be determined by the Committee at the time of the loan and at any subsequent time when a change in such amounts is required. Any loan balance may be prepaid without penalty.

        (4)  A Participant's loan shall be secured by his Accounts under the Plan to the extent of fifty percent (50%) of the aggregate dollar amount thereof, determined immediately after the loan is made; the remaining balance of his Accounts shall be unencumbered. In the event of any failure of the Participant to make a payment within 30 days of the date due, the Trustee shall enforce such security interest at the earliest time at which the Participant is entitled to receive a distribution under Section 9.03 or Article XI of the Plan. In addition, in the event of such a failure to repay, the Committee may direct a Trustee to exercise every creditor's right at law or equity available to the Trustee. In the event a Participant whose loan is in default requests a distribution (including a hardship withdrawal under Section 8.02) from the Plan, the otherwise distributable amount shall first be applied (but only to the extent of the security interest described in the first sentence of this paragraph (4)) to offset the remaining balance of principal and accrued but unpaid interest under the loan, and only the remaining distributable amount shall be paid over to the Participant.

        9.05     Suspension.    Any Participant who makes a withdrawal pursuant to Section 9.02 or 9.03 shall become a Suspended Participant for all purposes under the Plan for a period of 12 months beginning on the date of receipt of the withdrawal. Provided, however, that the suspension shall terminate only upon such Participant's written notice to his employer that the 12-month suspension period has elapsed.

ARTICLE X

VESTING

        10.01      Vesting.

        (a)   A Participant shall at all times be fully vested in his Employee Contribution Account, his Rollover Account, his Basic Employer Contribution Account and his ESOP Account, if any.

        (b)   Each Participant with an Hour of Service on or after January 1, 1989 shall be fully vested in his Matching Employer Contribution Account.

        (c)   The vesting in the Matching Employer Contribution Account of any Participant with no Hour of Service after December 31, 1988 shall be determined in accordance with the Plan as in effect when he had his last Hour of Service.

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ARTICLE XI

DISTRIBUTIONS

        11.01      General.    Upon the termination of employment of a Participant (severance from employment with respect to distributions on and after January 1, 2002), except by death:

        (a)   If the Participant's Vested Value does not exceed $3,500 ($5,000 on and after July 15, 1998), such Vested Value shall be distributed to such Participant in a lump sum within 60 days following the Accounting Date which coincides with or next follows his termination of employment.

        (b)   If such Participant's Vested Value exceeds $3,500 ($5,000 on and after July 15, 1998), the Committee shall distribute such Vested Value in a lump sum upon such Participant's attainment of age 65 or, if later, within 60 days following the Accounting Date which coincides with or next follows his termination of employment.

        (c)   Notwithstanding subsection (b), a Participant may elect in writing at any time following his or her termination of employment to receive a distribution of his or her entire Vested Value in a lump sum provided that such distribution occurs not more than 90 days following such Participant's election. A Participant shall be required to reconfirm his or her initial election to assure that the commencement of such distribution occurs within 90 days of an election. The Committee shall notify the Participant of the right to defer any distribution until the Participant attains age 65. Such notification shall be provided no less than 30 days and no more than 90 days prior to the commencement of benefits.

        (d)   Distribution may commence less than 30 days after the notice required under Section 1.411(a)-11(c) of the Regulations is given, provided that: (i) the Plan Administrator clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution.

        11.02      Form of Distribution.

        (a)   Amounts held in a Participant's Account will be paid in cash as a total distribution, unless the Participant (or Beneficiary) elects otherwise pursuant to subsection (b).

        (b)   When requesting a distribution under this Article XI, a Participant (or Beneficiary) may elect to receive the portion of his or her Account that is invested in the Newhall Fund in whole Depositary Units as determined on the preceding Accounting Date. The Plan shall not make distributions of less than 100 Depositary Units. Any balance representing fractional shares will be distributed in cash.

        11.03      Death of Participant.

        (a)   Upon the death of a Participant, the Participant's Vested Value shall be distributed to his Beneficiary (determined as specified in subsections (b) and (c) in a lump sum within 60 days following the end of the calendar quarter in which the death occurred.

        (b)   If a Participant dies after having submitted to the Committee on a form supplied by the Committee a written designation of a beneficiary which (unless such Participant is unmarried at death or unless such Beneficiary is, at the time of death, the spouse of such Participant) is consented to by such Participant's spouse in a writing which (i) acknowledges the effect of such consent, (ii) acknowledges the specific non-spouse beneficiary, and (iii) is witnessed by a notary public, the beneficiary so designated shall be the Beneficiary, entitled to the Participant's Vested Value as set forth in subsection (a).

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        (c)   If a Participant dies without having complied with subsection (b), then for purposes of subsection (a) the Beneficiary shall be the Participant's surviving spouse. If such Participant is not survived by a spouse, then the Participant's children then living shall be equal Beneficiaries. If there are no such living children, then the Beneficiary shall be the estate of the Participant.

        11.04      Required Distributions to Certain Participants.

        (a)   Effective January 1, 1985, distributions will be made in accordance with the Regulations under Section 401(a)(9), including the minimum distribution incidental benefit requirement of Section 401(a)(9)(G) of the Code.

        (b)   Notwithstanding Section 11.01 or any Participant's consent, distribution shall occur 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; provided, however, that:

        (1)  Any Participant who has not at any time been a Five Percent Owner and who has attained age 70¹/2 before January 1, 1988 may elect to defer distribution of his benefits until his actual retirement, and

        (2)  Any Participant who attains age 70¹/2 during 1988 shall be treated for purposes of this Section as having attained age 70¹/2 in 1989.

        11.05      Proof of Death and Right of Beneficiary.    The Committee may require and rely upon such proof of death and such evidence of the right of any Beneficiary to receive the Vested Value of the Accounts of a deceased Participant as the Committee may deem proper, and its determination of death and of the right of such Beneficiary to receive payment shall be conclusive.

ARTICLE XII

ADMINISTRATION OF THE PLAN

        12.01      The Board and the Committee.

        (a)   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 of the managing general partner) which shall be responsible for the administration of the Plan. Such members shall serve at the pleasure of the Company. 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.

        (b)   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.

        12.02      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.

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        (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.

        12.03      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;

        (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.

        12.04      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.

        12.05      Benefit Claims Procedures.

        (a)   All applications for benefits under the Plan (including applications for in-service withdrawals under Article IX) 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

33

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 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.

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

        12.07      Indemnity.    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.

        12.08      Reliance on Reports and Certificates.    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.

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        12.09    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.

        12.10    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 7.09; 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.

        12.11    Expenses.    Any brokerage commissions, transfer taxes and other charges and expenses in connection with the purchase and sale of securities or other property for a Fund shall be charged to that Fund. Any taxes payable with respect to a Fund shall likewise be charged to that Fund. Any other investment management or trustee expenses associated with the administration of the Plan other than those stated above shall be charged ratably to each Participating Company and shall not be charged to the Trust.

ARTICLE XIII

AMENDMENT AND TERMINATION

        13.01    Amendment.    The Plan, any Trust Agreement, and any contract described in Section 7.10 may be amended at any time and from time to time by an instrument in writing executed pursuant to authority granted by the Board. Any such amendment shall be effective on the date specified therein without notice to Participants and beneficiaries. 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 reverting 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 5.04) 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;

        13.02    Termination.    The Plan and Trust hereunder is purely voluntary on the part of the Company and each Participating Company, and the Company and each Participating Company hereby reserves the right in its sole discretion (subject to the consent of the Board) to discontinue its contributions to the Plan or to terminate the Plan, the Trust Agreement, each contract described in Section 7.10, and the Trust hereunder with respect to its Employees. For the purposes of this Section, a partial termination shall be deemed to occur only if an event is determined to be a partial termination within the meaning of Section 411(d)(3)(A) of the Code, where such determination is either (i) made or agreed to by the Committee, or (ii) made by the Internal Revenue Service and approved by a final decision of a court of competent jurisdiction. Upon complete termination or partial termination of the Plan, benefits shall be distributed to such Participants as may be affected, as soon as practicable; provided, however, that no amount in an ESOP Account representing the proceeds of sale of stock of The Newhall Land and Farming Company, a corporation (or of depositary receipts received in exchange for such stock) shall be distributed until permitted under Section 409(d) of the Code.

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        13.03    Successors.    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, each Trust Agreement and each contract described in Section 7.10 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 and the Trust Agreement. The substitution of a successor for a Participating Company shall not constitute a termination of the Plan for any purpose.

        13.04    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.

        13.05    Effect of Amendments by Participating Companies.    Except for technical amendments, an amendment to the Plan shall be binding upon a Participating Company and its employees when approved in writing by the Participating Company.

ARTICLE XIV

MISCELLANEOUS

        14.01    Source of Payment.    Benefits under the Plan shall be payable only out of the Trust, and no Participating Company shall have any legal obligation, responsibility or liability to make any direct payment of benefits under the Plan. Neither the Participating Companies, the Trustee nor the Insurance Company guarantees the Trust against any loss or depreciation or guarantees the payment of any benefits hereunder. No persons shall have any rights under the Plan with respect to the Trust, or against the Trustee, Insurance Company, Company or any Participating Company, except as specifically provided for herein.

        14.02    Inalienability of Benefits.

        (a)   Subject to subsection (b), benefits under the Plan or from the Trust 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)   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 (c)) unless the order is determined to be a Qualified Domestic Relations Order (as defined in subsection (d)). Benefits shall be paid in accordance with the applicable requirements of any Qualified Domestic Relations Order.

        (c)   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).

        (d)   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:

36

(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.

        (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.

        (f)     The Committee shall establish reasonable procedures to determine the qualified status of Domestic Relations Orders, to account separately for amounts during such determination, and to administer distributions under such orders.

        (g)   The prohibition set forth in subsection (a) shall not apply to an offset to a Participant's Account against an amount that the Participant is ordered or required to pay the Plan with respect to a judgment, order or decree issued, or a settlement entered into, on or after August 5, 1997 in accordance with Sections 401(a)(13)(C) and (D) of the Code.

        14.03    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 his employer.

        14.04    Payments to Minors or Incompetents.    If a Participant or Beneficiary entitled to receive payments hereunder is a minor or is deemed by the Committee or is adjudged to be legally incapable of giving valid receipt and discharge for such payments, they will be paid to such persons as the Committee might designate or to the duly appointed guardian or conservator. Any such payment shall be made for the account of such person and shall discharge the Plan of any liability therefor.

        14.05    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 by the Trustee 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 conditions set forth in Section 5.04.

        14.06    Eligible Rollover Distribution.

        (a)   This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a Distributee's election under this Section, a Distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the Distributee in a Direct Rollover.

        (b)   For purposes of this Section:

        (1)  "Eligible Rollover Distribution" means 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 ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net

37

unrealized appreciation with respect to employer securities); and any hardship withdrawal pursuant to Section 9.02.

        (2)  Eligible Retirement Plan means an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the Distributee's Eligible Rollover Distribution. However, 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, provided, however, that this restriction does not apply to Eligible Rollover Distributions effective January 1, 2002. 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 or political subdivision of a state, provided the plan agrees to separately account for amounts transferred into such plan from the Plan.

        (3)  Distributee means 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 Section 414(p) of the Code, are Distributees with regard to the interest of the spouse or former spouse.

        (4)  Direct Rollover means a payment by the Plan to the Eligible Retirement Plan specified by the Distributee.

        14.07    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 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.

        14.08    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 Section 414(u) of the Code.

        14.09    Lost Participants.    Notwithstanding Section 5.05, if a Plan benefit remains unpaid for five years from the date it becomes payable because the Committee, exercising due diligence, cannot locate the recipient, the benefit will be forfeited and used for other Plan purposes, including reduction of Participating Company contributions to the Plan. On presentation of an authenticated claim, by the recipient or the recipient's representative, amounts forfeited will be restored, without earnings, from a contribution made by the Participating Company designated by the Committee.

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

38

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 of "Key Employee" 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 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.

39

        (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 Accounting 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 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

40

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) or 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%).

        (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 respect to any Plan Year for which the Plan is Top-Heavy, each Participant who is not a Key Employee, and who has not ceased to be an Employee prior to the end of such Plan Year, shall be entitled to a contribution under this section. No Participant otherwise entitled to an allocation under this subsection shall be ineligible for such allocation solely because he or she has not completed 1,000 Hours of Service for the Plan Year.

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        (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.

        (c)   The benefit of each Participant who meets the requirements of subsection (a), and who does not participate in any defined benefit plan of any Affiliated Company, shall be such Participant's Company Contribution (including forfeitures) under the other provisions of the Plan; provided that the total employer contribution (including forfeitures) allocated to the Account of such Participant shall be not less than an amount which, when added to such Participant's allocable share of employer contributions and forfeitures under any other defined contribution plan of any of the Affiliated Companies, equals at least 4% of his or her Remuneration. The benefit described in this subsection (b) is subject to the following:

        (I)  In the event that the percentage of employer contributions and forfeitures under the plans in which such Participant participates for the Plan Year on behalf of the Key Employee for whom such percentage is greatest is less than 4% of such Key Employee's Remuneration for the Plan Year, then such Participant shall not be entitled to a contribution under this subsection (b) for the Plan Year in excess of such percentage of such Participant's Remuneration, unless this Plan enables a defined benefit plan included in a Required Aggregation Group with this Plan to satisfy the requirements of Section 401(a) or 410 of the Code (except the average benefits test).

        (II)  Notwithstanding the preceding paragraph, if the highest rate allocated to a Key Employee is less than 3%, amounts contributed as a result of a salary reduction agreement shall be included when determining contributions made on behalf of Key Employees.

        (III) If a Participant also participates in a defined benefit 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 the Retirement Plan and is offset by the benefits provided under the this Plan.

        For Plan Years beginning on and after January 1, 2002, Matching Employer Contributions are taken into account as an employer contribution for purposes of the minimum benefit.

        15.04    Earnings Limit.    With regard to any Plan Year for which the Plan is Top-Heavy with respect to a particular Participating Company, neither the annual Remuneration nor the annual Earnings of any Participant from such Participating Company and all its Related Companies taken into account for any purpose under the Plan (other than for the purposes of Sections 5.03) shall exceed the limit in effect under Section 401(a)(17) of the Code (as adjusted by the Commissioner for increase in cost of living for such year).

        15.05    Limitation on Annual Additions.    With regard to any Plan Year for which the Plan would be Top-Heavy with respect to a particular Participating Company if "ninety percent (90%)" were substituted for "sixty percent (60%)" each place it appears in Section 15.02, Section 5.04 shall be modified by substituting "1.0" in place of "1.25" in the definitions of "Defined Contribution Fraction" and "Defined Benefit Fraction" with respect to such Participating Company and its Related Companies, provided that in no event shall the accrued benefit or account balance of any Participant be reduced below the amount of such accrued benefit or account balance immediately before the Plan becomes Top-Heavy with respect to such Participating Company.

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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 15th day of October, 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/  EDWARD C. GIERMANN
Its	Secretary and General Counsel

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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 September 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 September 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 September 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of The Newhall Land and Farming Company.

Date: November 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
		/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 September 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 September 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 September 30, 2002 fairly presents, in all material respects, the financial condition and results of operations of The Newhall Land and Farming Company.

Date: November 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
		/s/  STUART R. MORK Senior Vice President and Chief Financial Officer of Newhall Management Corporation (Principal Financial Officer)