Document:

AGREEMENT and PLAN of MERGER

 Exhibit 10.1 
  
 EXECUTION COPY 
  

  
 AGREEMENT AND PLAN OF
MERGER 
  
 by and among 
  
 THE NEWHALL LAND AND FARMING COMPANY, 
  
 LENNAR CORPORATION, 
  
 LNR PROPERTY CORPORATION, 
  
 NWHL INVESTMENT LLC, 
  
 and 
  
 NWHL ACQUISITION, L.P. 
  
 Dated as of 
  
 July 21, 2003 
  

 TABLE OF CONTENTS 
  

	 	  	 	  	Page

			
	 ARTICLE 1
	  	 MERGER OF ACQUISITION AND THE COMPANY
	  	2
			
	 1.1  
	  	 The Merger
	  	2
			
	 1.2  
	  	 Certificate of Limited Partnership
	  	2
			
	 1.3  
	  	 Limited Partnership Agreement
	  	2
			
	 1.4  
	  	 General Partner
	  	2
			
	 1.5  
	  	 Limited Partner
	  	2
			
	 1.6  
	  	 Further Assurances
	  	2
			
	 1.7  
	  	 Units of Interest in the Company
	  	3
			
	 1.8  
	  	 Units of Interest in Acquisition
	  	3
			
	 1.9  
	  	 Deposit
	  	3
			
	 1.10
	  	 Adjustments
	  	4
			
	 1.11
	  	 Distributions with Regard to Company Interests
	  	4
			
	 1.12
	  	 Determinations Regarding Documents
	  	5
			
	 1.13
	  	 Equity Awards
	  	6
			
	 1.14
	  	 Withholding
	  	6
			
	 ARTICLE 2
	  	 EFFECTIVE TIME OF MERGER
	  	6
			
	 2.1  
	  	 Date of the Merger
	  	6
			
	 2.2  
	  	 Execution of Certificate of Merger
	  	7
			
	 2.3  
	  	 Effective Time of the Merger
	  	7
			
	 ARTICLE 3
	  	 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
	  	7
			
	 3.1  
	  	 Organization and Authorization, Validity of Agreement, Company Action
	  	7
			
	 3.2  
	  	 No Conflicts
	  	7
			
	 3.3  
	  	 No Violations
	  	8
			
	 3.4  
	  	 Qualification
	  	9
			
	 3.5  
	  	 Capitalization
	  	9
			
	 3.6  
	  	 Subsidiaries
	  	9
			
	 3.7  
	  	 Reports and Financial Statements
	  	10
			
	 3.8  
	  	 Assets
	  	10
			
	 3.9  
	  	 Compliance with Law; Permits
	  	10
			
	 3.10
	  	 Tax Matters
	  	10

  

 i 

 TABLE OF CONTENTS 
 (continued) 
  

	 	  	 	  	Page

			
	 3.11
	  	 Environmental Matters
	  	 11

			
	 3.12
	  	 Opinion of Financial Advisor
	  	 12

			
	 3.13
	  	 Litigation
	  	 12

			
	 3.14
	  	 Section 280G
	  	 12

			
	 3.15
	  	 Affiliate Transactions
	  	 12

			
	 3.16
	  	 ERISA Matters
	  	 13

			
	 3.17
	  	 Brokers or Finders
	  	 14

			
	 3.18
	  	 Material Contracts
	  	 14

			
	 3.19
	  	 Conduct of Business
	  	 15

			
	 ARTICLE 4
	  	 REPRESENTATIONS AND WARRANTIES OF LIMA, PARENT AND ACQUISITION
	  	 15

			
	 4.1  
	  	 Organization
	  	 15

			
	 4.2  
	  	 Authorization
	  	 15

			
	 4.3  
	  	 No Violations
	  	 15

			
	 4.4  
	  	 Consents; Approval
	  	 16

			
	 4.5  
	  	 Brokers or Finders
	  	 16

			
	 ARTICLE 5
	  	 COVENANTS
	  	 16

			
	 5.1  
	  	 Due Diligence Period
	  	 16

			
	 5.2  
	  	 Company’s Activities Until Effective Time
	  	 20

			
	 5.3  
	  	 Parent’s, Acquisition’s and Lima’s Activities Until Effective Time
	  	 22

			
	 5.4  
	  	 Regulatory Filings; Securities Filings
	  	 22

			
	 5.5  
	  	 Unitholders’ Action
	  	 23

			
	 5.6  
	  	 Proxy Statement
	  	 23

			
	 5.7  
	  	 No Solicitation of Offers; Notice of Proposals from Others
	  	 24

			
	 5.8  
	  	 Company Financial Information
	  	 25

			
	 5.9  
	  	 Company Disclosure Letter
	  	 26

			
	 ARTICLE 6
	  	 CONDITIONS
	  	 26

			
	 6.1  
	  	 Conditions to the Company’s Obligations
	  	 26

			
	 6.2  
	  	 Conditions to Parent’s, Lima’s and Acquisition’s Obligations
	  	 26

			
	 6.3  
	  	 Conditions to the Parties’ Obligations
	  	 27

  

 ii 

 TABLE OF CONTENTS 
 (continued) 
  

	 	  	 	  	Page

	 ARTICLE 7
	  	 TERMINATION
	  	28
			
	 7.1  
	  	 Right to Terminate
	  	28
			
	 7.2  
	  	 Manner of Terminating Agreement
	  	30
			
	 7.3  
	  	 Effect of Termination
	  	30
			
	 7.4  
	  	 Survival
	  	30
			
	 ARTICLE 8
	  	 OTHER AGREEMENTS
	  	31
			
	 8.1  
	  	 Liquidated Damages
	  	31
			
	 8.2  
	  	 Other Actions; Filings; Consents
	  	33
			
	 8.3  
	  	 Notification of Certain Matters
	  	34
			
	 8.4  
	  	 Post-Closing Tax Matters
	  	34
			
	 ARTICLE 9
	  	 GENERAL
	  	35
			
	 9.1  
	  	 Expenses
	  	35
			
	 9.2  
	  	 Employee Benefit Plans
	  	35
			
	 9.3  
	  	 Insurance and Indemnification
	  	36
			
	 9.4  
	  	 Benefit of Provisions
	  	37
			
	 9.5  
	  	 Access to Properties, Books and Records
	  	37
			
	 9.6  
	  	 Press Releases; Tax Matters Disclosure
	  	37
			
	 9.7  
	  	 Entire Agreement
	  	38
			
	 9.8  
	  	 Interpretation
	  	38
			
	 9.9  
	  	 Prohibition Against Assignment
	  	39
			
	 9.10
	  	 Intentional Failure to Perform Obligations; Termination Post 270 Days after Date of this Agreement
	  	39
			
	 9.11
	  	 Notices and Other Communications
	  	40
			
	 9.12
	  	 Governing Law
	  	41
			
	 9.13
	  	 Amendments
	  	41
			
	 9.14
	  	 Counterparts
	  	41
			
	 9.15
	  	 Assignability; Parties in Interest
	  	41
			
	 9.16
	  	 Joint and Several Obligation of Lima
	  	42

  

 iii 

 TABLE OF CONTENTS 
 (continued) 
  

	 	  	Page

	 Exhibit A – Voting Agreement
	  	 
	 Exhibit B – Escrow Agreement
	  	 

  

 iv 

 EXECUTION COPY 
  
 AGREEMENT AND PLAN OF MERGER 
  

AGREEMENT AND PLAN OF MERGER, dated as of July 21, 2003 (this “Agreement”), by and among The Newhall Land and Farming Company, a California
limited partnership (the “Company”), Lennar Corporation, a Delaware corporation, and LNR Property Corporation, a Delaware corporation (collectively, “Lima”), NWHL Investment LLC, a Delaware limited liability company, a directly
or indirectly owned subsidiary of Lima (“Parent”), and NWHL Acquisition, L.P., a California limited partnership (“Acquisition”). 
  
 RECITALS 
  
 The board of directors, board of managers, general partner or general partners, as the case may be, of each of Lima, Parent, Acquisition and the Company
have approved, and deem it fair, advisable and in the best interests of each respective corporation, limited liability company or limited partnership and its shareholders, members or limited partners, as the case may be, to consummate the
acquisition of the Company by Parent through the merger of Acquisition with and into the Company upon the terms and subject to the conditions set forth in this Agreement (the “Merger”). 
  
 The respective general partner or general partners of each of Acquisition and
the Company have unanimously approved the Merger and the principal terms of this Agreement in accordance with the California Revised Limited Partnership Act (the “RLPA”) and the respective board of directors or members of each of Lima and
Parent have approved the Merger and the Agreement. 
  
 The general
partners of the Company have determined that this Agreement is advisable, and that the consideration to be paid for each Unit (as defined in Section 1.7) in the Merger is fair to the holders of such Units, and have resolved to recommend that the
holders of such Units approve the principal terms of the Merger on the terms and subject to the conditions set forth in this Agreement. 
  
 As a condition and inducement to each party’s entering into this Agreement and incurring the obligations set forth herein, (i) certain unitholders of
the Company, concurrently with the execution and delivery of this Agreement, are entering into a voting agreement, substantially in the form attached to this Agreement as Exhibit A (the “Voting Agreement”), and (ii) Parent is delivering to
the Company cash in the amount of $5.0 million. 
  
 AGREEMENT 
  
 In consideration of the foregoing
and the mutual representations, warranties and covenants in this Agreement, the parties hereto, intending to be legally bound, agree as follows: 
  

 1 

 ARTICLE 1 
 MERGER OF ACQUISITION AND THE COMPANY 
  
 1.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the RLPA, at the Effective Time (as defined in Section 2.3), Acquisition will be merged with and
into the Company, which will be the surviving limited partnership in the Merger (the “Surviving Partnership”). Except as specifically provided in this Agreement, when the Merger becomes effective, (a) the real and personal property, other
assets, rights, privileges, immunities, powers, purposes and franchises of the Company will continue as those of the Surviving Partnership, unaffected and unimpaired by the Merger, (b) the separate existence of Acquisition will terminate, and
Acquisition’s real and personal property, other assets, rights, privileges, immunities, powers, purposes and franchises will be merged into the Surviving Partnership, which will succeed to and assume all the rights and obligations of
Acquisition in accordance with the RLPA, and (c) the Merger will have the other effects specified in the RLPA (including Section 15678.6 of the RLPA). 
  
 1.2 Certificate of Limited Partnership. The certificate of limited partnership of the Company immediately before the Effective Time will be amended
in its entirety to be identical to the certificate of limited partnership of Acquisition immediately before the Effective Time and shall be the certificate of limited partnership of Surviving Partnership from the Effective Time until subsequently
amended in accordance with applicable law. The certificate of limited partnership of Company, as so amended, separate and apart from this Agreement, may be certified as the certificate of limited partnership of the Surviving Partnership. 

 
 1.3 Limited Partnership Agreement. The limited partnership
agreement of the Company immediately before the Effective Time will be amended in its entirety to be identical to the limited partnership agreement of Acquisition immediately before the Effective Time and shall be the limited partnership agreement
of the Surviving Partnership from the Effective Time until it is amended in accordance with its terms and applicable law. 
  
 1.4 General Partner. NWHL GP LLC, a Delaware limited liability company, a wholly owned subsidiary of Parent (“Acquisition General
Partner”), as the sole general partner of Acquisition immediately prior to the Effective Time, will be the sole general partner of the Surviving Partnership after the Effective Time and will serve in accordance with the limited partnership
agreement of the Surviving Partnership until its withdrawal or removal in accordance with the terms of the limited partnership agreement of the Surviving Partnership. 
  
 1.5 Limited Partner. Parent, the sole limited partner of Acquisition immediately prior to the Effective Time, will be
the sole limited partner of the Surviving Partnership after the Effective Time. 
  
 1.6 Further Assurances. If at any time after the Effective Time, the Surviving Partnership determines or is advised that any deeds, bills of sale, assignments, assurances or other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the Surviving Partnership its right, obligation, title or interest in, to or under any of the rights, properties or assets of either the Company or Acquisition acquired or
to be acquired by the Surviving Partnership as a result of, or in connection with, the Merger or otherwise to 

  

 2 

 
carry out the transactions which are the subject of this Agreement, the general partner of the Surviving Partnership will be authorized to execute and
deliver all documents, in the name and behalf of the Company, Acquisition or otherwise, and to take all other actions and do all other things as may be necessary or desirable to vest, perfect or confirm any and all right, obligation, title and
interest in, to and under such rights, properties or assets in the Surviving Partnership or otherwise to carry out the transactions contemplated by this Agreement. 
  
 1.7 Units of Interest in the Company. 
  
 (a) At the Effective Time, each depositary unit of limited partnership interest in the Company (each, a “Unit”),
including Units owned by the General Partners (as defined in Section 3.1), which is outstanding immediately before the Effective Time will be converted into and become the right to receive (i) $40.50 in cash, without interest, plus (ii) an amount in
cash equal to the product of (A) $40.50, multiplied by (B) 5% multiplied by (C) the fraction obtained by dividing (1) the total number of days elapsed between (x) the date that is 270 days after the date that a public announcement is first jointly
made by the parties with respect to the proposed Merger and (y) the Merger Date, by (2) 365, (the sum of (i) and (ii) above, net of and reduced by applicable Tax (as defined in Section 3.10) withholding, being referred to as the “Merger
Consideration”). From and after the Effective Time, a depositary receipt which represented a Unit will represent only the right to receive the Merger Consideration. 
  
 (b) At the Effective Time, each general partnership interest in the Company which is outstanding immediately before the
Effective Time will be converted into and become the right to receive the Merger Consideration. From and after the Effective Time, any certificate which represented any general partnership interest in the Company will represent only the right to
receive the Merger Consideration. The parties acknowledge that each general partnership interest in the Company is represented by a unit (a “GP Unit”) which represents the same economic interest in the Company as a Unit; accordingly, for
purposes of paying the Merger Consideration, each GP Unit shall be considered to be a Unit. 
  
 (c) Concurrently with the execution of this Agreement, the holders of Units listed in Section 1.7 of the Company Disclosure Letter (as defined in Article 3), who hold in the aggregate 12.13% of the Units outstanding
on the date of this Agreement, delivered Voting Agreements to Parent. 
  
 1.8 Units of Interest in Acquisition. At the Effective Time, each unit of limited partnership interest in Acquisition (each, an “Acquisition Unit”) which is outstanding immediately before the Effective Time will remain
outstanding and will become one limited partnership unit of the Surviving Partnership. 
  
 1.9 Deposit. Concurrently with the execution and delivery of this Agreement, Lima is delivering to the Company cash in the amount of $5.0 million (the “Initial Deposit Amount”). In the event this
Agreement has not been terminated by Parent pursuant to Section 7.1(c) or otherwise terminated pursuant to Article VII prior to the Due Diligence Termination Date (as defined in Section 3.3), (i) Lima, Parent, the Company and Wells Fargo Bank, N.A.
(the “Escrow Agent”) shall, on or prior to the Due Diligence Termination Date, execute an Escrow Agreement substantially in the form attached hereto as Exhibit B, subject to any changes that may be 

  

 3 

 
required by the Escrow Agent (the “Escrow Agreement”), and (ii) Lima shall (or shall cause Parent to), on the first business day after the Due
Diligence Termination Date, deliver to the Escrow Agent cash in the amount of $25.0 million (the “Additional Deposit Amount”) to be held by the Escrow Agent in escrow pursuant to the terms of the Escrow Agreement. In the event that this
Agreement has not been terminated pursuant to Article VII on or prior to the date of the Company Meeting (as defined in Section 5.5) and the principal terms of the Merger are approved by the holders of the majority of the Units entitled to vote on
the matter at the Company Meeting, Lima shall (or shall cause Parent to), on the first business day after the Company Meeting, cause the Escrow Agent to deliver the Additional Deposit Amount to the Company pursuant to the terms of the Escrow
Agreement. The Initial Deposit Amount and all amounts held in escrow at any time (including the Additional Deposit Amount together with interest earned thereon while held by the Escrow Agent) shall be referred to in this Agreement as the
“Escrow Fund”). 
  
 1.10 Adjustments. If between
the date of this Agreement and the Effective Time, the outstanding Units or GP Units are changed into a different number of Units or GP Units by reason of a reclassification, recapitalization, split up, combination or exchange of Units or GP Units
that has a record date between the date of this Agreement and the Effective Time, the Merger Consideration will be adjusted to provide the holders of the Units (the “Unitholders”) and the holders of the GP Units (“GP Holders”)
the same economic effect as that contemplated by this Agreement if the reclassification, recapitalization, split-up, combination, or exchange had not taken place. 
  
 1.11 Distributions with Regard to Company Interests. 
  
 (a) Prior to the Effective Time, Parent and the Company will jointly designate a bank or trust company to act as
distributing agent in connection with the Merger (the “Distributing Agent”). Immediately before the Effective Time, (i) the Company will wire transfer the Escrow Fund (excluding interest) to the Distributing Agent and (ii) Lima will (or
will cause Parent to) provide the Distributing Agent with the balance of the Merger Consideration, after taking into account the Escrow Fund, which will have to be distributed to Unitholders and GP Holders under Section 1.11(c). 
  
 (b) While the Distributing Agent is holding funds provided by Lima or Parent
under Section 1.11(a), the Distributing Agent will invest the funds, as directed by Parent, in obligations of or guaranteed by the United States of America or obligations of an agency of the United States of America which are backed by the full
faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody’s Investors Services Inc. or Standard & Poors’ Corporation, or in deposit accounts, certificates of deposit or
banker’s acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating more than $500 million (based on the most recent
financial statements of the banks which are then publicly available at the Securities and Exchange Commission (“SEC”) or otherwise); provided that any losses on such investment will not reduce any Unitholder’s right or GP
Holder’s right to Merger Consideration. 
  

 4 

 (c) Promptly after the Effective Time, Lima or Parent will cause the Distributing Agent to mail to each
person who was a Unitholder of record or GP Holder of record at the Effective Time, a letter of transmittal (in a form which will have been approved by counsel to the Company prior to the Effective Time, which approval shall not be unreasonably
withheld) for use in effecting the surrender of depositary receipts representing Units or certificates representing GP Units (such depository receipts and certificates being referred to herein as “Certificates”), in order to receive
payment of the Merger Consideration. When the Distributing Agent receives a Certificate, together with a properly completed and executed letter of transmittal and any other required documents, the Distributing Agent will distribute to the holder of
the Certificate, or as otherwise directed in the letter of transmittal, the Merger Consideration with regard to the Units or GP Units represented by the Certificate, and the Certificate will be canceled. No interest will be paid or accrued on the
cash payable upon the surrender of Certificates. If payment is to be made to a person other than the person in whose name a surrendered Certificate is registered, the surrendered Certificate must be properly endorsed or otherwise be in proper form
for transfer, and the person who surrenders the Certificate must provide funds for payment of any transfer or other taxes required by reason of the distribution to a person other than the registered holder of the surrendered Certificate or establish
to the satisfaction of the Surviving Partnership that the tax has been paid. After the Effective Time, a Certificate which has not been surrendered will represent only the right to receive the Merger Consideration, without any interest. 

 
 (d) If a Certificate has been lost, stolen or destroyed, Lima or Parent
will accept (and will cause the Distributing Agent to accept) an affidavit and indemnification or bond reasonably satisfactory to it instead of the Certificate and will cause the Merger Consideration to be paid the holder of the Units or GP Units
which had been represented by the Certificate. 
  
 (e) At any time
which is more than six months after the Effective Time, Lima or Parent may require the Distributing Agent to deliver to it any funds which had been made available to the Distributing Agent and have not been disbursed to former holders of Units or GP
Units (including, without limitation, interest and other income received by the Distributing Agent in respect of the funds made available to it), and after the funds have been delivered to Lima or Parent, former holders of Units or GP Units must
look to Lima or Parent for payment of the Merger Consideration upon surrender of the Certificates held by them. None of Lima, Parent, the Surviving Partnership or the Distributing Agent will be liable to any former holders of Units or GP Units for
any Merger Consideration which is delivered to a public official pursuant to any abandoned property, escheat or similar law. 
  
 (f) At the close of business on the day during which the Effective Time occurs, the Company will not record any transfers of Units or GP Units on the
books of the Company, and the depositary of the Company will be closed. If, after the Effective Time, Certificates are presented for transfer (together with a properly completed letter of transmittal as contemplated by Section 1.11(c)), they will be
canceled and treated as having been surrendered for the Merger Consideration described in Section 1.7(a). 
  
 1.12 Determinations Regarding Documents. The Surviving Partnership will have the discretion, which it may delegate in whole or in part, to
determine whether letters of transmittal accompanying Certificates have been properly and timely completed, signed and submitted and 

  

 5 

 
to determine whether or not to disregard immaterial defects in particular letters of transmittal. The decision of the Surviving Partnership with regard to
those matters will be conclusive and binding. None of Lima, Parent, the Company, the Surviving Partnership or the Distributing Agent will have any obligation to notify any person of any defect in a letter of transmittal submitted to the Surviving
Partnership or the Distributing Agent, as applicable. 
  
 1.13
Equity Awards. Immediately prior to the Effective Time, each option, appreciation right, restricted Unit or Unit right issued by the Company which is outstanding at the Effective Time (collectively, the “Awards”) and not then
otherwise fully vested will be deemed fully vested pursuant to the terms of the applicable plan or instrument for the total number of Units purchasable or issuable thereunder. All vested Awards will be cancelled in connection with the Merger. As of
the Effective Time, each cancelled Award will represent the right to receive an amount of cash equal to the product of (x) the number of Units subject to the Award multiplied by (y) the Merger Consideration, reduced by the aggregate unpaid exercise
or purchase price or other consideration payable for the Units issued under such Award. To receive the amount to which a holder of an Award is entitled under this Section 1.13, the holder must deliver to the Surviving Partnership (a) any certificate
or agreement relating to the Award and (b) a document in form reasonably satisfactory to Parent in which the holder acknowledges that the payment the holder is receiving is in full satisfaction of any rights the holder may have under or with regard
to the Award. Lima will (or will cause Parent or the Surviving Partnership to) pay the amount due (less the applicable exercise price of such Award) under this Section 1.13 to a holder of an Award promptly after the Surviving Partnership receives
from the holder the items described in clauses (a) and (b) of the preceding sentence. 
  
 1.14 Withholding. Parent may withhold from the Merger Consideration payable to any Unitholder or GP Holder or consideration payable to any holder of an Award pursuant to Section 1.13 and pay to the appropriate
taxing authorities, any amounts which Parent may be required (or may reasonably believe it is required) to withhold under the Internal Revenue Code of 1986 (the “Code”), or any provision of state, local or foreign tax law. Any portion of
the Merger Consideration or consideration payable pursuant to Section 1.13 which is withheld as permitted by this Section 1.14 will be deemed to have been paid to the Unitholder, GP Holder, or holder of an Award with respect to whom it is withheld.
Parent acknowledges that because the Units represent interests in a publicly traded partnership that are regularly traded on an established securities market, no withholding will be required or undertaken by Parent under Section 1445(a) of the Code.

  
 ARTICLE 2 
 EFFECTIVE TIME OF MERGER 
  
 2.1 Date of the Merger. Unless this Agreement is terminated prior to the Effective Time in accordance with Article 7, the day on which the Merger
is to take place (the “Merger Date”) shall be within seven business days after the day on which all the conditions set forth in Article 6 (other than conditions which are contemplated to be satisfied on or after the Merger Date) have been
satisfied or waived. The Merger Date may be changed with the consent of the Company and Parent. 
  

 6 

 2.2 Execution of Certificate of Merger. On or prior to the Merger Date, Acquisition and the
Company will each execute a certificate of merger (the “Certificate of Merger”) along with appropriate officers’ certificates as required by applicable law, each of which will be in proper form for filing under the RLPA, and deliver
it to Paul, Hastings, Janofsky & Walker LLP for filing with the Secretary of State of California after all of the conditions in Article 6 have been satisfied or waived. When all the conditions in Article 6 have been satisfied or waived, Parent
and the Company will (a) cause the Certificate of Merger to be filed with the Secretary of State of the State of California on the Merger Date and (b) cause all other documents which must be recorded or filed as a result of the Merger to be recorded
or filed. 
  
 2.3 Effective Time of the Merger. The Merger
will become effective at the date and time that the Certificate of Merger is filed with the Secretary of State of the State of California, or at such other time and date as are agreed upon by Parent and the Company and specified in the Certificate
of Merger (that being the “Effective Time”). 
  
 ARTICLE 3 
 REPRESENTATIONS AND WARRANTIES OF THE COMPANY 
  
 Except as set forth in a disclosure letter, dated as of the date of this Agreement (the “Company Disclosure
Letter”), delivered to Parent as provided in Section 5.9 hereof, the Company represents and warrants to Parent and Acquisition as follows: 
  
 3.1 Organization and Authorization, Validity of Agreement, Company Action. The Company is a limited partnership duly formed, validly existing and
in good standing under the laws of the State of California. The Company has all partnership power and authority necessary to enable it to enter into this Agreement and carry out the transactions contemplated by this Agreement. All limited
partnership actions necessary to authorize the Company to enter into this Agreement and carry out the transactions contemplated by it, other than approval of the principal terms of the Merger by a majority of the Unitholders entitled to vote on the
matter, have been taken. This Agreement has been duly executed by the Company and, assuming the due authorization, execution and delivery of this Agreement by each of Acquisition, Parent and Lima, is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms. Each of Newhall Management Limited Partnership, a California limited partnership, which is the Company’s managing general partner (the “Managing General Partner”), Newhall
General Partnership, a California general partnership, which is the Company’s only other general partner (together with the Managing General Partner, the “General Partners”) and Newhall Management Corporation, a California
corporation, which is the managing general partner of the Managing General Partner, and its board of directors, have, in accordance with their respective organizational and constituent documents, approved the Merger and this Agreement and have voted
to recommend to the Unitholders that they approve the principal terms of the Merger. 
  
 3.2 No Conflicts. Neither the execution and delivery of this Agreement or of any document to be delivered in accordance with this Agreement nor the consummation of the transactions contemplated by this
Agreement or by any document to be delivered in accordance with this Agreement will (a) violate, result in a breach of, or constitute a default (or an event which, with notice or lapse of time or both, would constitute a default) under, the
certificate of 

  

 7 

 
limited partnership or the limited partnership agreement of the Company (the “Governing Documents”) or any of the constituent documents of either
of the General Partners or (b) contravene, conflict with, or result in a violation or breach (with or without the passage of time or the giving of any notice) in any material respect of any provision of, or give any person the right to declare a
default or exercise any remedy or right of termination under, or to accelerate the maturity or performance of, or to cancel, terminate, or modify, any loan or other evidence of indebtedness or mortgage or any other material contract or document to
which the Company is a party or any of its assets or property is bound or subject, except as provided in Section 1.13 hereof and except as shown in Section 3.2 of the Company Disclosure Letter. 
  
 3.3 No Violations. Except as shown in Section 3.3 of the Company
Disclosure Letter, no governmental filings, authorizations, approvals, or consents, or other governmental action, other than the expiration or termination of waiting periods under the Hart-Scott Rodino Antitrust Improvements Act of 1976 (the
“HSR Act”), clearance by the SEC of the Proxy Statement for mailing, and the approval of the California Public Utilities Commission (“Utilities Commission”) under the California Public Utilities Act (the “PUA”), are
required to permit the Company to fulfill all its obligations under this Agreement and consummate the Merger, other than governmental filings, authorizations, approvals, consents or other governmental actions the absence of which would not have a
Material Adverse Effect on the Company. As used in this Agreement, the term “Material Adverse Effect on the Company” means (i) aggregate losses, liabilities and/or expenses to the Company and its subsidiaries that exceed, or would
reasonably be expected to exceed, $50.0 million or (ii) events, facts, circumstances and/or conditions that would reasonably be expected to prevent the Company from consummating the Merger, but (a) no individual loss, liability or expense of $1.0
million or less will be counted in determining losses, liabilities or expenses which are aggregated towards such $50.0 million threshold, although a series of directly related losses, liabilities or expenses will be aggregated together to determine
whether the $1.0 million threshold has been met; (b) no losses, liabilities or expenses related to, arising out of or otherwise by virtue of the Newhall Ranch Entitlement (as defined in Section 5.2(b)) will be aggregated toward such $50.0 million
threshold; (c) no losses, liabilities or expenses related to, arising out of or otherwise by virtue of (i) changes in general economic conditions (including, without limitation, changes in interest rates), (ii) changes or occurrences affecting the
homebuilding industry generally or (iii) changes in laws, rules, orders or regulations of governmental entities, will be aggregated toward such $50.0 million threshold; (d) no losses, liabilities or expenses required by a change in generally
accepted accounting principles (“GAAP”) will be aggregated toward such $50.0 million threshold; and (e) no losses, liabilities or expenses arising out of, related to, or otherwise by virtue of facts, circumstances or conditions that
existed on or before September 4, 2003 (the “Due Diligence Termination Date”) and which either (i) the Company disclosed in writing to Parent and/or Lima at least three (3) business days prior to the Due Diligence Termination Date or (ii)
Parent or Lima has independently obtained actual and current knowledge as of the Due Diligence Termination Date will be aggregated toward such $50.0 million threshold. Except as shown in Section 3.3 of the Company Disclosure Letter, neither the
Company nor any other person is or will be required to give any notice to or obtain any consent or approval from any person in connection with the execution and delivery of this Agreement or the consummation or performance of the transaction
contemplated hereby or any change in control of the Company. In that regard, except as specifically shown in Section 3.3 of the Company Disclosure Letter, as a result of the change in control of the Company, no 

  

 8 

 
indebtedness or other material obligations or material contracts of the Company or any of its subsidiaries or affiliates will be accelerated, become due or
terminate. 
  
 3.4 Qualification. Section 3.4 of the
Company Disclosure Letter contains a true and complete list of all of the Company’s subsidiaries, the states of organization or formation and the percentage ownership by the Company of such subsidiaries and a true and complete list of all other
equity interests, options, warrants or other rights exercisable into or debt or equity convertible or exchangeable into equity interests of any other person or entity owned directly or indirectly by the Company or any of its subsidiaries. The
Company and each of its subsidiaries is qualified to do business as a foreign partnership or other business entity in each state in which it is required to be qualified, except states in which the failure to qualify, in the aggregate, would not have
a Material Adverse Effect on the Company. 
  
 3.5
Capitalization. On July 18, 2003, there were 36,483,333 Units outstanding (including 187,000 outstanding restricted Units shown in Section 3.5 of the Company Disclosure Letter and 13,252,347 Units held in treasury) and 288,810 GP Units
outstanding. All the outstanding Units and GP Units have been duly authorized and issued and are fully paid and issued in accordance with the Company’s limited partnership agreement. Except as shown in Section 3.5 of the Company Disclosure
Letter, the Company has not issued any options, warrants or convertible or exchangeable securities or other rights to acquire Units or GP Units or any other equity securities or any appreciation rights, and is not a party to any other agreements,
which require, or upon the passage of time, the payment of money or the occurrence of any other event may require, the Company to issue or sell any Units or GP Units or any other equity securities. Except as set forth in Section 3.5 of the Company
Disclosure Letter, there are no restricted Units outstanding. The number of Units which the Company repurchased between January 1, 2003 and the date of this Agreement did not exceed 1,289,265 Units and the total amount the Company paid for those
Units did not exceed $37,779,695. 
  
 3.6 Subsidiaries.
Except as shown in Section 3.6 of the Company Disclosure Letter, (a) each of the corporations and other entities of which the Company owns directly or indirectly 51% or more of the equity (each corporation or other entity of which a company owns
directly or indirectly 51% or more of the equity being a “subsidiary” of that company) has been duly organized, and is validly existing and in good standing under the laws of its state of incorporation or organization, (b) all the shares
of stock or interests owned by the Company or any subsidiary of the Company are duly authorized, validly issued, fully paid and, in the case of stock, non-assessable and are not subject to any preemptive rights, and (c) neither the Company nor any
of its subsidiaries has issued any options, warrants or convertible or exchangeable securities or any other rights to acquire any equity securities or any appreciation rights, or is a party to any other agreements, which require, or upon the passage
of time, the payment of money or the occurrence of any other event may require, the Company or any subsidiary to issue or sell any stock or other equity interests in any of the Company’s subsidiaries and, there are no registration covenants or
transfer or voting restrictions or other shareholder agreements or arrangements with respect to outstanding securities of any of the Company’s subsidiaries. 
  

 9 

 3.7 Reports and Financial Statements. 
  
 (a) Since January 1, 2002, the Company has filed with the SEC all forms,
statements, reports and documents it has been required to file under the Securities Act of 1933, as amended (the “Securities Act”), the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or the rules promulgated
under them. 
  
 (b) The Company’s Annual Report on Form 10-K
for the year ended December 31, 2002 (the “2002 10-K”) and its Quarterly Report on Form 10-Q for the period ended March 31, 2003 (the “March 10-Q”) which the Company filed with the SEC, including the documents incorporated by
reference therein, each contained, all the information required to be included in it and, when it was filed, did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made in
it, in light of the circumstances under which they were made, not misleading. Without limiting what is said in the preceding sentence, the financial statements included in the 2002 10-K all were prepared, and the financial information included in
the March 10-Q was derived from financial statements which were prepared, in accordance with GAAP applied on a consistent basis (except that financial information included in the March 10-Q does not contain notes and is subject to normal year-end
adjustments) and present fairly the consolidated financial condition and the consolidated results of operations of the Company and its subsidiaries at the dates, and for the periods, to which they relate. 
  
 3.8 Assets. The assets of the Company and its subsidiaries constitute,
in the aggregate, all the assets (including, but not limited to, intellectual property rights) used in or necessary to the conduct of their businesses as they currently are being conducted. 
  
 3.9 Compliance with Law; Permits. 
  
 (a) The Company and its subsidiaries have at all times complied, and
currently are complying, with all applicable Federal, state, local and foreign laws and regulations, except failures to comply which would not reasonably be expected, in the aggregate, to have a Material Adverse Effect on the Company. 
  
 (b) Except as shown in Section 3.9(b) of the Company Disclosure Letter, the
Company and its subsidiaries have all licenses and permits which are required at the date of this Agreement to enable them to conduct their businesses as they currently are being conducted, except licenses or permits the lack of which would not
reasonably be expected, in the aggregate, to have a Material Adverse Effect on the Company. 
  
 3.10 Tax Matters. The Company and each of its subsidiaries has filed when due (taking account of extensions) all Tax Returns (as defined below) relating to Federal income taxes, and all other material Tax
Returns, which it has been required to file and has paid all Taxes shown on those returns to be due. Those Tax Returns are true, correct and complete in all material respects and accurately reflect the income, gains, losses, deductions, credits and
Taxes required to have been reported or paid, except to the extent of items which may be disputed by applicable taxing authorities but for which there is substantial authority to support the position taken by the Company or the subsidiary and which
have been adequately reserved against in 

  

 10 

 
accordance with GAAP on the balance sheet at March 31, 2003 included in the March 10-Q. The Company has maintained all documents, books and records as are
required to be maintained by it and its subsidiaries under applicable Tax laws. Except as shown in Section 3.10 of the Company Disclosure Letter, (a) no waiver or consent regarding the application of the statute of limitations or extension of time
given by the Company or any of its subsidiaries for completion of the audit of any of its Federal income Tax Returns or other material Tax Returns is in effect, (b) no tax lien has been filed by any taxing authority against the Company or any of its
subsidiaries or any of their assets relating to Taxes, penalties and interest in excess of $100,000 in any instance, or $1,000,000 in aggregate, (c) no Federal income Tax Return, or material state, local or foreign Tax Return, of the Company or any
subsidiary, is the subject of a pending audit or other administrative proceeding or court proceeding, (d) except as shown in Section 3.10 of the Company Disclosure Letter, neither the Company nor any subsidiary is a party to any agreement providing
for the allocation or sharing of Taxes (other than agreements solely between the Company and its direct or indirect wholly owned subsidiaries or among direct or indirect wholly owned subsidiaries of the Company), (e) neither the Company nor any
subsidiary has participated in or cooperated with an international boycott as that term is used in Section 999 of the Code, (f) the liabilities and reserves for Taxes reflected in the consolidated balance sheet at March 31, 2003 included in the
March 10-Q cover all Taxes for all periods ended at or prior to the date of such balance sheet and have been determined in accordance with GAAP and there is no material liability for Taxes for any period beginning after the date of such balance
sheet other than Taxes arising in the ordinary course of business, including Tax liabilities assumed or incurred in the purchase of real estate in the ordinary course of business which are not material in the aggregate, (g) no event, transaction,
act or omission has occurred which could result in the Company’s becoming liable to pay or to bear any Tax as a transferee, successor or otherwise which is primarily or directly chargeable or attributable to any other person, firm or company,
and the Company has no actual or contingent liability (whether by reason of any indemnity, warranty or otherwise) to any other person in respect of any actual, contingent or deferred liability of such person for Taxes, (h) the Company is not
required to include in income any adjustment pursuant to Section 481(a) of the Code by reason of a voluntary change in accounting method initiated by the Company, and the Internal Revenue Service (the “IRS”) has not proposed any such
adjustment or change in accounting method, (i) the Company and each of its subsidiaries which have been treated as partnerships or disregarded entities for federal or state Tax purposes have been properly so classified for each taxable year
beginning in or after 1985, (j) the Company has satisfied the requirements of Section 7704(c) of the Code for each year beginning after December 31, 1987, and (k) the Company has not made an election under Section 7704(g)(2) of the Code. For the
purposes of this Agreement, the term “Taxes” means all taxes (including, but not limited to, withholding taxes), assessments, fees, levies and other governmental charges, and any related interest or penalties. For the purposes of this
Agreement, the term “Tax Return” means any report, return or other tax-related information required to be supplied to a taxing authority or to Unitholders or their assignees in connection with Taxes. 
  
 3.11 Environmental Matters. The Company and its subsidiaries have all
material environmental permits which are necessary to enable them to conduct their businesses as they currently are being conducted without violating any Environmental Laws, except as shown in Section 3.11 of the Company Disclosure Letter. Except as
shown in Section 3.11 of the Company Disclosure Letter, neither the Company nor any subsidiary has received any written notice of, and, to the Knowledge of the Officers (as defined below), the Company is not aware 

  

 11 

 
of, noncompliance or liability under any Environmental Law which is now pending. Except as shown in Section 3.11 of the Company Disclosure Letter, neither
the Company nor any subsidiary has performed any acts, including, but not limited to, releasing, storing or disposing of hazardous materials, there is no condition on any property owned or leased by the Company or a subsidiary, and there was no
condition on any property formerly owned or leased by the Company or a subsidiary while the Company or a subsidiary owned or leased that property, that would be a basis for liability of the Company or a subsidiary under any Environmental Law, except
as shown in Section 3.11 of the Company Disclosure Letter. Except as shown in Section 3.11 of the Company Disclosure Letter, neither the Company nor any subsidiary is subject to any order of any court or governmental agency requiring the Company or
any subsidiary to take, or refrain from taking, any actions in order to comply with any Environmental Law and no action or proceeding seeking such an order is pending or, to the Knowledge of the Officers, threatened against the Company. For purposes
of this Agreement the term “Knowledge of the Officers” means the current actual knowledge of Gary M. Cusumano, Donald L. Kimball, Ross J. Pistone, Thomas E. Dierckman, Steven D. Zimmer and Eric Higgins. As used in this Agreement, the term
“Environmental Law” means any Federal, state or local law, rule, regulation, guideline or other legally enforceable requirement of a governmental authority relating to protection of the environment (including, without limitation,
endangered or threatened species) or to environmental conditions which affect human health or safety. 
  
 3.12 Opinion of Financial Advisor. The General Partners have received the opinion of Morgan Stanley & Co. Incorporated (the “Financial
Advisor”), the Company’s financial advisor, dated not earlier than the day before the date of this Agreement, in form satisfactory to the General Partners, to the effect that, as of the date of such opinion, the Merger Consideration was
fair, from a financial point of view, to the Unitholders. 
  
 3.13
Litigation. Except as is described in the 2002 10-K or a subsequent report filed with the SEC prior to the date hereof or in Section 3.13 of the Company Disclosure Letter, neither the Company nor any subsidiary is a party to (i) any
condemnation proceedings (pending or, to the Knowledge of the Officers, threatened), (ii) any proceedings (pending, or to the Knowledge of the Officers, threatened) relating to employment or employee related matters or (iii) any litigation,
proceeding or investigation (pending or, to Knowledge of the Officers, threatened) which is required to be disclosed in an Annual Report on Form 10-K of the Company or would reasonably be expected to result in the Company incurring any loss,
liability or expense in excess of $1 million. 
  
 3.14 Section
280G. Except as shown in Section 3.14 of the Company Disclosure Letter, there are no contracts, agreements or other arrangements which could result, as a result of the Merger or this Agreement, in the payment by the Company or by any of its
subsidiaries or the Surviving Partnership, Parent or Lima of an “Excess Parachute Payment” as that term is used in Section 280G of the Code or the payment by the Company or any of its subsidiaries or the Surviving Partnership, Parent or
Lima of compensation which will not be deductible because of Section 162(m) of the Code. 
  
 3.15 Affiliate Transactions. Except as shown in Section 3.15 of the Company Disclosure Letter, no Unitholder (to the extent of the Knowledge of any Officer), officer, director or general partner of the Company,
affiliate of the Company or a general partner, officer, director 

  

 12 

 
or general partner of an affiliate of the Company or member of the immediate family of any of the foregoing (to the extent of the Knowledge of the Officers)
has within the preceding 18 months: (a) borrowed from or loaned money or other property to the Company or an affiliate of the Company which has not been repaid or returned; or (b) except as described in the 2002 10-K (i) had any direct or indirect
material interest in any person which is a customer or supplier of the Company or an affiliate of the Company or (ii) has any other material contract, agreement or arrangement (oral or written) with the Company. 
  
 3.16 ERISA Matters. Section 3.16 of the Company Disclosure Letter
contains a complete and accurate list of each pension, retirement, profit sharing, savings, stock option, restricted stock, severance, termination, bonus, fringe benefit, insurance, supplemental benefit, medical, or education reimbursement,
including each material “employee benefit plan” as defined in Section 3(3) of ERISA, sponsored, maintained or contributed to or required to be contributed to by the Company for the benefit of current or former employees and/or officers of
the Company or any subsidiary (each a “Plan”). Company is in compliance in all material respects with and not in material violation of any and all material obligations and agreements of the Company under each Plan and is not in material
violation of any law, regulation, rule or other requirement of any governmental authority with respect to any Plan and no “reportable event” within the meaning of Section 4043 of ERISA (excluding any such event for which the thirty-day
notice requirement has been waived under the regulations to Section 4043 of ERISA) nor any event described in Section 4062 or 4063 of ERISA has occurred. Complete and accurate copies of the following items relating to each Plan, where applicable,
have been delivered to Parent or its representatives: (a) all material Plan documents and related trust agreements, including amendments thereto; (b) the most recent determination letter received from the IRS with respect to each such Plan that is
intended to be qualified under the Code; (c) the most recent summary plan description, summary of material modifications and all material communications to participants, other than individualized participant communications such as benefit
statements, projections, and the like; and (d) the most recent Annual Report (5500 Series) and accompanying schedules for each Plan as filed with the IRS. Each of the Plans that is intended to be “qualified” within the meaning of Section
401(a) of the Code has either been determined to be so qualified by the IRS, still has a remaining period of time under applicable Treasury Regulations or IRS pronouncements in which to apply for such determination letter and to make any amendments
necessary to obtain a favorable determination (and Section 3.16 of the Company Disclosure Letter indicates which are in the foregoing category) or has been established under a standardized prototype plan for which an IRS opinion letter has been
obtained by the plan sponsor and is valid as to the Plan. The Company has incurred no liability with respect to a Plan termination under Title IV of ERISA, a funding deficiency under Section 412 of the Code or Section 302 of ERISA or a withdrawal
from a “multiemployer plan” or under Section 4063 of ERISA. The consummation of the transactions contemplated under this Agreement will not change, create or accelerate any obligation or liability of the Company under any Plan or terminate
or require any material modification or change to any Plan except as provided in Section 1.13 hereof and as set forth in Section 3.16 of the Company Disclosure Letter. Each Plan can be amended, terminated or otherwise discontinued after the Merger
Date in accordance with its terms, without liability to Acquisition (other than ordinary administrative expenses typically incurred in a termination event). With respect to each Plan, the Company and its affiliates have complied in all material
respects with (x) the applicable health care continuation and notice provisions of COBRA and the regulations thereunder, (y) the applicable requirements 

  

 13 

 
of the Family Medical and Leave Act of 1993 and the regulations thereunder, and (z) the applicable requirements of the Health Insurance Portability and
Accountability Act of 1996 and the regulations thereunder. Set forth in Section 3.16 of the Company Disclosure Letter is a list of all employment and consulting agreements or similar type agreements of the Company and its subsidiaries. 

 
 3.17 Brokers or Finders. Except for the Financial Advisor (whose
fees will be paid by the Company), neither the Company nor any Company subsidiary or their respective affiliates has an obligation to pay any agent, broker, investment banker, financial advisor or other firm or Person any brokers’ or
finder’s fee or any other commission or similar fee in connection with any of the transactions contemplated by this Agreement. For purposes of this agreement the term “Person” will mean a natural person, partnership (general or
limited), corporation limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, governmental entity or other entity or organization. 
  
 3.18 Material Contracts. Section 3.18 of the Company Disclosure Letter
contains a true and complete list of the Material Contracts (as hereinafter defined) to which the Company or any of its subsidiaries is a party as of the date hereof which relates directly or indirectly to the Company or the assets owned or used by
the Company or the Company’s or any of its subsidiaries’ business or operations, including, without limitation, loans, guarantees or other evidence of indebtedness; mortgages or security agreements; warranties; contracts relating to
employment and services of independent contractors, the purchase of raw materials and supplies or other products or service contracts; contracts relating to the purchase or sale of real estate; development or construction contracts; the Plans;
contracts with any government authority or other third parties relating to the sharing of costs of the construction, installation and maintenance of streets, utility lines or other on or off-site improvements; contracts relating to the reproration
of real estate taxes and assessments following the Company’s acquisition of any real estate (excluding all contracts for the sale of homes entered into with a home buyer or for the purchase or sale of land entered into in either case in the
ordinary course of business consistent with past custom and practice); and any contract or agreement relating to the Units or a change in control of the Company. For purposes of this Section 3.18, a contract is deemed material (the “Material
Contracts”) if it is: (i) a contract for the sale of real estate or the purchase of real estate (under which legal title to such real estate has not yet been fully conveyed to the Company or any of its subsidiaries or the Company or any of its
subsidiaries has any outstanding liability or obligation) or the leasing of real estate (other than commercial tenant leases) or an option or other right to purchase or sell or lease (other than commercial tenant leases) real estate; (ii) a contract
or agreement (including any commercial tenant leases) that gives rise to rights, liabilities, expenses or obligations on the part of either the Company or another party exceeding $1.0 million in the aggregate throughout the term of the contract or
agreement; provided, however, that any such contract or agreement shall not be deemed material for purposes of this Section 3.18 if such contract or agreement is terminable or cancelable at will by the Company without any penalty, charge, fee or
further obligation or liability of the Company or any of its subsidiaries thereunder; (iii) each joint venture, partnership, limited liability company and other contract involving a sharing of profits, losses, costs, or liabilities by the Company
with any other person or relating to any ownership or equity interest of the Company in any person; (iv) a contract containing covenants that in any way purport to restrict the business activity of the Company or any of its subsidiaries or limit the
freedom of the Company or any of its subsidiaries 

  

 14 

 
to engage in any line of business or to compete with any person; or (v) union contracts or collective bargaining agreements. The Company has performed, in
all material respects, its obligations under each Material Contract to the extent that such obligations to perform have accrued. Except as set forth in Section 3.18 of the Company Disclosure Letter, no breach or default, alleged breach or default,
or event which would constitute a breach or default (by either Company or any party thereto, but as to any other party only to the Knowledge of the Officers) has occurred under any Material Contract or will occur as a result of this Agreement or the
consummation of the transactions contemplated hereunder, except to the extent that such breach or default would not reasonably be expected to have a Material Adverse Effect. 
  
 3.19 Conduct of Business. Since January 1, 2003 to the date of this Agreement, (i) the Company and its subsidiaries
have conducted their respective businesses in the ordinary course and in the same manner in which they were conducted prior to January 1, 2003 and (ii) no events or circumstances have occurred or material facts exist which, individually or in the
aggregate, have had a Material Adverse Effect on the Company which has not been disclosed in Section 3.19 of the Company Disclosure Letter. 
  
 ARTICLE 4 
 REPRESENTATIONS AND
WARRANTIES OF LIMA, 
 PARENT AND ACQUISITION 
  
 Each of Lima, Parent and Acquisition represents and warrants to the Company as follows: 
  
 4.1 Organization. Each of Lima is a Delaware corporation, validly
existing and in good standing under the laws of the State of Delaware. Parent is a limited liability company duly formed, validly existing and in good standing under the laws of the State of Delaware. Acquisition is a limited partnership duly
formed, validly existing and in good standing under the laws of the State of California. Parent has only two members. Acquisition General Partner is the sole general partner of Acquisition. Neither Parent nor Acquisition has engaged in any business
since the date of its organization other than as contemplated hereby. 
  
 4.2 Authorization. Each of Lima, Parent and Acquisition has the power and authority necessary to enable it to enter into this Agreement and carry out the transactions contemplated by this Agreement. All actions necessary to authorize
each of Lima, Parent and Acquisition to enter into this Agreement and carry out the transactions contemplated by it, including obtaining the approval of the board of directors of each Lima, partners of Acquisition and all of the members of Parent,
have been taken. This Agreement has been duly executed by each of Lima, Parent and Acquisition and, assuming the due authorization, execution and delivery of this Agreement by the Company, is a valid and binding agreement of each of Lima, Parent and
Acquisition, enforceable against each of Lima, Parent and Acquisition in accordance with its terms. 
  
 4.3 No Violations. Neither the execution and delivery of this Agreement or of any document to be delivered in accordance with this Agreement nor
the consummation of the transactions contemplated by this Agreement or by any document to be delivered in accordance with this Agreement will violate, result in a breach of, or constitute a default (or an event which, with notice or lapse of time or
both, would constitute a default) under, (a) the certificate of 

  

 15 

 
incorporation or bylaws of each Lima, (b) the certificate of formation or operating agreement of Parent or (c) the certificate of limited partnership or
limited partnership agreement of Acquisition, any agreement or instrument to which either of Lima, Parent or Acquisition or by which any of them is bound, any law, or any order, rule or regulation of any court or governmental agency or other
regulatory organization having jurisdiction over Lima, Parent and/or Acquisition, except violations or breaches of, or defaults under, agreements or instruments which would not have a material adverse effect on the ability of Lima, Parent or
Acquisition to timely consummate the transactions contemplated by this Agreement. 
  
 4.4 Consents; Approval. No governmental filings, authorizations, approvals, or consents, or other governmental action, other than (a) the expiration or termination of waiting periods under the HSR Act, if any,
(b) the approval of the Utilities Commission under the PUA and the filing of the Certificate of Merger as required by the RLPA, are required to permit each of Lima, Parent and Acquisition to fulfill all its obligations under this Agreement.

  
 4.5 Brokers or Finders. Neither Lima, Parent or
Acquisition, nor their respective affiliates, has any obligation to pay any agent, broker, investment banker, financial advisor or other firm or Person, any brokers’ or finders’ fee or any other commission or similar fee in connection with
any of the transactions contemplated by this Agreement. 
  
 ARTICLE 5 
 COVENANTS 
  
 5.1 Due Diligence Period. 
  
 (a) Inspections. In addition to the rights of Parent under Section 9.5, Parent will have the right, at any time during the period commencing on the
date of this Agreement and ending at the termination of this Agreement (the “Termination Date”) and at Parent’s sole cost and expense except as otherwise provided in Section 7.1(i) and Section 8.1, to investigate, review, inspect and
become familiar with all aspects of the land owned or leased, directly or indirectly, by the Company or any of its subsidiaries, together with any easements, access rights, air, water and riparian rights, development rights, solar rights and all
tenements, privileges and appurtenances thereto, including all improvements to such land (the “Real Property”), and the Company’s and its subsidiaries’ operations and businesses. Parent will, at Parent’s sole cost and
expense: (i) consult with such geotechnical engineers, contractors and other professional consultants as deemed necessary by Parent, (ii) conduct a physical inspection of the Real Property with such professional consultants as Parent deems
necessary; (iii) consult with employees of the Company; (iv) contact and consult with governmental and regulatory agencies and authorities and their representatives; and (v) make such other inquiries, evaluations, appraisals, inspections and
investigation as Parent deems necessary or advisable; provided, however, that any entry onto the Real Property by Parent or Parent’s Representatives will be made in accordance with and subject to Section 5.1(b). Subject to Section
7.1(i) and Section 8.1, Parent will be responsible for all costs and expenses incurred in connection with its investigations relating to the Real Property. In no event will the Company be liable for any amount or payments for any work done by or on
behalf of Parent. As used in this Agreement, the “Parent’s Representatives” means engineers, professional consultants, lenders, contractors, subcontractors, agents, employees, licensees, invitees or representatives or any other
parties 

  

 16 

 
directly or indirectly employed or contracted by Parent, Acquisition, any of Parent’s members or affiliates or reasonably under the control of any of
the foregoing or for whose acts any of the foregoing may be liable. 
  
 (b) License to Enter Real Property. The Company hereby grants to Parent a nonexclusive license and permission to enter upon the Real Property for the purpose of inspecting and investigating the Real Property and for no other purpose
and otherwise subject to Parent’s strict compliance with the following terms and conditions: 
  
 (i) The permission granted by this Section 5.1(b) is solely a license; Parent has no rights as an owner, purchaser or tenant solely by virtue of this
Agreement or the right to enter the Real Property. 
  
 (ii) The
term of this license will commence as of the date of this Agreement and will continue until the earlier of the Due Diligence Termination Date or the termination of this Agreement. Upon the expiration or termination of this license, Parent will
vacate all portions of the Real Property and remove any of Parent’s property located thereon. 
  
 (iii) Except for Parent’s Representatives, Parent will not authorize any other party or person to enter or use the Real Property during the term of
this license without the Company’s prior written consent. Parent will be totally responsible and liable for all acts and omissions of any of Parent’s Representatives to the same extent Parent is responsible and liable for the acts and
omissions of parties directly employed by Parent. In no event will the Company be liable to Parent for any amount whatsoever for work done by Parent or any of Parent’s Representatives on or with respect to the Real Property. Parent will be
solely responsible for all payments due all Parent’s Representatives whether or not such persons or parties are entitled to assert mechanics’ liens, stop notices, equitable liens or labor and material bond rights against the Real Property.

  
 (iv) Lima or Parent and each of Lima’s or Parent’s
Representatives, or Lima or Parent on behalf of Lima or Parent’s Representatives, will, at their sole cost and expense, maintain in full force and effect with reputable companies qualified to do business in California during any time when
Parent and/or any of Parent’s Representatives enter upon the Real Property or are otherwise taking any action with respect to the Real Property, the following insurance: 
  
 (A) If such party or person has employees, such person or party will maintain in force at all times prior to the Due
Diligence Termination Date workers’ compensation insurance, including employer’s liability (at a minimum limit of $1,000,000 each accident, $1,000,000 disease policy limit, $1,000,000 disease each employee) for all persons who will be
carrying out any work on or in connection with the Real Property. Such insurance will be in accordance with the requirements of the most current and applicable workers’ compensation insurance laws in effect from time to time. 
  
 (B) Such person will maintain in force at all times prior to the Due
Diligence Termination Date comprehensive or commercial general liability insurance on an 

  

 17 

 
“occurrence” basis with a combined single limit for death, bodily injury and property damage of $5,000,000 per occurrence. 
  
 (C) Such person will maintain in force at all times prior to the Due
Diligence Termination Date owned, hired and non-owned automobile liability insurance covering all use of all automobiles, trucks and other motor vehicles utilized by or on behalf of Parent or Parent’s Representative in connection with
investigations of and access to/from the Real Property with a combined single limit for bodily injury and property damage of $1,000,000 or in an amount equal to the limit from time to time carried by Parent or Parent’s Representatives, if
greater. 
  
 (D) The limits of liability of the insurance
coverage specified in this Section 5.1(b) may be provided by any combination of primary and excess liability insurance policies. Parent hereby waives all rights against the Company and its subsidiaries and affiliates (and each of their respective
employees, partners, managers, representatives, agents and officers) for damages caused by fire and other perils and any other risk to the extent covered by Parent’s policies of insurance or required to be covered by Parent’s policies of
insurance as set forth above. The Company will be included as an additional insured in a form acceptable to the Company under the coverage specified above (exclusive of worker’s compensation), and Parent will deliver certificates issued by
Parent’s insurance carriers acceptable to the Company showing such policies in force for the specified period. Nothing contained in these insurance requirements is to be construed as limiting the type, quality or quantity of insurance Parent
should maintain or the extent of Parent’s responsibility for payment of damages resulting from its operations. 
  
 (c) Compliance with Rules. Parent and Lima will comply with, and will cause Parent’s Representatives to comply with, all oral or written rules
and regulations established by the Company from time to time for access to and entry on the Real Property, including, without limitation, the following: 
  
 (i) The Company reserves the right to prohibit and restrict access at certain times and from time to time without notice to Lima, Parent and
Parent’s Representatives; provided, however, that such prohibitions and restrictions shall not negatively impact Parent’s or Parent’s Representatives’ ability to conduct their due diligence investigation. No access and/or use of
the Real Property will be permitted or otherwise undertaken except during reasonable business hours and such other times as authorized by the Company. 
  
 (ii) Lima and Parent (and their respective representatives) will be subject to being stopped by the Company’s security personnel and will cooperate
with such security personnel, including providing personal and company identification. 
  
 (iii) The Company may require that Lima and Parent (and their respective representatives) be accompanied at any or all times when accessing the Real Property or on the Real Property by the Company or its authorized
representatives so long as the foregoing does not negatively impact Parent’s or Parent’s Representatives’ ability to conduct their due diligence investigation. 
  

 18 

 (iv) None of the following will be permitted on the Real Property: drugs or narcotics (except subject to
a written medical prescription therefor and which is evidenced thereon), alcohol, firearms or fires. 
  
 (v) The Company will have the right to participate in, and supervise, all meetings between Parent or Parent’s Representatives and the employees of
the Company or representatives of any governmental agency or entity. 
  
 (d) Compliance with Applicable Laws. Lima and Parent (and their respective representatives) will comply with all applicable federal, state or local laws, ordinances, rules, regulations (whether under common law, statute, rule,
regulation or otherwise), permits, orders and any other requirements of governmental authorities and agencies having jurisdiction over the Real Property (“Applicable Laws”). Parent will give the Company immediate written notice of any
known violation, potential violation or non-compliance by Lima or Parent or their respective representatives with any Applicable Laws. 
  
 (e) Risk. All persons who enter upon the Real Property pursuant to the license granted in Section 5.1(b) do so at their sole and exclusive risk.
Parent acknowledges that neither the Real Property nor the access routes thereto will be maintained to facilitate viewing or inspection of the Real Property and that the same may contain hazardous conditions. The Company will not: (i) have any duty
or obligation to inspect the Real Property or the access routes thereto, (ii) have any duty or obligation to warn any person of any patent or latent defect, condition or risk that might be incurred by Parent and Parent’s Representatives at the
Real Property or in transit thereto; or (iii) be liable for any damage of any kind whatsoever to any property belonging to or used by Parent or any of Parent’s Representatives while accessing or on the Real Property or otherwise in connection
with the Real Property. Lima and Parent hereby waive all claims and demands relating to the matters described in the preceding sentence. 
  
 (f) No Interference. Parent acknowledges that the Company, utility companies and governmental authorities may be in the process of grading,
constructing and installing infrastructure, landscaping and other improvements for the Real Property. Neither Parent’s access to nor use of the Real Property under this license will interfere with the reasonable use and enjoyment thereof by the
Company or any persons claiming through or under the Company. 
  
 (g) No Improvements. Neither Parent nor any of Parent’s Representatives will grade the Real Property, construct or install any improvements or structures of any kind on the Real Property or bring or permit any hazardous
materials to be located on the Real Property in violation of any law. 
  
 (h) Repair of Real Property; Mechanics’ Liens. Parent will, at its sole cost and expense, repair any damage done to the Real Property during the term of this license by Parent or any of Parent’s Representatives. Upon the
termination or expiration of this license, Parent will repair and restore every portion of the Real Property to at least as good condition as existed prior to Parent’s entry onto the Real Property and otherwise attributable to activities of
Parent and any Parent’s Representatives. Parent will, at its sole cost and expense, promptly cause the removal of all exceptions to title and otherwise pay and discharge all mechanics’, 

  

 19 

 
materialmen’s, contractors’ or subcontractors’ or other liens or claims, or possible liens or claims or similar exceptions arising from
Parent’s inspections and investigations of and on the Real Property. Any and all increased costs of any title policy arising from or due to the removal of such exceptions will be borne by Parent. 
  
 5.2 Company’s Activities Until Effective Time. From the date of
this Agreement to the Effective Time, or such earlier time as this Agreement is terminated in accordance with Article 7, the Company will, and will cause each of its subsidiaries to, except with the written consent of Parent (which consent will not
be unreasonably withheld, conditioned or delayed): 
  
 (a)
Operate its business in the ordinary course and in a manner consistent with past practices. 
  
 (b) Use commercially reasonable efforts to obtain in the ordinary course, and not request a continuance, without the approval of Parent (which approval will not be unreasonably conditioned, withheld or delayed), the
Newhall Ranch Entitlement. “Newhall Ranch Entitlement” means obtaining all approvals, permits, consents and other authorizations from government and quasi-government agencies for the entitlement and development of the project known as
Newhall Ranch, including, defending litigation and other claims under California Environmental Quality Act, the Subdivision Map Act, California Zoning and Planning Law, Federal and state Endangered Species Acts, the Clean Water Act and local
ordinances (it being understood that the receipt of such approvals, permits, consents and other authorizations shall not be a condition to Parent’s, Lima’s and Acquisition’s obligations hereunder). 
  
 (c) Use commercially reasonable efforts to maintain the goodwill and value of
its business and the continued employment of its executives and other key employees and to maintain good relationships with the customers, vendors, suppliers, contractors, lenders, governmental and regulatory agencies and authorities and others with
which it does business. 
  
 (d) At its expense, use commercially
reasonable efforts to maintain all its assets in good repair and condition, except to the extent of reasonable wear and use and damage by fire or other casualty. 
  
 (e) Not make any borrowings, other than borrowings in the ordinary course of business consistent with past practices under
working capital lines which are disclosed in the notes to the consolidated balance sheet included in the 2002 10-K. 
  
 (f) Not incur or enter into any contractual commitments involving capital expenditures, loans or advances, and not voluntarily incur any contingent
liabilities, except, in each case, in the ordinary course of business consistent with past practices. 
  
 (g) Not redeem or purchase any of the outstanding Units and not make or declare any distributions of any kind or repayments of debt to its partners (other
than payments by subsidiaries of the Company to the Company or to other wholly owned subsidiaries of the Company), except in a manner consistent with past practice or in accordance with existing contractual obligations described in Section 5.2(g) of
the Company Disclosure Letter; provided, however, that redemptions or purchases of any outstanding Units will not be made at a purchase price in excess of the Merger Consideration; provided, further, however, that, notwithstanding

  

 20 

 
the foregoing, the distributions made by the Company in any fiscal quarter from the date of this Agreement through the Merger Date with respect to
outstanding Units may not exceed $0.10 per Unit in each of the second, third and fourth fiscal quarters and in the first fiscal quarter the greater of $0.10 per Unit or the amount by which federal income tax (assuming the then highest marginal
federal income tax rate) payable by a holder of a Unit as a result of the taxable income allocated to such holder by the Company with respect to the prior calendar year exceeds $0.30 per Unit. 
  
 (h) Not make any loans or advances (other than advances for travel and other
normal business expenses otherwise permitted by law) to Unitholders or directors, officers or employees of the Company or its General Partners or any affiliates thereof. 
  
 (i) Maintain its books of account and records in the usual manner, in accordance with GAAP applied on a basis consistent
with the basis on which they were applied in prior years (except to the extent such bases of reporting are required to be changed by changes in GAAP or applicable law), subject to normal year-end adjustments and accruals. 
  
 (j) Comply in all material respects with all applicable laws and regulations
of governmental agencies. 
  
 (k) Except as set forth in Section
5.2(k) of the Company Disclosure Letter, not purchase, sell or otherwise dispose of or encumber any property or assets, except in each case in the ordinary course of business and not in violation of this Agreement. 
  
 (l) Not sell any real property or asset out of the ordinary course of
business or at a price that is inconsistent with the Company’s past practices except for the sales listed in Section 5.2(l) of the Company Disclosure Letter. 
  
 (m) Not enter into or amend any employment, severance, change in control or similar agreements or arrangements, or increase
the salaries of any employees, other than through normal annual increases consistent with past practices. 
  
 (n) Not adopt or amend any employee compensation, employee benefit or post-employment benefit plan or agreement including, the Plans, other than as
required by a change in law. 
  
 (o) Not amend its Governing
Documents. 
  
 (p) Except as set forth in Section 5.2(p) of the
Company Disclosure Letter, (i) not issue or sell any of its stock, membership units or partnership units (except upon exercise of Awards which are outstanding on the date of this Agreement) or issue or grant any Awards (except Awards having a
purchase or exercise price payable to the Company at least equal to the amount of the Merger Consideration as of the date of the grant of any such Award) or any other options, warrants or convertible or exchangeable securities or other rights to
acquire equity securities or appreciations rights, (ii) not split, combine or reclassify its outstanding stock, membership units or partnership interests, and (iii) represent and warrant that as of the date of this Agreement none of the actions set
forth in clauses (i) and (ii) above has occurred since July 18, 2003. 
  

 21 

 (q) Except as set forth in Section 5.2(q) of the Company Disclosure Letter, not construct any commercial
buildings. 
  
 (r) Not materially reduce the amount or modify the
type and scope of any insurance coverage provided by existing insurance policies (including, without limitation, not allowing any policy to expire); 
  
 (s) Not make or change any material election in respect of Taxes, adopt or change any accounting method in respect of Taxes, file any material Tax Return
or any amendment to a material Tax Return except in the ordinary course of business consistent with past practices, enter into any closing agreement, settle any claim or assessment in respect of Taxes, or consent to any extension or waiver of the
limitation period applicable to any claim or assessment in respect of Taxes. 
  
 (t) Not authorize or enter into any agreement to take any of the actions which constitute negative covenants referred to in, or otherwise are restricted or prohibited by, Sections 5.2(a) through 5.2(s). 
  
 5.3 Parent’s, Acquisition’s and Lima’s Activities Until
Effective Time. From the date of this Agreement to the Effective Time, or such earlier time as this Agreement is terminated in accordance with Article 7, each of Lima, Parent and Acquisition will, and will cause each of its subsidiaries to,
except with the written consent of the Company: 
  
 (a) Not take
action, or not fail to take any action, which could reasonably be expected to prevent or delay the provision of funding by Lima or Parent in order to pay the Merger Consideration. 
  
 (b) Provide the Company all information reasonably requested by the Company and all documents regarding the provision of
funding by Lima or Parent in order to pay the Merger Consideration. 
  
 (c) Not purchase (i) any Units in excess of 10% of the Company’s outstanding Units prior to the Company Meeting, or (ii) any Units at any time that any of Lima, Parent or Acquisition is in possession of any material, non-public
information, except by operation of the Merger. 
  
 (d) Not
authorize or enter into any agreement to take any of the actions referred to in Sections 5.3(a) and 5.3(c). 
  
 5.4 Regulatory Filings; Securities Filings. 
  
 (a) The Company, Lima and Parent and its members will each make as promptly as practicable the filing it is required to make under the HSR Act and the PUA
with regard to the transactions which are the subject of this Agreement and each of them will take all reasonable steps within its control (including providing information to the Federal Trade Commission and the Department of Justice, or the
Utilities Commission, as the case may be) to cause the waiting periods required by the HSR Act to be terminated or to expire, and approval of the Utilities Commission to be obtained, as promptly as practicable. The Company, Lima and 

  

 22 

 
Parent will each provide information and cooperate in all other respects to assist the other of them in making its filing under the HSR Act and the PUA.

  
 (b) Any report that the Company is required to file after the
date of this Agreement with the SEC will contain all of the information required to be included in such report and, when such report is filed, it will not contain an untrue statement of a material fact or omit to state a material fact necessary to
make the statements in such report, in light of the circumstances under which they are made, not misleading. 
  
 5.5 Unitholders’ Action. Subject to the Company’s right to terminate this Agreement pursuant to Section 7.1, the Company will take all
action which is necessary in accordance with applicable law and its Governing Documents to call and convene a meeting of the Unitholders (a “Company Meeting”) to consider and vote upon approval of the principal terms of the Merger, which
meeting shall be held regardless of whether the General Partners have withdrawn or modified their recommendation to approve the Merger unless this Agreement is terminated pursuant to Article VII. The proxy statement distributed by the Company with
respect to the Company Meeting (“Proxy Statement”) will include the recommendation of the General Partners that the Unitholders vote to approve the principal terms of the Merger, unless the General Partners determine in good faith, after
consultation with counsel about the nature of their fiduciary duties, that the failure to amend, withdraw or modify their recommendation of the Merger would reasonably be expected to constitute a breach of their fiduciary duties to the Unitholders
under applicable law; provided that for all purposes of this Agreement, a reasonable delay (not in excess of 10 days) in the date of the Company Meeting to allow the General Partners to consider a Third Party (as defined in Section 5.7)
proposal for an Acquisition Transaction (as defined in Section 5.7) will not constitute a withdrawal, change or modification of the General Partners’ recommendation. Subject to the preceding sentence, the Company will (a) use commercially
reasonable efforts to solicit from the Unitholders proxies or votes in favor of approval of the principal terms of the Merger, (b) mail the Proxy Statement to Unitholders as soon as practicable after the SEC has cleared the Proxy Statement for
mailing but in no event later than five business days thereafter, and (c) cause the Company Meeting to be held as soon as practicable after mailing of the Proxy Statement but in no event later than 45 days after the date on which the Proxy Statement
is cleared for mailing. 
  
 5.6 Proxy Statement.

  
 (a) The Company will prepare and file with the SEC as soon as
practicable after the date of this Agreement a Proxy Statement. Parent, Lima and the Company will (i) consult with each other’s counsel, (ii) cooperate with each other in good faith (including the Company providing Lima and Parent and their
respective counsel for comment drafts of the Proxy Statement (which drafts shall be promptly reviewed by them) and including any additions or changes reasonably requested by them), and (iii) provide all information about itself and its affiliates
which is required to be included in the Proxy Statement in a timely manner so the Proxy Statement can be filed with the SEC as soon as reasonably practicable. The Company will cause the Proxy Statement to comply as to form in all material respects
with the applicable provisions of the Exchange Act and the rules under the Exchange Act. The Company will use commercially reasonable efforts, and Parent and Lima will cooperate with the Company, to cause the Proxy Statement to be cleared for
mailing by the staff of the SEC as promptly as 

  

 23 

 
practicable after it is filed (including, without limitation, responding to any comments received from the SEC with respect to the Proxy Statement) and to
keep the Proxy Statement accurate as long as is necessary to consummate the Merger. The Company will, as promptly as practicable, provide to Parent copies of any written comments received from the SEC with regard to the Proxy Statement and will
advise Parent of any comments with respect to the Proxy Statement which are received orally from the staff of the SEC. 
  
 (b) Parent, Lima and Acquisition each represents and warrants to the Company, and the Company represents and warrants to Parent, that none of the
information supplied by it for inclusion, or included in a document filed by it which is incorporated by reference, in the Proxy Statement and any amendments or supplements to it, will, at the time it is mailed to Unitholders and at the time of the
Company Meeting, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If
at any time before the Company Meeting an event occurs with respect to the Company or any of its subsidiaries, or with respect to Parent or any of its members, as the case may be, which is required to be described in the Proxy Statement, an
amendment or supplement to the Proxy Statement will be filed with the SEC as promptly as practicable and, to the extent required by law, will be distributed to the Unitholders. The Company will not make any amendment or supplement to the Proxy
Statement without the approval of Parent, which approval will not be unreasonably withheld (and will under no circumstances be withheld to the extent the amendment or supplement is required to cause the Proxy Statement to comply with applicable law
or relates to a withdrawal, modification or amendment to the General Partners’ recommendation as contemplated by Section 5.5). The Company will advise Parent promptly after it receives notice that the Proxy Statement has been cleared for
mailing or that any supplement or amendment to it has been filed, that any order suspending or preventing the use of the Proxy Statement has been issued, of any request by the staff of the SEC for an amendment of the Proxy Statement, or of the
receipt of comments or requests for additional information from the staff of the SEC or the response to any such comments or requests for additional information. 
  
 5.7 No Solicitation of Offers; Notice of Proposals from Others. 
  
 (a) Neither the Company nor any of its subsidiaries will, and the Company
will use commercially reasonable efforts to cause its and its subsidiaries’ respective directors, officers, employees, investment bankers, attorneys and other agents and representatives not to, directly or indirectly (i) solicit, initiate or
knowingly facilitate or encourage (including by way of furnishing or disclosing nonpublic information) any inquiry or the making of any offer or proposal by any corporation, partnership, trust, person or other entity or group (a “Third
Party”) with respect to, or that could reasonably be expected to lead to, any acquisition of Units representing 15% or more of the fully diluted Units as of the date of determination, any merger, consolidation, asset purchase, unit exchange,
business combination, tender offer, exchange offer or similar transaction involving the acquisition of all or a substantial amount of the assets or real property of the Company and its subsidiaries, taken as a whole, out of the ordinary course of
the Company’s business, or a 15% or greater fully diluted equity interest in (including by way of tender offer), or a recapitalization or restructuring of, the Company or any of its material subsidiaries (any of those transactions being an
“Acquisition Transaction”) or (ii) negotiate, explore or otherwise communicate in any way with any Third Party with respect to any possible 

  

 24 

 
Acquisition Transaction, or enter into, approve or recommend any agreement, arrangement or understanding requiring it to abandon, terminate or otherwise fail
to consummate the Merger or any other of the transactions contemplated by this Agreement; provided, however, that the Company may, in response to a proposal which was not solicited after the date of this Agreement furnish information
to, and engage in discussions or negotiations with, a Third Party, if, but only if, (A) the General Partners determine in good faith, after consultation with a financial advisor of nationally recognized reputation, that the Third Party is
financially capable of completing the transaction which is the subject of the proposal and that, if completed, that transaction would, taking all relevant circumstances into consideration, reasonably be expected to result in greater value to the
Unitholders than the transactions contemplated by this Agreement and (B) before furnishing or disclosing any non-public information to, or entering into discussions or negotiations with, the Third Party, the Company receives from the Third Party an
executed confidentiality agreement with terms no less favorable in the aggregate to the Company than those contained in the Confidentiality Agreement, dated as of February 28, 2002 (as amended, the “Confidentiality Agreement”), among each
of Lima and the Company, which confidentiality agreement does not provide for any exclusive right to negotiate with the Company or payments by the Company. Nothing in this Section will prohibit the Company from complying with Rule 14e-2 and Rule
14d-9 under the Exchange Act with regard to a tender offer or an exchange offer or prohibit the Company from selling assets or properties in the ordinary course of business. 
  
 (b) The Company will (i) no later than the end of the first business day after the Company receives an inquiry, proposal or
offer with respect to a possible Acquisition Transaction or a request for non-public information relating to the Company in connection with a possible Acquisition Transaction or for access to its or any of its subsidiaries’ properties, books or
records by any Third Party that informs the General Partners that the Third Party is considering making, or has made, a proposal or offer with respect to an Acquisition Transaction (any such inquiry proposal, offer or request being an
“Acquisition Proposal”), notify Parent in writing of the inquiry, proposal, offer or request, (ii) in that written notice, indicate in reasonable detail the identity of the Third Party (including the name of the Third Party) and the terms
and conditions of the proposal or offer, (iii) promptly notify Parent of any determination by the General Partners that the Company should furnish information to, or engage in discussions or negotiations with, any Third Party, and (iv) keep Parent
informed of the progress of any discussions or negotiations with any Third Party. 
  
 (c) The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties (other than Parent) which are currently being conducted before the date of this
Agreement with respect to any possible Acquisition Transaction, and will inform any such parties of the Company’s obligations under this Section 5.7. 
  
 5.8 Company Financial Information. To the extent Lima is required under the Securities Act or the Exchange Act and/or the rules promulgated
thereunder or determines to include in any of their respective SEC filings to be made between the execution and delivery of this Agreement and the Merger Date the Company’s financial statements or financial information (in whole or in part) for
any period or periods prior to the Merger Date (including prior years’ financial statements or information), the Company agrees to make such financial statements and information available to Lima and to cause its independent public accounts to
discuss same and 

  

 25 

 
cooperate with Lima in order for Lima to be able to include such financial statements and information in their respective SEC filings. 
  
 5.9 Company Disclosure Letter. Notwithstanding anything to the
contrary contained herein, Lima, Parent and Acquisition acknowledge that the Company Disclosure Letter has not yet been delivered to them and the Company covenants and agrees to deliver to Parent, as soon as practicable but in no event later than
seven (7) days after the date of this Agreement (the “Delivery Date”), the Company Disclosure Letter in form reasonably satisfactory to Parent. In the event that such Company Disclosure Letter is not delivered to Parent on or before the
Delivery Date, the Due Diligence Termination Date shall be extended by the number of days after the Delivery Date on which such Company Disclosure Letter was delivered to Parent. 
  
 ARTICLE 6 
 CONDITIONS 
  
 6.1 Conditions to the
Company’s Obligations. The obligations of the Company to complete the Merger are subject to satisfaction on or before the Merger Date of the following conditions (any or all of which may be waived by the Company): 
  
 (a) The representations and warranties of Lima, Parent and Acquisition
contained in this Agreement will, except as contemplated by this Agreement, be true and correct on the Merger Date with the same effect as though made on that date except that representations or warranties which relate expressly to a specified date
or a specified period need only have been true and correct (without giving effect to any qualifications as to “materiality” or any “material adverse effect” set forth therein) in all material respects with respect to the
specified date or period, and Lima and Parent will have delivered to the Company a certificate dated that date and signed by the president or a vice president or similar representative of Lima and Parent to that effect. 
  
 (b) Lima, Parent and Acquisition will have fulfilled in all material respects
all their obligations under this Agreement required to have been fulfilled on or before the Merger Date, and Lima and Parent will have delivered to the Company a certificate dated that date and signed by the president or a vice president or similar
representative of Lima and Parent to that effect. 
  
 (c) Lima or
Parent will have delivered to the Company reasonable evidence that the monies required to pay the Merger Consideration have been or concurrently with the filing of the Certificate or Merger will be wire transferred, in the form of immediately
available funds, to the Distributing Agent. 
  
 6.2 Conditions
to Parent’s, Lima’s and Acquisition’s Obligations. The obligations of Parent, Lima and Acquisition to complete the Merger are subject to satisfaction on or before the Merger Date of the following conditions (any or all of which
may be waived by Parent): 
  
 (a) The representations and
warranties of the Company contained in this Agreement will be true and correct in all respects (without giving effect to any qualifications as to “materiality” or any “Material Adverse Effect on the Company” set forth therein) on
the Merger Date with the same effect as though made on that date (except that representations or 

  

 26 

 
warranties which relate expressly to a specified date or a specified period need only have been true and correct with regard to the specified date or
period), except where the failure of such representations and warranties to be true and correct (without giving effect to any qualifications as to “materiality” or any “Material Adverse Effect on the Company” set forth therein)
would not, individually or in the aggregate, result in a Material Adverse Effect on the Company; and the Company will have delivered to Parent a certificate dated that date and signed by the president or a vice president of the Managing General
Partner to that effect. 
  
 (b) The Company will have fulfilled in
all material respects all its obligations under this Agreement required to have been fulfilled on or before the Merger Date. 
  
 (c) No action will be pending against the Company, Lima, Parent or Acquisition relating to the transactions which are the subject of this Agreement which
presents a reasonable likelihood of resulting in an award of damages against the Company, Lima, Parent, Acquisition or the Surviving Partnership which, in the case of the Company or the Surviving Partnership, would reasonably be expected to have a
Material Adverse Effect on the Company or the Surviving Partnership or, in the case of the other foregoing entities, would reasonably be expected to have a material adverse effect on them. 
  
 (d) Since the date of this Agreement, no events will have occurred and no
circumstances will have occurred that, individually or in the aggregate, have resulted in or would reasonably be expected to result in a Material Adverse Effect on the Company. 
  
 (e) The Company will have delivered to Parent reasonable evidence that any of the Escrow Fund released to the Company prior
to the Merger Date has been or concurrently with the filing of the Certificate of Merger will be wire transferred, in the form of immediately available funds, to the Distributing Agent. 
  
 6.3 Conditions to the Parties’ Obligations. The obligations of each of the parties to complete the Merger are
subject to satisfaction on or before the Merger Date of the following conditions (any or all of which may be waived by the parties, except as prohibited by applicable law): 
  
 (a) Any waiting period under the HSR Act with regard to the Merger will have expired or been terminated, without the
imposition of any cost, restriction or requirement on the operation of the Surviving Partnership’s business that would reasonably be expected to have a Material Adverse Effect on the Company (including the Surviving Partnership). 
  
 (b) The Utilities Commission will have approved the transfer of a controlling
interest in the capital stock of Valencia Water Company, a California corporation, as a result of the Merger, without the imposition of any cost or restriction on the operation of the Surviving Partnership’s business that would be reasonably
expected to have a Material Adverse Effect on the Company (including the Surviving Partnership). 
  
 (c) No statute, rule or regulation will have been enacted or promulgated by any governmental authority which prohibits the consummation of the Merger, and
there will be no order or injunction of a court of competent jurisdictions in effect precluding the consummation of the Merger. 
  

 27 

 (d) The principal terms of the Merger will have been approved by the holders of a majority of the Units
entitled to vote on the matter. 
  
 (e) No order will have been
entered by any court or governmental authority and be in force which invalidates this Agreement or materially restrains Parent, Acquisition or the Company from completing the transactions which are the subject of this Agreement. 
  
 ARTICLE 7 
 TERMINATION 
  
 7.1 Right to Terminate. This Agreement may be terminated at any time prior to the Effective Time (whether or not the Unitholders have approved the principal terms of the Merger): 
  
 (a) By mutual written consent of the Company (after receiving approval from
the General Partners) and Parent. 
  
 (b) By the Company if (i) it
is determined that there has been a breach of any of the representations and warranties of Lima, Parent or Acquisition contained in this Agreement which would result in the failure of the condition set forth in Section 6.1(a) to be satisfied as of
the time such representation or warranty shall have been breached (assuming the Merger Date were as of such time), or (ii) if Lima, Parent or Acquisition has breached any of their respective obligations contained in this Agreement which would result
in the failure of the condition set forth in Section 6.1(b) to be satisfied as of the time of such breach (assuming the Merger Date were as of such time); provided, however, that, if a breach of Lima’s, Parent’s or
Acquisition’s representations, warranties or obligations occurring as of a date subsequent to the date of this Agreement is curable by such parties and such parties are continuing to exercise all reasonable efforts to cure such breach, then the
Company may not terminate this Agreement under this Section 7.1(b) on account of such breach until 10 business days subsequent to the date of such breach if such breach has not been cured. 
  
 (c) By Parent, on or before the Due Diligence Termination Date, if Parent (in
its subjective judgment made in its sole discretion) is not satisfied with the results of its due diligence investigation of the Company. 
  
 (d) By Parent if (i) it is determined that there has been a breach of any of the representations and warranties of the Company contained in this Agreement
which would result in the failure of the condition set forth in Section 6.2(a) to be satisfied as of the time such representation or warranty shall have been breached (assuming the Merger Date were as of such time), or (ii) if the Company has
breached any of its obligations contained in this Agreement which would result in the failure of the condition set forth in Section 6.2(b) to be satisfied as of the time of such breach (assuming the Merger Date were as of such time);
provided, however, that, if a breach of the Company’s representations, warranties or obligations occurring as of a date subsequent to the date of this Agreement is curable by the Company and the Company is continuing to exercise
all reasonable efforts to cure such breach, then Parent may not terminate this Agreement under this Section 7.1(d) on account of such breach until 10 business days subsequent to the date of such breach if such breach has not been cured. 

 

 28 

 (e) By either Parent or the Company if the Merger is not consummated on or before December 31, 2004 which
date will be extended to March 31, 2005 if the required approval under the PUA has not been received from the Utilities Commission or if such order has been stayed or enjoined as of December 31, 2004 (such date, as may be extended hereunder, being
referred to as the “Outside Termination Date”); provided, however, that the right to terminate this Agreement pursuant to this Section 7.1(e) will not be available to any party whose failure to perform or observe in any
material respect any of its obligations under this Agreement has been the cause of, or resulted in, the failure of the Merger to occur on or before the Outside Termination Date. 
  
 (f) By either Parent or the Company, if any court of competent jurisdiction or other governmental authority issues an order
(other than a temporary restraining order), decree or ruling, or takes any other action, restraining, enjoining or otherwise prohibiting the Merger, and that order, decree, ruling or other action becomes final and nonappealable. 
  
 (g) By either Parent or the Company, if the Unitholders fail to approve the
principal terms of the Merger at the Company Meeting. 
  
 (h) By
Parent, if the General Partners (i) withdraw, change or modify in a manner materially adverse to Parent their recommendation that the Unitholders vote to approve the principal terms of the Merger; or (ii) adopt resolutions approving or otherwise
authorizing or recommending or otherwise approve, authorize or recommend an Acquisition Transaction (other than the Merger) to the Unitholders. 
  
 (i) By the Company, if before the principal terms of the Merger are approved by the holders of the majority of the Units entitled to vote on the matter at
the Company Meeting (i) the Company or either of its General Partners receives an Acquisition Proposal in which a person or group (a “Potential Acquiror”) makes a specific proposal for an Acquisition Transaction on specific terms (a
“Firm Proposal”), or a Potential Acquiror commences a cash tender offer or exchange offer for at least 50% of the then outstanding Units (other than any Units already owned by the Potential Acquiror), (ii) within ten (10) days after the
Company or its General Partners receives the Firm Proposal or the tender offer or exchange offer is commenced, the General Partners determine that the Firm Proposal or the tender offer or exchange offer is a Superior Proposal and resolves to accept
the Superior Proposal, or to recommend that the Unitholders vote for, authorize, or tender their Units in response to, the Superior Proposal, (iii) the Company has given Parent at least three (3) business days’ prior notice of the terms of the
Superior Proposal (including the consideration per Unit, which the Unitholders would receive as a result of the Superior Proposal), and that it intends in three business days to terminate this Agreement pursuant to this Section 7.1(i) unless within
the three (3) business day period Lima and Parent make a written offer that the Company determines, in good faith after consultation with its financial advisors, is at least as favorable as the Superior Proposal set forth in the notice, and (iv) the
Company has (A) paid Parent $35 million (the “Special Termination Fee”), (B) reimbursed Parent for all the out-of-pocket expenses which Lima and Parent or their subsidiaries (including Acquisition) incurred in connection with this
Agreement and the transactions contemplated by it (including reasonable fees and expenses of professionals and other consultants, commitment fees and other financing costs, and out of pocket costs incurred by employees in investigating the business
(including the Real Property), operations and 

  

 29 

 
financial condition of the Company and in connection with the negotiation of this Agreement and efforts to carry out the transactions which are the subject
of this Agreement) (the “Parent Expenses”) regarding which Parent has presented reasonable documentation to the Company as of the date of termination (the “Parent Incurred Expenses”), (C) agreed in writing to reimburse Lima and
Parent for all Parent Expenses for which Parent presents after the date of termination reasonable documentation to the Company (the “Parent Invoiced Expenses”) as soon as practicable after the presentation thereof, up to a total
reimbursement of Parent Expenses under clauses (B) and (C) not exceeding $5 million, and (D) either terminated the Escrow Agreement and instructed the Escrow Agent to return the Escrow Fund it is then holding to Parent, if the Escrow Agent is then
holding any portion of the Escrow Fund, and/or returned any of the Escrow Fund released to the Company to Parent (without any interest earned after the Escrow Fund was released to the Company). A “Superior Proposal” is a proposal for an
Acquisition Transaction or a tender offer or exchange offer which would result in the Unitholders receiving consideration which the General Partners determine in good faith, considering all relevant factors (including, but not limited to, financing
contingencies, any due diligence out to the extent that the Due Diligence Termination Date has passed, the financial wherewithal of the Potential Acquiror to carry out the transaction and the overall likelihood of consummation) and after
consultation with their financial advisor, would deliver superior value (valuing non-cash consideration at its fair value as determined in good faith by the General Partners after consultation with their financial advisor) to the Unitholders (after
giving effect to the payment of the fees and expenses contemplated by clause (iv)) than the transactions contemplated by this Agreement. 
  
 7.2 Manner of Terminating Agreement. If at any time the Company or Parent has the right under Section 7.1 to terminate this Agreement, it can
terminate this Agreement by a written notice to the other of them that it is terminating this Agreement; provided, that the right to terminate this Agreement pursuant to Section 7.1(c) may only be exercised on or before the Due Diligence
Termination Date. 
  
 7.3 Effect of Termination. If this
Agreement is terminated pursuant to Section 7.1, after this Agreement is terminated, neither party will have any further rights, obligations or liabilities under this Agreement, other than the rights and obligations under (a) Section 8.1, (b) the
agreement to reimburse expenses described in Section 7.1(i), (c) the right of the applicable party to receive the Escrow Fund then held pursuant to the terms of the Escrow Agreement and (d) the rights and obligations under Section 9.10(b) hereof.

  
 7.4 Survival. The representations and warranties in
this Agreement or in any certificate delivered pursuant to this Agreement will terminate at the earlier to occur of the (a) Effective Time or (b) the termination of this Agreement pursuant to this Article 7, and none of the Company, Lima, Parent or
Acquisition, nor any of their respective affiliates, stockholders, members or partners, as the case may be, will have any rights or claims as a result of any of those representations or warranties after such time except the representations and
warranties in Sections 3.17 and 4.5 shall survive the termination of this Agreement. 
  

 30 

 ARTICLE 8 
 OTHER AGREEMENTS 
  
 8.1
Liquidated Damages. 
  
 (a) If at any time prior to or at
the Company Meeting (i) the General Partners withdraw or change or modify in a manner materially adverse to Parent their recommendation that the Unitholders vote in favor of the principal terms of the Merger, but (ii) this Agreement is not
terminated before the Company Meeting and (iii) at that Company Meeting, the principal terms of the Merger are not approved by holders of the majority of the Units entitled to vote on the matter, within three business days after the day on which
that Company Meeting is held, the Company will (A) return to Parent the amount (without interest) released to the Company from the Escrow Fund pursuant to the Escrow Agreement, (B) pay $30 million (the “Termination Fee”) to Parent, (C)
reimburse Parent for all Parent Incurred Expenses, (D) agree in writing to reimburse Parent for all Parent Invoiced Expenses (up to a total reimbursement of Parent Expenses under clauses (C) and (D) not exceeding $5 million) and (E) instruct the
Escrow Agent to release to Parent any of the Escrow Fund then being held by it. Upon the payment by the Company of the amount (without interest) released to the Company from the Escrow Fund, the Termination Fee and Parent Expenses to Parent
hereunder and the release by the Escrow Agent to Parent of any of the Escrow Fund then held by the Escrow Agent, this Agreement will terminate. Notwithstanding the foregoing, if within twelve months after such termination the Company consummates a
Change of Control Transaction (as defined in Section 8.1(b)) or enters into a definitive agreement for such a transaction, and such Change of Control Transaction is consummated, the Company will pay an additional $5 million to Parent upon such
consummation. 
  
 (b) If the General Partners do not withdraw or
change or modify their recommendation that the Unitholders approve the principal terms of the Merger, but nonetheless, at the Company Meeting, the principal terms of the Merger are not approved, within three business days after the day on which the
Company Meeting is held, the Company will (i) reimburse Parent for all Parent Incurred Expenses and will agree in writing to reimburse Parent for all Parent Invoiced Expenses (up to a total reimbursement of all Parent Expenses not exceeding $5
million), (ii) will return to Parent any of the Escrow Fund released to the Company (without any interest earned after it was released to the Company), (iii) instruct the Escrow Agent to release to Parent any of the Escrow Fund then being held by
it, and (iv) if on or prior to the Company Meeting there is a publicly announced proposal for a Change of Control Transaction and within twelve months after such Company Meeting the Company consummates a Change of Control Transaction (as defined
below) or enters into a definitive agreement for such a transaction and such Change of Control Transaction is consummated with the party or parties (including their respective affiliates) that made, or were the proposed acquiror(s) in, such publicly
announced proposal, pay to Parent on such consummation the Special Termination Fee. A “Change of Control Transaction” means an Acquisition Transaction which results in the Unitholders of the Company immediately prior to the transaction
owning 50% or less of the equity or voting power of the Company or of the surviving or successor entity resulting from or of the purchaser in the transaction. 
  

 31 

 (c) If this Agreement is terminated pursuant to Section 7.1(b), (i) the Company will retain the Initial
Deposit Amount, (ii) the Company will return to Parent (without any interest earned after it was released to the Company), or instruct the Escrow Agent to release to Parent (with interest), the Additional Deposit Amount, (iii) Parent will reimburse
the Company for all the out-of-pocket expenses which the Company incurred in connection with this Agreement and the transactions contemplated by it (including reasonable fees and expenses of professionals and other consultants and out of pocket
costs incurred in connection with the negotiation of this Agreement and efforts to carry out the transactions which are the subject of this Agreement) (the “Company Expenses”) regarding which the Company has presented reasonable
documentation to Parent as of the date of termination (the “Company Incurred Expenses”) and (iv) Parent will agree in writing to reimburse the Company for all Company Expenses for which the Company presents after the date of termination
reasonable documentation to Parent (the “Company Invoiced Expenses”) as soon as practicable after the presentation thereof, up to a total reimbursement of Company Expenses under clauses (iii) and (iv) not exceeding $5 million; provided,
however, that, if the termination by the Company is as a result of an intentional or willful breach or intentional or willful misrepresentation by Lima, Parent or Acquisition, the Company will also retain the entire Escrow Fund and, to the extent
that the Escrow Agent then holds any of the Escrow Fund, the Parent will instruct the Escrow Agent to release to the Company any of the Escrow Fund then being held by it. 
  
 (d) If this Agreement is terminated by Parent pursuant to Section 7.1(c), then the Company shall retain the Initial Deposit
Amount (along with any interest accrued thereon). 
  
 (e) If this
Agreement is terminated by Parent pursuant to Section 7.1(d), the Company will (i) return to Parent the amount (without any interest earned after it was released to the Company) released to the Company from the Escrow Fund, (ii) instruct the Escrow
Agent to release to Parent any of the Escrow Fund then being held by it, (iii) reimburse Parent for all Parent Incurred Expenses and (iv) agree in writing to reimburse all Parent Invoiced Expenses (up to a total reimbursement of Parent Expenses
under clauses (iii) and (iv) not exceeding $5 million); provided, however, that, if termination by Parent is as a result of the intentional or willful breach or intentional or willful misrepresentation by the Company, (a) the Company shall also pay
the Termination Fee to Parent and (b) the Company shall have the obligations, and Parent shall have the right to reinstate this Agreement, as set forth in Section 9.10(b)(i)(B) to the same extent and as if this Agreement had been terminated by the
Company pursuant to Section 9.10(b). 
  
 (f) If this Agreement is
terminated pursuant to Section 7.1(e), then the Company (i) will retain the Initial Deposit Amount (along with any interest accrued thereon) and (ii) return to Parent (without any interest earned after it was released to the Company), or instruct
the Escrow Agent to release to Parent (with interest), the Additional Deposit Amount. 
  
 (g) If this Agreement is terminated pursuant to Section 7.1(f), the Company will return and/or cause the Escrow Agent to return to Parent the Escrow Fund (without any interest earned after it was released to the
Company). 
  
 (h) If all conditions in Section 6.2 and all
conditions in Section 6.3 have been satisfied prior to the Merger Date, and within seven business days thereof the Merger is not 

  

 32 

 
consummated due to any action or inaction by Lima, Parent or Acquisition, then, and without limiting Company’s rights under Article 7, the other
provisions of this Section 8.1 or under Section 9.10, the Company will retain the entire Escrow Fund that has been released to it and, to the extent that the Escrow Agent then holds any of the Escrow Fund, the Parent will instruct the Escrow Agent
to release to the Company any of the Escrow Fund then being held by it. 
  
 (i) If all conditions in Section 6.1 and all conditions in Section 6.3 have been satisfied prior to the Merger Date, and within seven business days thereof the Merger is not consummated due to any action or inaction by the Company, then,
and without limiting Lima’s and Parent’s rights under Article 7, the other provisions of this Section 8.1 or under Section 9.10, the Company will (i) return to Parent the amount (without any interest earned after it was released to the
Company) released to the Company from the Escrow Fund and, (ii) to the extent that the Escrow Agent then holds any of the Escrow Fund, the Company will instruct the Escrow Agent to release to Parent any of the Escrow Fund then being held by it.

  
 (j) The parties irrevocably stipulate that actual damages in
the event of a termination of this Agreement would be extremely difficult or impracticable to determine. Accordingly, but subject, however, to Section 9.10, the Company, Lima, Parent and Acquisition each acknowledge and agree that given the
circumstances in effect at the time this Agreement is executed, the payments set forth in this Section 8.1 constitute liquidated damages and, if a party seeks the remedy of damages hereunder, a reasonable calculation of damages designed to
compensate for injuries suffered as a result of termination of this Agreement. If any of the parties hereto challenge the applicability or efficacy of this Section 8.1 or if this provision is held to be void or unenforceable for any reason, the
other party will be entitled to any and all other damages and remedies otherwise provided at law, including attorneys’ fees. 
  
 8.2 Other Actions; Filings; Consents. Subject to the terms and conditions contained in this Agreement, Lima, Parent, Acquisition and the Company
each will (a) use its commercially reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all other things, which are necessary, proper or appropriate under applicable laws and regulations, or are required to
be taken by any governmental authorities, to consummate the Merger as promptly as practicable, (b) use its commercially reasonable efforts to make as promptly as practicable all necessary filings, and subsequently make any other required
submissions, with regard to this Agreement or the Merger under (i) the Exchange Act and any other applicable federal or state securities laws or regulations, (ii) the HSR Act and any related governmental requests under that HSR Act, (iii) the PUA
and any related governmental or quasi-governmental requests under the PUA and (iv) any other applicable or federal, state, local or foreign statutes, laws, rules or regulations, (c) use its commercially reasonable efforts to obtain from governmental
authorities any consents, licenses, permits, waivers, approvals, authorizations and orders required to be obtained by the Company or Parent or any of their respective subsidiaries in connection with the authorization, execution and delivery of this
Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement, (d) use its commercially reasonable efforts to resolve any objections which may be asserted by any governmental authority with regard to the
Merger or any other transactions contemplated by this Agreement under any anti-trust, trade or regulatory laws or regulations, (e) furnish the other of them, upon request, with copies of all correspondence, filings and communications between it and
its affiliates and representatives, on the one hand, and any governmental authority or 

  

 33 

 
member of the staff of any governmental authority, on the other hand, with respect to this Agreement, the Merger or any other of the transactions
contemplated by this Agreement, (f) furnish the other of them with all information and reasonable assistance which the other of them may reasonably request in connection with the preparation of filings, registrations or submissions of information
required by any governmental authorities, (g) use its commercially reasonable efforts to cause any injunction, restraining order or other order of any court or governmental authority which adversely effects the ability of the parties to consummate
the Merger to be dissolved, and to defend vigorously any litigation seeking to enjoin, prevent or delay the consummation of the Merger or seeking material changes in the terms of the Merger or any other transaction which is the subject to this
Agreement, and (h) use commercially reasonable efforts to cause the conditions in Article 6 to be satisfied as promptly as practicable. 
  
 8.3 Notification of Certain Matters. The Company will cause one or more of its representatives to confer on a regular and frequent basis with
Parent’s Representatives and to report to Parent and Parent’s Representatives on the general status of its ongoing operations. Each party will give prompt notice to the other party of (a) any written notice or other communication from any
third party alleging that the consent of that third party is or may be required in connection with the Merger or other transactions contemplated by this Agreement, (b) its receipt of written notice of any governmental complaint, investigation or
hearing, or any litigation, which may impair the parties’ ability to consummate the Merger or any of the other transactions contemplated by this Agreement or may have a Material Adverse Effect on the Company, (c) any change, event, fact or
circumstance that, in the party’s good faith judgment, is reasonably likely to impair the party’s ability to consummate the Merger or is reasonably likely to have a Material Adverse Effect on the Company or (d) the occurrence or the
existence of any event that would, or could with a passage of time or otherwise, make any representation or warranty in this Agreement untrue. 
  
 8.4 Post-Closing Tax Matters. 
  
 (a) Acquisition General Partner will, from and after the Effective Time, be the successor Tax Matters Partner of the Company (the “TMP”), within
the meaning of Section 6231 of the Code, with respect to all Taxable years of the Company and as of the closing assumes the duties of the Managing General Partner, as the current TMP, to the Unitholders. As TMP and subject to the provisions and
requirements of the Code, Acquisition General Partner will represent the Company and control the handling of any Tax audit, investigation or assessment against the Company, regardless of the Taxable year to which such audit, investigation or
assessment relates. In exercising its duties as TMP, Acquisition General Partner will have the right to employ counsel of its choice at its expense and to control the conduct of such audit, investigation, assessment or proceeding, including
settlement or other disposition thereof and to settle the contest of any Tax or agree to an adjustment to any Tax or partnership item. Notwithstanding the preceding sentence, Acquisition General Partner will neither consent nor agree to the
settlement of any dispute regarding Taxes for any Taxable period (or portion thereof) ending on or prior to the Merger Date if such settlement would reasonably be expected to have a material adverse impact on the Unitholders without the prior
written consent of the Managing General Partner (or any successor person or entity), which consent will not be unreasonably withheld or delayed. Notwithstanding the foregoing, the Managing General Partner will prepare and file all income and
franchise Tax Returns of the Company due after the 

  

 34 

 
Merger Date (taking into account applicable extensions of time for filing) with respect to any Taxable period (or portion thereof) ending on or prior to the
Merger Date. In connection with the foregoing, the Managing General Partner will submit drafts of all income and franchise Tax Returns to the Acquisition General Partner no later than twenty days prior to the filing date and will not file such Tax
Returns without the prior written consent of the Acquisition General Partner (or any successor person or entity), which consent will not be unreasonably withheld or delayed. 
  
 (b) The parties acknowledge that pursuant to the Company’s currently effective election under Section 754 of the Code,
the tax basis of the Company’s assets will be adjusted pursuant to Sections 743 and 755 of the Code upon the Merger. Acquisition General Partner and the Managing General Partner shall cooperate to prepare, within a reasonable time after the
Effective Time, a schedule (the “Allocation Schedule”) allocating the Merger Consideration, the liabilities of the Company and any other applicable amounts among the assets and properties of the Company in accordance with Section 755 and
Section 1.755-2T of the Treasury Regulations thereunder which will be consistent with the allocation of the value of assets and properties between the members of Parent. The Allocation Schedule so arrived at shall be used by (i) Acquisition General
Partner in determining and reporting the basis of the Company’s assets for federal (and all applicable state) income tax purposes, and (ii) the Managing General Partner in preparing reports to the respective Unitholders enabling them to report
their taxable income from the Merger and to comply with Section 1.751-1(a)(3) of the Treasury Regulations (“Partner Reports”). The Managing General Partner shall prepare and provide the Partner Reports to the Acquisition General Partner
for approval within thirty days after the Allocation Schedule is finally completed. The Managing General Partner shall not forward the Partner Reports to the Unitholders until approved by the Acquisition General Partner, which approval shall not be
unreasonably withheld or delayed. The parties further agree that, in reporting the Merger for federal (and applicable state) income tax purposes, they shall treat any amount of the Escrow Fund released to the Company and then paid to the Unitholders
as constituting additional Merger Consideration. 
  
 ARTICLE 9

 GENERAL 
  
 9.1 Expenses. Except as provided in Sections 7.1(i) and 8.1, the Company, Lima, Parent and Acquisition will each pay its own expenses in connection
with the transactions which are the subject of this Agreement, including legal fees. 
  
 9.2 Employee Benefit Plans. 
  
 (a) Lima and Parent agree to provide (or cause the Surviving Partnership to provide) to employees of the Surviving Partnership as of the Merger Date (the “Surviving Employees”), where any of Lima or Parent provide substantially
similar type benefits as provided by the Company prior to the Merger Date, employee benefits as provided to similarly situated employees of Lima, Parent or any of their respective Affiliates, provided that where the Company provided higher
levels of benefits Lima or Parent shall provide such higher levels or the substantial economic equivalent of such. Lima or Parent shall credit or cause the Surviving Partnership to credit Surviving Employees with service credit for their period of
employment 

  

 35 

 
with the Company for eligibility and vesting purposes under any Lima or Parent plan that is qualified under Section 401(a) of the Code that is applicable to
the Surviving Employees. Lima and Parent will and will cause the Surviving Partnership to waive all pre-existing condition exclusions with respect to group health plans maintained for the benefit of Surviving Employees (to the extent such
pre-existing conditions were satisfied prior to the Merger Date under the Company’s group health plans) and provide that each such Surviving Employee will be given credit for all deductible payments and co-payments paid by such employee under
the Company’s group health plans prior to the Merger Date during the current year for purposes of determining the extent to which any such employee has satisfied any deductible or maximum out-of-pocket limitation under such plan for such plan
year. 
  
 (b) From and after the Effective Time, Lima and Parent
agree to maintain or to cause one of its affiliates to maintain the severance plans, and the non-qualified deferred compensation plans that supplement qualified retirement plans set forth in Section 9.2(b) of the Company Disclosure Letter, without
any material modification, in accordance with their terms; provided, however, that Lima and Parent shall have the right to terminate the foregoing plans at any time on or after the Merger Date subject to paying out the accrued benefits thereunder as
of such date of termination. The provisions of this Section 9.2 are intended to be for the benefit of, and shall be enforceable by, each of the covered Company employees. 
  
 (c) Nothing in this Section 9.2 shall create any right to employment nor make any person’s employment other than
“at will.” 
  
 9.3 Insurance and Indemnification.

  
 (a) The Surviving Partnership will at all times after the
Effective Time indemnify and hold harmless each person who is at the date of this Agreement, or has been at any time prior to the date of this Agreement, a general partner of the Company (or any general partner, officer or director thereof) or a
managing member, general partner, director, officer or employee of any of their respective subsidiaries (“Indemnified Parties”), in each case to the fullest extent permitted by applicable law, with respect to any claim, liability, loss,
damage, cost, fees (including reasonable attorneys’ fees) or expense (whenever asserted or claimed) based in whole or in part, or arising in whole or in part out of, any act or omission by that person at or prior to the Effective Time in
connection with that person’s duties as a general partner, managing member, director, officer or employee, to the same extent and on the same terms (including with respect to advancement of expenses) provided in the relevant limited partnership
agreement, operating agreement or articles of incorporation, or in any indemnification agreements, in effect on the date of this Agreement. The Surviving Partnership will pay all reasonable expenses, including attorney’s fees that may be
incurred by any Indemnified Party in enforcing the indemnity and other obligations of the Surviving Partnership under this Section 9.3. 
  
 (b) Lima and Parent will cause the Surviving Partnership to keep in effect (at no less than their current levels of coverage) for at least six years after
the Effective Time the policies or tail liability coverage of (i) general partners’ liability insurance maintained by the General Partners and/or Company and (ii) either directors and officers’ liability insurance, general partner’s
liability insurance or managing member liability insurance, as the case may be, maintained by the General Partners, the Company, their respective subsidiaries at the date of this 

  

 36 

 
Agreement; provided that (A) Lima and Parent may substitute policies having comparable coverage and amounts and containing similar terms and conditions which
are no less advantageous to the persons who are currently covered by those policies and with carriers comparable in terms of credit worthiness to those which have written those policies and (B) neither Lima, Parent nor the Surviving Partnership will
be required to pay an annual premium for that insurance in excess of three times the annual premium relating to the year during which this Agreement is executed, but if they are not able to maintain the required insurance for an annual premium for
that amount, they will purchase as much coverage as it can obtain for that amount. 
  
 9.4 Benefit of Provisions. The provisions of Sections 9.2 and 9.3 are intended for the benefit of, and will be enforceable by, the parties who are entitled to benefits or rights under those Sections.

  
 9.5 Access to Properties, Books and Records. Subject to
Section 5.1 from the date of this Agreement until the Effective Time, the Company will, and will cause each of its subsidiaries to, give Parent’s Representatives reasonable access during normal business hours to all of their respective
properties, books, records, contracts and agreements, reports, evaluations, title policies, financial and other information and files and cause its independent public accountants to make their audit work papers available to Parent’s
Representatives and to answer questions related thereto and to the Company’s financial statements. Parent will, and will cause Parent’s Representatives to, hold all information received as a result of access to the properties, books and
records of the Company or its subsidiaries in confidence in compliance with the Confidentiality Agreement. If this Agreement is terminated prior to the Effective Time, Parent will, at the request of the Company, deliver to the Company all documents
and other material obtained by Parent and Parent’s Representative’s from the Company or any of its subsidiaries in connection with the transactions which are the subject of this Agreement or evidence that that material has been destroyed
by Parent. 
  
 9.6 Press Releases; Tax Matters Disclosure.
The Company and Lima, Parent and Acquisition will consult with each other before issuing any press release or otherwise making any public statement with respect to this Agreement or the Merger, except that nothing in this Section will prevent either
party from making any statement when and as required by law or by the rules of any securities exchange or securities quotation or trading system on which securities of that party or an affiliate are listed, quoted or traded. Notwithstanding anything
to the contrary set forth in this Agreement, any party to this Agreement (and any employee, shareholder, representative or other agent of any party hereto) may disclose to any and all persons without limitation of any kind, the tax treatment and tax
structure of the Merger and all materials of any kind (including opinions or other tax analyses) that are provided to the party relating to such tax treatment and tax structure; provided however, that, such disclosure may not be made to the
extent reasonably necessary to comply with any applicable federal or state securities laws; provided further that for the purposes of this Section 9.6, (i) the “tax treatment” of the Merger means the purported or claimed federal
income tax treatment of the Merger, and (ii) the “tax structure” of the Merger means any fact that may be relevant to understanding the purported or claimed federal income tax treatment of the Merger. The preceding sentence is intended to
cause the Merger to be treated as not having been offered under conditions of confidentiality for purposes of Section 1.6011-4(b)(3) (or any successor provision) of the Treasury Regulations 

  

 37 

 
promulgated under Section 6011 of the Internal Revenue Code of 1986, as amended, and shall be construed in a manner consistent with such purpose. 

 
 9.7 Entire Agreement. This Agreement, the Confidentiality Agreement
and the documents to be delivered in accordance with this Agreement contain the entire agreement among the Company, Lima, Parent and Acquisition relating to the transactions which are the subject of this Agreement and those other documents, all
prior negotiations, understandings and agreements between the Company and either Lima, Parent or Acquisition are superseded by this Agreement and those other documents, and there are no representations, warranties, understandings or agreements
concerning the transactions which are the subject of this Agreement or those other documents other than those expressly set forth in this Agreement or those other documents. 
  
 9.8 Interpretation. 
  
 (a) Whenever the words “include,” “includes” or “including” are used in this Agreement, they will be deemed to be followed
by the words “without limitation.” 
  
 (b) The words
“hereof,” “herein” and “herewith” and words of similar import will, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of and to this Agreement unless otherwise specified. 
  
 (c) The plural of any defined term will have a meaning correlative to such defined term, and words denoting any gender will
include both genders and the neuter. Where a word or phrase is defined herein, each of its other grammatical forms will have a corresponding meaning. 
  
 (d) A reference to any party to this Agreement or any other agreement or document will include such party’s successors and permitted assigns.

  
 (e) A reference to any legislation or to any provision of any
legislation will include any modification, amendment or re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued thereunder or pursuant thereto. 
  
 (f) The parties have participated jointly in the negotiation and drafting of
this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement will be construed as if drafted jointly by the parties, and no presumption or burden of proof will arise favoring or disfavoring any party by virtue of
the authorship of any provisions of this Agreement. 
  
 (g) No
prior draft nor any course of performance or course of dealing will be used in the interpretation or construction of this Agreement. 
  
 (h) The descriptive headings in this Agreement are intended for reference purposes only and will not be used in the interpretation or construction of this
Agreement. 
  

 38 

 9.9 Prohibition Against Assignment. Neither this Agreement nor any right of any party under it may
be assigned. 
  
 9.10 Intentional Failure to Perform
Obligations; Termination Post 270 Days after Date of this Agreement.  
  
 (a) The Company, on the one hand, and Lima, Parent and Acquisition, on the other hand, each acknowledges and agrees that they would be damaged irreparably in the event any of the provisions of this Agreement are
intentionally or willfully not performed by the other party in accordance with their specific terms or otherwise are intentionally or willfully breached and that actual damages would be impossible to determine. Accordingly, and notwithstanding
anything to the contrary contained herein, the parties agree that the performing or non-breaching party shall be entitled to an injunction or injunctions (temporary and permanent) and other equitable relief to prevent intentional or willful breaches
of or failures to perform any of the provisions of this Agreement that occur within 270 days of the date of this Agreement and in consequence to enforce specifically this Agreement and the terms and provisions hereof. 
  
 (b) Notwithstanding anything to the contrary contained herein, if at any time
after 270 days of the date of this Agreement and prior to any termination of this Agreement pursuant to any provision of Article 7 either the Company, on the one hand, or Lima, Parent and Acquisition, on the other hand, desires to terminate this
Agreement and all of its or their obligations hereunder (other than as set forth hereinbelow), such party or parties (as the case may be) shall have the right to do so by delivering to the other party(ies) written notice thereof and: 
  
 (i) with respect to the Company’s termination under this Section
9.10(b): 
  
 (A) the Company will, concurrently with delivering
such notice to the other parties, (1) return to Parent the amount (without interest) released to the Company from the Escrow Fund pursuant to the Escrow Agreement and instruct the Escrow Agent to release to Parent any of the Escrow Fund then being
held by it, (2) pay the Termination Fee to Parent, (3) reimburse Parent for all Parent Incurred Expenses and (4) deliver to Parent an agreement in writing to reimburse Parent for all Parent Invoiced Expenses (up to a total reimbursement of Parent
Expenses under clauses (3) and (4) not exceeding $5 million); and 
  
 (B) if the Company desires to enter into a definitive agreement for or consummate a Change of Control Transaction with a Third Party within 270 days after the date of termination by the Company under this Section 9.10(b), the Company shall
be obligated to so advise Lima and Parent in writing prior to entering into any definitive agreement for or consummating such Change of Control Transaction and Lima and Parent shall have the right to reinstate this Agreement in its entirety as if
this Agreement had not been terminated by delivering, within ten (10) business days after the receipt of such written notice of such Change of Control Transaction, written notice thereof to the Company, together with returning to the Company the
Termination Fee paid by the Company, and returning the Escrow Fund to the Company and/or the Escrow Agent, as applicable based upon where the Escrow Fund was held immediately prior to such termination, and, if this Agreement is timely reinstated by
Lima and Parent, then: 
  

 39 

 (1) the Company, on the one hand, and Lima, Parent and Acquisition, on the other hand, shall proceed
using best efforts to complete the Merger and, in connection therewith, to satisfy all unsatisfied conditions and covenants hereunder as expeditiously and as soon as possible thereafter; and 
  
 (2) notwithstanding anything to the contrary contained in this Agreement
(including, without limitation, Article 7 or 8 or Section 9.10(a)), Lima, Parent and Acquisition shall be entitled to an injunction or injunctions (temporary and permanent) and other equitable relief in consequence to enforce specifically this
Agreement and the terms and provisions hereof and the Company’s obligation to complete the Merger. 
  
 (ii) with respect to the Parent’s termination under this Section 9.10(b), (A) the Company will retain the entire Escrow Fund then held by it and (B)
Parent will, concurrently with delivering such notice to the Company, (1) instruct the Escrow Agent to release to the Company any of the Escrow Fund then being held by it, (2) reimburse the Company for all Company Incurred Expenses and (3) deliver
an agreement in writing to reimburse the Company for all Company Invoiced Expenses (up to a total reimbursement of Company Expenses under clauses (2) and (3) not exceeding $5 million). 
  
 9.11 Notices and Other Communications. Any notice or other communication under this Agreement must be in writing and
will be deemed given when it is delivered in person or sent by facsimile (with proof of receipt at the number to which it is required to be sent) or on the business day after the day on which it is sent by a major nationwide overnight delivery
service to the following addresses (or such other address as may be specified after the date of this Agreement by the party to which the notice or communication is sent): 
  
 If to Lima, Parent or Acquisition: 
  
 Lennar Corporation 
 24800 Chrisanta Drive 
 Mission Viejo, CA 92691 
 Attention: Mr. Jonathan Jaffe 
 Facsimile No.: (949) 598-8622 
  
 with a copy (which will not constitute notice) to: 
  
 Bilzin Sumberg Baena Price & Axelrod LLP 
 2500 Wachovia Financial Center 
 Miami, Florida 33131-2336 
 Attention: Brian L. Bilzin, Esq. 
 Facsimile No.: (305) 374-7593 
  

 40 

 LNR Property Corporation 
 1601 Washington Avenue 
 Suite 800 
 Miami Beach, Florida 33139 
 Attention: Mr. Jeffrey Krasnoff 
 Facsimile No.: (305) 695-5449 
  
 with a copy (which will not constitute notice) to: 
  
 Clifford Chance LLP 
 200 Park Avenue 
 New York, New York 10166-0153 
 Attention: David W. Bernstein, Esq. 
 Facsimile No.: (212) 878-8375 
  
 If to the Company: 
  
 The Newhall Land and Farming Company 
 23823 Valencia Boulevard 
 Valencia, California 91355 
 Attention: Gary M. Cusumano 
 Facsimile No.: (661) 255-4200 
  
 with a copy (which will not constitute notice) to:

  
 Paul, Hastings, Janofsky & Walker LLP

 515 South Flower Street, 25th Floor 
 Los Angeles, California 90071 
 Attention: Kenneth R. Bender, Esq. 
 Facsimile No.: (213) 627-0705 
  
 9.12 Governing Law. This Agreement will be governed by, and construed
under, the substantive laws of the State of California (without regard to any conflicts of law principles). 
  
 9.13 Amendments. This Agreement may be amended only by a document in writing signed by both the Company, on the one hand, and Parent, Acquisition
and Lima, on the other hand. 
  
 9.14 Counterparts. This
Agreement may be executed in two or more counterparts, some of which may be signed by fewer than all the parties or may contain facsimile copies of pages signed by some of the parties. Each of those counterparts will be deemed to be an original copy
of this Agreement, but all of them together will constitute one and the same agreement. 
  
 9.15 Assignability; Parties in Interest. This Agreement or the rights or obligations hereunder shall not be assigned or transferred (in whole or in part) by operation of law or otherwise except (i) with the
prior written consent of the parties hereto which consent can be arbitrarily withheld, or (ii) Lima can add an additional member(s) or partner(s) (as the case may be) to Parent and/or Acquisition so long as (A) Lima remains directly or indirectly in
control by 

  

 41 

 
owning at least an aggregate of 50% of the equity voting interests of each of Parent and Acquisition, (B) Lima remains obligated under this Agreement as
provided herein, (C) such additional member(s) or partner(s) agree in writing to be obligated under Sections 5.3(a) and 5.3(b) of this Agreement to the same extent as Lima and Parent, and (D) the Company shall have given prior written consent to the
addition of such additional member(s) and/or partner(s), provided that such consent may only be withheld if in the opinion of the Company such additional member(s) and/or partner(s) could reasonably be expected to interfere with the ability of Lima
or Parent to fulfill their obligations under this Agreement or could reasonably be expected to materially adversely affect the obtaining of the approval of the Utilities Commission of the transfer of a controlling interest in the capital stock of
Valencia Water Company as a result of the Merger or the timing of obtaining such approval, or otherwise result in a delay in consummation of the Merger. To the extent that an additional member(s) an/or partner(s) of Parent or Acquisition is added as
permitted hereunder, the parties agree that the representations and warranties of Lima, Parent and Acquisition set forth in this Agreement shall be deemed modified to take into account the ownership of such additional member(s) and/or partner(s) of
Parent and/or Acquisition. 
  
 9.16 Joint and Several
Obligation of Lima. Each of Lima shall be jointly and severally liable for the covenants, agreements and obligations of Lima hereunder. 
  
 IN WITNESS WHEREOF, the Company, Lima, Parent and Acquisition have executed this Agreement, intending to be legally bound by it, on the day shown on the
first page of this Agreement. 
  

	 THE NEWHALL LAND AND FARMING COMPANY

		
	 By:
	 	 Newhall Management Limited Partnership,

	 	 	 Managing General Partner

			
	 	 	 By:
	 	 Newhall Management Corporation,

	 	 	 	 	 Managing General Partner

				
	 	 	 	 	 By:
	 	 /s/ Gary M. Cusumano

	 	 	 	 	 	 	 Name:
	 	 Gary M. Cusumano

	 	 	 	 	 	 	 Title:
	 	 President and Chief Executive Officer

				
	 	 	 	 	 By:
	 	 /s/ Donald L. Kimball

	 	 	 	 	 	 	 Name:
	 	 Donald L. Kimball

	 	 	 	 	 	 	 Title:
	 	 Vice President and Chief Financial Officer

  
  

 42 

	 LENNAR CORPORATION

		
	 By:
	 	     /s/ Jonathan M. Jaffe

	 	 	 Name:    Jonathan M. Jaffe

	 	 	 Title:      Vice President

	
	 LNR PROPERTY CORPORATION

		
	 By:
	 	     /s/ Shelly L. Rubin

	 	 	 Name:    Shelly L. Rubin

	 	 	 Title:      Vice President

	
	 NWHL INVESTMENT LLC

		
	 By:
	 	     /s/ Jonathan M. Jaffe

	 	 	 Name:    Jonathan M. Jaffe

	 	 	 Title:      Vice President

	
	 NWHL ACQUISITION, L.P.

		
	 By:
	 	 NWHL GP LLC,
 General Partner

		
	 	 	 By:    /s/ Jonathan M. Jaffe

	 	 	          Name:    Jonathan M. Jaffe

	 	 	          Title:      Vice
President

  
  

 43 

 Exhibit A 
  

Form of Voting Agreement 

 EXECUTION COPY 
  
 FORM OF VOTING AGREEMENT 
  
 VOTING AGREEMENT, dated as of July 21, 2003 (this “Agreement”), by and between NWHL Investment LLC, a Delaware limited liability company (the
“Parent”), and the undersigned (the “Unitholder”). 
  
 RECITALS 
  
 Concurrently with the execution of this Agreement, Lennar
Corporation, a Delaware corporation, LNR Property Corporation, a Delaware corporation, the Parent, NWHL Acquisition, L.P., a California limited partnership, and The Newhall Land and Farming Company, a California limited partnership (the
“Company”) are entering into an Agreement and Plan of Merger (the “Merger Agreement”), pursuant to which the Parent and the Company shall effect a business combination, upon the terms and subject to the conditions set forth in
the Merger Agreement (the “Merger”). Unless otherwise indicated, capitalized terms not defined in this Agreement have the respective meanings given to them in the Merger Agreement. 
  
 The Unitholder is a limited partner of the Company and has the voting power with respect to
such number of limited partnership units of the Company as is indicated on the final page of this Agreement (collectively, the “Existing Units” and, together with the New Units (as defined in Section 1.2), collectively, the
“Units”). 
  
 As a material inducement to enter into the Merger
Agreement and to consummate the Merger, the Parent desires the Unitholder to agree, and the Unitholder is willing to agree (a) to vote the Units owned by Unitholder or cause such Units to be voted so as to facilitate consummation of the Merger and
(b) to not engage in certain solicitation activities. 
  
 AGREEMENT

  
 The parties, intending to be legally bound, agree as follows: 
  
 1. Voting of Units. 
  
 Section 1.1 Voting Agreement. Subject to the terms and conditions of
this Agreement, at every meeting of the holders of limited partnership units of the Company called with respect to any of the following, and at every adjournment or postponement thereof, and on every action or approval by written consent of the
holders of limited partnership units of the Company with respect to any of the following, the Unitholder shall vote or cause to be voted the Units (a) in favor of (i) approval of the principal terms of the Merger, (ii) waiving any notice that may
have been or may be required relating thereto and (iii) any matter that could reasonably be expected to facilitate the consummation of the Merger and (b) against any matter that could reasonably be expected to hinder, impede, prevent or delay the
consummation of the Merger. The Unitholder shall not, from the date of this Agreement until the Expiration Date (as defined in Section 8), enter into any agreement or understanding with any person to vote or give instructions inconsistent with
clause (a) or clause (b) of the preceding sentence. 

 Section 1.2 New Units. The Unitholder agrees that any limited partnership units of the Company as
to which the Unitholder acquires beneficial ownership (the “New Units”) after the execution of this Agreement and prior to the Expiration Date shall be subject to the terms and conditions of this Agreement to the same extent as if they
constituted Existing Units. 
  
 Section 1.3 Proxy.

  
 (a) Concurrently with the execution of this Agreement: (i) the
Unitholder shall deliver to the Parent a proxy in the form attached hereto as Exhibit A, which shall be irrevocable to the fullest extent permitted by law, with respect to the Units referred to therein (the “Proxy”); and (ii) as
soon as practicable hereafter, the Unitholder shall give voting instructions to its broker or nominee to cause to be delivered to the Parent, as soon as practicable, an additional proxy (in the form attached hereto as Exhibit A) executed on
behalf of the record owner of any Existing Units that are owned beneficially (but are not owned of record) by Unitholder. 
  
 (b) After the execution of this Agreement until the Expiration Date, the Unitholder shall execute or cause to be executed such further proxies as may be
requested by the Parent with respect to any New Units, and the Unitholder shall promptly notify the Parent upon acquiring beneficial ownership of any New Units. 
  

(c) The attorneys-in-fact and proxies named in the Proxy shall not be under any liability or responsibility by reason of any loss or damage arising in
consequence of any mistake or error of law or fact or any matter or thing done or omitted to be done under or in relation to this Agreement or the Proxy of any nature whatsoever, except to the extent such loss or damage is in consequence of any such
attorney-in-fact’s and proxy’s own gross negligence, willful wrongful act or willful default. The attorneys-in-fact and proxies named in the Proxy may rely upon the opinion or advice of counsel in relation this Agreement or the Proxy and
shall not be responsible for any loss occasioned by acting or failing to act thereon. 
  
 2. No Transfer of Units. 
  
 Section 2.1 No Disposition or Encumbrance of Units. From the date of this Agreement until the Expiration Date, the Unitholder shall not, directly
or indirectly: (a) offer, sell, offer to sell, contract to sell, pledge, grant any option to purchase or otherwise dispose of or transfer (each a “Transfer”), or permit or announce any Transfer of, any of the Units, or any interest in any
of the Units, to any person or entity other than the Parent; (b) create or permit to exist any liens, claims, options, charges or other encumbrances on or otherwise affecting any of the Units; or (c) reduce the Unitholder’s beneficial ownership
of, interest in or risk relating to any of the Units; provided, that nothing herein shall prohibit Transfers of Units to any third party, affiliate, related party, family member or trust established for the benefit of the Unitholder or any of
the foregoing persons or entities as long as the transferee of such Units shall, prior to such transfer, agree in writing to be bound by the provisions of this Agreement; provided, further, that the Unitholder may in good faith pledge (or
grant a security interest in) Units to a bona fide lender and may transfer Unitholder’s remaining interest therein to such lender upon any foreclosure of the pledge or security interest so long as the lender agrees to be bound by the terms of
this agreement with respect to such securities or rights to the same extent as the Unitholder is obligated with respect to the Units. 
  

 2 

 Section 2.2 Transfer of Voting Rights. From the date of this Agreement until the Expiration Date
(as defined in Section 8), the Unitholder shall not deposit any of the Units into a voting trust or grant a proxy or enter into a voting agreement or similar contract with respect to any of the Units. 
  
 3. Waiver of Appraisal Rights. 
  
 The Unitholder hereby irrevocably and unconditionally waives any rights of
appraisal, dissenters’ rights, rights of disassociation or similar rights that the Unitholder may have in connection with the Merger. The Unitholder shall cause to be irrevocably and unconditionally waived any such rights that any affiliate
(other than the Company or a General Partner) of the Unitholder may have in connection with the Merger. 
  
 4. Representations and Warranties of the Unitholder. The Unitholder represents and warrants that: 
  
 Section 4.1 Ownership of Units. The Unitholder (a) is the record and
beneficial owner of and has the sole right to vote or direct the voting of the Existing Units, which as of the date hereof are free and clear of any liens, claims, options, charges or other encumbrances (other than restrictions on transfers arising
under applicable securities laws) and (b) does not own, either beneficially or of record, as of the date of this Agreement, any partnership units of the Company other than the Existing Units (excluding (i) interests as to which the Unitholder
currently disclaims beneficial ownership in accordance with applicable law and (ii) interests which Unitholder has the right to acquire pursuant to Awards granted to the Unitholder by the Company). 
  
 Section 4.2 No Conflict. The execution and delivery of this Agreement
and the Proxy by the Unitholder do not, and the performance of this Agreement and the Proxy by the Unitholder shall not: (a) conflict with or violate any legal requirement, order, decree or judgment applicable to the Unitholder or by which the
Unitholder or any of the Unitholder’s properties is bound or affected; or (b) result in any breach of or constitute a default (with notice or lapse of time, or both) under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of an encumbrance on or otherwise affecting any of the Existing Units pursuant to, any contract to which the Unitholder is a party or by which the Unitholder or any of the Unitholder’s properties is
bound or affected. The execution and delivery of this Agreement and the Proxy by the Unitholder do not, and the performance of the Unitholder’s obligations under this Agreement and the granting of the Proxy by the Unitholder shall not, require
any consent of any person. 
  
 Section 4.3 Enforceability.
The Unitholder has all requisite power and capacity to execute and deliver this Agreement and the Proxy and to perform the Unitholder’s obligations hereunder and thereunder. This Agreement and the Proxy have been duly executed and delivered by
the Unitholder and, assuming the due authorization, execution and delivery of this Agreement by the Parent, each constitute the legal, valid and binding obligations of Unitholder, enforceable against Unitholder in accordance with their respective
terms. 
  
 Section 4.4 Continuous Warranty. The
representations and warranties contained in this Agreement are accurate in all respects as of the date of this Agreement, and shall be accurate in all 

  

 3 

 
material respects at all times through the Expiration Date and shall be accurate in all material respects as of the date of the consummation of the Merger as
if made on that date. 
  
 5. Covenants of Unitholder. The Unitholder hereby
covenants and agrees to cooperate fully with the Parent and to execute and deliver any additional documents necessary or desirable and to take such further actions, in the reasonable opinion of the Parent, necessary or desirable to carry out the
intent of this Agreement. 
  
 6. No Solicitation. Until the Effective Time,
the Unitholder (in the Unitholder’s capacity as such) shall not, and shall not directly or indirectly authorize, direct or knowingly permit any of the Unitholder’s partners, officers, directors, employees, affiliates (it being understood
that neither the Company nor any General Partner is an affiliate of the Unitholder restricted by this Agreement), investment bankers, attorneys, accountants or other agents, advisors or representatives to take any action that the Company would be
prohibited from taking under Paragraph 5.7 of the Merger Agreement. In addition to the foregoing, the Unitholder shall immediately notify the Parent of any notice of any proposal or offer for an Acquisition Transaction received by the Unitholder
indicating, in connection with such notice, the name of the person or persons making such offer or proposal and the material terms and conditions of any such proposals or offers, and shall keep the Parent informed, on a current basis, of the status
and material terms of any such offer or proposal and of any modifications to the terms thereof; provided however, that this provision shall not in any way be deemed to limit the obligations of the Unitholder set forth in the preceding
sentence or limit the rights and remedies of the Parent or the agreements or obligations of the Company under the Merger Agreement. Each of the Unitholder and the Parent acknowledge that this Section 6 was a significant inducement for the Parent to
enter into the Merger Agreement and the absence of such provision would have resulted in a failure to induce the Parent to enter into the Merger Agreement. 
  
 7. Consent and Waiver. The Unitholder hereby gives any consents or waivers that are reasonably required for the consummation of the Merger under the terms of (a)
any agreements between the Unitholder (or any affiliates of the Unitholder) and the Company or any subsidiary of the Company or (b) pursuant to any other rights the Unitholder may have. 
  
 8. Termination. This Agreement shall terminate and shall have no further force or effect as of the earlier of (a) the Merger Date and
(b) the termination of the Merger Agreement (the “Expiration Date”); provided, however, that if the Merger Agreement is reinstated pursuant to Section 9.10(b) thereof, then this Agreement shall be similarly reinstated as of
the date the Merger Agreement is reinstated. 
  
 9. No Restraint on General
Partner, Officer or Director Action. This Agreement is intended to bind the Unitholder only with respect to the specific matters set forth herein, and shall not prohibit the Unitholder or any of the Unitholder’s employees or affiliates from
acting in accordance with their fiduciary duties under applicable law to the other Unitholders, if any, as an officer or director of any General Partner or any subsidiary of the Company. 
  
 10. Limited Proxy. The Unitholder shall retain at all times the right to vote the Units, in the Unitholder’s sole discretion, on
all matters other than those set forth in Section 1.1 which are at any time or from time to time presented to the Company’s limited partners generally. 
  

 4 

 11. Miscellaneous. 
  
 Section 11.1 Fees and Expenses. Except as specifically provided to the contrary in this Agreement, all costs and
expenses incurred in connection with this Agreement shall be paid by the party incurring such expenses. 
  
 Section 11.2 Amendments and Modification. Subject to applicable law, this Agreement may not be amended, modified, or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto. 
  
 Section 11.3 Nonsurvival of Representations and Warranties. None of the representations and warranties in this Agreement or other document delivered pursuant to this Agreement shall survive the Expiration Date;
provided, however that the termination of this Agreement shall not relieve any party from any liability for willful material breach of this Agreement. 
  
 Section 11.4 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally,
telecopied (with the sender receiving a confirmation thereof) or sent by a nationally recognized overnight courier service, such as Federal Express, to the parties at the following addresses (or at such other address for a party as shall be
specified by like notice): 
  
 (a) if to Parent,
to: 
  
 NWHL Investment LLC 
 c/o Lennar Corporation 
 24800 Chrisanta Drive 
 Mission Viejo, CA 92691 
 Attention: Mr. Jonathan Jaffe 
 Facsimile No.: (949) 598-8622 
  
 with a copy (which will not constitute notice) to: 
  
 Bilzin Sumberg Baena Price & Axelrod LLP 
 2500 Wachovia Financial Center 
 Miami, Florida 33131-2336 
 Attention: Brian L. Bilzin, Esq. 
 Facsimile No.: (305) 374-7593 
  
 and to: 
  
 NWHL Investment LLC 
 c/o LNR Property Corporation 
 1601 Washington Avenue 
 Suite 800 
 Miami Beach, Florida 33139 
 Attention: Mr. Jeffrey Krasnoff 
 Facsimile No.: (305) 695-5449 
  

 5 

 with a copy (which will not constitute notice) to: 
  
 Clifford Chance LLP 
 200 Park Avenue 
 New York, New York 10166-0153 
 Attention: David W. Bernstein, Esq. 
 Facsimile No.: (212) 878-8375 
  
 (b) if to Unitholder, to the address for notice set forth on the last page hereof; 
  
 with a copy (which will not constitute notice) to:

  
 Paul, Hastings, Janofsky & Walker LLP

 515 South Flower Street, 25th Floor 
 Los Angeles, California 90071 
 Attention: Kenneth R. Bender, Esq. 
 Facsimile No.: (213) 627-0705 
  
 Section 11.5 Counterparts. This Agreement may be executed in one or
more counterparts (whether delivered by facsimile or otherwise), each of which shall be considered one and the same agreement. 
  
 Section 11.6 Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the documents and the instruments referred to herein): (a)
constitute the entire agreement and supersede all prior agreements, negotiations, arrangements and understandings, both written and oral, among the parties with respect to the subject matter hereof, and (b) are not intended to confer upon any person
other than the Parent and the Unitholder any rights or remedies hereunder. 
  
 Section 11.7 Severability. Any term or provision of this Agreement that is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable in any situation in any jurisdiction
shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the invalid, void or unenforceable term or provision in any other situation or in any other jurisdiction. If the final
judgment of a court of competent jurisdiction or other authority declares that any term or provision hereof is invalid, void or unenforceable, the parties agree that the court making such determination shall have the power to and shall, subject to
the discretion of such court, reduce the scope, duration, area or applicability of the term or provision, to delete specific words or phrases, or to replace any invalid, void or unenforceable term or provision with a term or provision that is valid
and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. 
  
 Section 11.8 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California. 

 
 Section 11.9 Enforcement. The parties agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions
to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement in any court of the United States or California state court 

  

 6 

 
sitting in the City of Los Angeles, California, this being in addition to any other remedy to which they are entitled at law or in equity. In addition, each
of the parties (a) consents to submit itself to the personal jurisdiction of any Federal court or any California state court sitting in the City of Los Angeles, California in the event any dispute arises out of this Agreement or any of the
transactions contemplated by this Agreement, (b) agrees that it shall not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any such court and (c) agrees that it shall not bring any action relating to
this Agreement or any of the transactions contemplated by this Agreement in any court other than a Federal court sitting in the State of California or a California state court sitting in the City of Los Angeles, California. THE PARENT AND UNITHOLDER
EACH IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT THEY MAY HAVE TO TRIAL BY JURY IN CONNECTION WITH THIS AGREEMENT, THE PROXY OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY. 
  
 Section 11.10 Extension, Waiver. At any time prior to the Expiration Date, the parties to this Agreement may (a)
extend the time for the performance of any of the obligations or other acts of the other parties to this Agreement, (b) waive any inaccuracies in the representations and warranties of the other parties contained in this Agreement or in any document
delivered pursuant to this Agreement or (c) waive compliance by the other parties with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party. The failure of any party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights. 
  
 Section 11.11 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the parties to this Agreement (whether by operation of law or otherwise) without the prior written consent of the other parties to this Agreement. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 
  
 Section 11.12 Legal Counsel. The Unitholder acknowledges that he has been advised to, and has had the opportunity to consult with [his], [her] or
[its] personal attorney prior to entering into this Agreement. The Unitholder acknowledges that counsel for the Company represents the Company and does not represent any of the limited partners of the Company in connection with the Merger Agreement,
this Agreement or any of the transactions contemplated hereby or thereby. 
  
 Section 11.13 Agreement Negotiated. The form of this Agreement has been negotiated by or on behalf of the Parent and the Unitholder, each of which was represented by attorneys who have carefully negotiated the
provisions hereof. No law or rule relating to the construction or interpretation of contracts against the drafter of any particular clause should be applied with respect to this Agreement or the Proxy. 
  
 Section 11.14 Effect of Headings. The Section headings herein are for
convenience only and shall not affect the construction or interpretation of this Agreement. 
  
 Section 11.15 Legends. The certificates representing the Units or the New Units shall be legended at the request of the Parent to reflect the voting agreement contained in this Agreement and, if applicable, the
irrevocable proxy granted by this Agreement. If any of the Units are not 

  

 7 

 
certificated, such Units shall be certificated at the request of the Parent in order to effectuate the foregoing. 
  
 Section 11.16 Attorneys’ Fees. If any action or proceeding
relating to this Agreement or the enforcement of any provision of this Agreement is brought against any party hereto, the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any
other relief to which the prevailing party may be entitled) before and at trial and at all appellate levels. 
  
 [Signature Page Follows] 
  

 8 

 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed on the date and year first
above written. 
  

	 NWHL INVESTMENT LLC

		
	 By:
	 	  

	 Name:
	 	  

	 Title:
	 	  

	
	 UNITHOLDER

		
	 Signature:
	 	  

	 Print Name:
	 	  

	 Title:
	 	  

	
	 Number of Existing Units Beneficially owned by
 Unitholder:                        

	
	

	 Address:
  
	 	

	 	 	  

 Exhibit A 
  

FORM OF IRREVOCABLE PROXY 
  
 The undersigned limited partner (the “Unitholder”) of The Newhall Land and Farming Company, a California limited partnership (the “Company”), hereby
irrevocably appoints and constitutes Jonathan Jaffe and David Team of NWHL Investment LLC, a Delaware limited liability company (the “Parent”), and each of them, or any other designee of the Parent, as the sole and exclusive
attorneys-in-fact and proxies of the undersigned, with full power of substitution and resubstitution, to the full extent of the undersigned’s rights with respect to the limited partnership units of the Company beneficially owned by the
undersigned, which limited partnership units are listed on the final page of this irrevocable proxy (the “Irrevocable Proxy”) or such lesser number of limited partnership units that the undersigned limited partner may own as of any
applicable record date, and any and all other limited partnership units or securities issued or issuable in respect thereof, or otherwise acquired by the undersigned on or after the date hereof (collectively, the “Units”), until the
earlier of (a) the Merger Date (as defined in the Merger Agreement, as defined below) and, (b) the termination of the Merger Agreement. Upon the undersigned’s execution of this Irrevocable Proxy, any and all prior proxies given by the
undersigned with respect to any Units are hereby revoked and the undersigned agrees not to grant any subsequent proxies with respect to the Units until after the Expiration Date. 
  
 This Irrevocable Proxy is irrevocable (to the fullest extent provided by applicable law), is coupled with an interest, is granted pursuant
to the Voting Agreement, dated as of July 21, 2003, by and between the Parent and the undersigned Unitholder (the “Voting Agreement”), and is granted in consideration of the Parent (a) entering into that certain Agreement and Plan of
Merger, dated as of July 21, 2003 (the “Merger Agreement”), by and among Lennar Corporation, a Delaware corporation, LNR Property Corporation, a Delaware corporation, Parent, NWHL Acquisition, L.P., a California limited partnership, and
the Company and (b) consummating the Merger (as defined in Merger Agreement). 
  
 The attorneys and proxies named above, and each of them, are hereby authorized and empowered by the undersigned at any time prior to the Expiration Date to act as the undersigned’s attorney-in-fact and proxy to vote the Units and to
exercise all voting and other rights of the undersigned with respect to the Units (including, without limitation, the power to execute and deliver written consents with respect to the Units pursuant to the California Revised Limited Partnership Act)
at every annual, special or adjourned meeting of the limited partners of the Company, and in every written consent in lieu of such a meeting, or otherwise, (a) in favor of (i) approval of the principal terms of the Merger, (ii) waiving any notice
that may have been or may be required relating thereto and (iii) any matter that could reasonably be expected to facilitate the consummation of the Merger and (b) against any matter that could reasonably be expected to hinder, impede, prevent or
delay the consummation of the Merger. 
  
 The attorneys-in-fact and proxies named
above may not exercise this Irrevocable Proxy on any other matter except as provided above. The undersigned Unitholder may vote the Units on all such other matters. 
  

 10 

 All authority herein conferred shall survive the death or incapacity of the undersigned and any
obligation of the undersigned hereunder shall be binding upon the heirs, personal representatives, successors and assigns of the undersigned. THIS PROXY IS IRREVOCABLE. 
  

		
	 Signature of Unitholder:
	 	  

	 Print name of Unitholder:
	 	  

	 Existing Units beneficially
 owned:
	 	  
  

 Exhibit B 
  

Escrow Agreement 

 ESCROW AGREEMENT 
  
 ESCROW AGREEMENT, dated as of September 4, 2003 (this “Agreement”), by and among Lennar Corporation, a Delaware corporation, and
LNR Property Corporation, a Delaware corporation (collectively, “Lima”), NWHL Investment LLC, a Delaware limited liability company (the “Parent”), The Newhall Land and Farming Company, a California limited partnership (the
“Company”), and Wells Fargo Bank, N.A., as escrow agent (the “Escrow Agent”). Capitalized terms used but not defined in this Agreement shall have the respective meanings ascribed to them in the Merger Agreement (as defined
below). 
  
 RECITALS 
  
 Company, Lima, Parent and NWHL Acquisition, L.P., a California limited partnership
(“Acquisition”), have entered into that certain Agreement and Plan of Merger, dated as of July 21, 2003 (the “Merger Agreement”), pursuant to which Acquisition will merge with and into the Company (the “Merger”).

  
 It is contemplated under the Merger Agreement that Parent will deposit $25
million into escrow to secure performance of its obligations under the Merger Agreement. 
  
 A copy of the Merger Agreement has been delivered to the Escrow Agent, and the Escrow Agent is willing to act as the Escrow Agent hereunder. 
  
 AGREEMENT 
  
 In consideration of the foregoing and the mutual agreements contained herein and in the Merger Agreement, and intending to be legally bound hereby, the parties agree as
follows: 
  
 1. Appointment and Agreement of the Escrow Agent. Parent and
the Company hereby appoint the Escrow Agent to serve as, and the Escrow Agent hereby agrees to act as, the escrow agent upon the terms and conditions set forth in this Agreement. 
  
 2. Establishment of the Escrow Fund. 
  
 (a) Initial Deposit. Pursuant to Section 1.9 of the Merger Agreement, in the event that the Merger Agreement has not been terminated by Parent
pursuant to Article VII of the Merger Agreement prior to the Due Diligence Termination Date, Lima shall or shall cause Parent to deliver to the Escrow Agent $25 million in cash (the “Deposit”) on the first Business Day (as hereinafter
defined) after the Due Diligence Termination Date. The Escrow Agent shall hold the Deposit, together with interest thereon (the “Escrow Fund”), in escrow and will not transfer any of the Escrow Fund except pursuant to the terms of this
Agreement. For purposes of this Agreement, “Business Day” shall mean any day excluding Saturday, Sunday and any day which shall be in the State of California a legal holiday or a day on which banking institutions are authorized by law to
close. 
  
 (b) The Escrow Agent shall deposit the Deposit, when
received, into the Wells Fargo 100% Treasury Money Market Fund, or in such other money market mutual fund designated by 

 
Parent which invests solely in obligations the principal and interest of which are guaranteed by the United States of America. 
  
 (c) Each of Lima, Parent and the Company confirms to the Escrow Agent and to
each other that the Escrow Fund is free and clear of any lien, charge, claim, option, pledge, security interest or other encumbrance, except as may be created by this Agreement and the Merger Agreement. 
  
 3. Purpose of the Escrow Fund. 
  
 3.1 Security and Release. 
  
 (a) The Escrow Fund is deposited with the Escrow Agent and held by the Escrow Agent to secure the performance by Lima and
Parent of their obligations under the Merger Agreement. 
  
 (b)
The Escrow Fund shall be released to either the Company or Parent upon the earliest of the following events: 
  
 (i) to the Company on the second Business Day after the Escrow Agent receives a written affidavit (the “Approval Affidavit”) signed by two
officers of the Company attesting to the fact that (A) Unitholders of the Company holding a majority of the Units have approved the principal terms of the Merger at the Company Meeting, and (B) a copy of the Approval Affidavit has been delivered to
Parent; 
  
 (ii) to the Company on the tenth calendar day (or the
next Business Day thereafter if the tenth calendar day is not a Business Day) (the “Company Release Date”) after the Escrow Agent has received a written affidavit (a “Company Affidavit”) signed by two officers of the Company
attesting to the fact that (A) the Merger Agreement has been terminated (or will terminate upon release of the Escrow Fund to the Company), (B) the Company is entitled to receive the Escrow Fund under the terms of the Merger Agreement, specifying
the applicable provisions of the Merger Agreement, and (C) a copy of the Company Affidavit has been delivered to Parent; provided, however, that the Escrow Agent shall not release the Escrow Fund if, prior to the Company Release Date, it has
received a written notice (a “Parent Dispute Notice”) from Parent objecting to the release of the Escrow Fund to the Company; 
  
 (iii) to Parent on the tenth calendar day (or the next Business Day thereafter if the tenth calendar day is not a Business Day) (the “Parent Release
Date”) after the Escrow Agent has received a written affidavit (a “Parent Affidavit”) signed by two offices of Parent attesting to the fact that (A) the Merger Agreement has been terminated (or will terminate upon release of the
Escrow Fund to Parent), (B) Parent is entitled to receive the Escrow Fund under the terms of the Merger Agreement, specifying the applicable provisions of the Merger Agreement, and (C) a copy of the Parent Affidavit has been delivered to the
Company; provided, however, that the Escrow Agent shall not release the Escrow Fund if, prior to the Parent Release Date, it has received a written notice (a “Company Dispute Notice”) from the Company objecting to the release of the
Escrow Fund to Parent; 
  

 2 

 (iv) to Parent on the first Business Day after the Escrow Agent has received a written request from the
Company to release the Escrow Fund to Parent; or 
  
 (v) to the
Company on the first Business Day after the Escrow Agent has received a written request from Parent to release the Escrow Fund to the Company. 
  
 (c) If the Escrow Agent receives a Company Dispute Notice prior to a Parent Release Date or a Parent Dispute Notice prior to a Company Release Date, the
escrow shall continue with respect to the Escrow Fund until the Escrow Agent is directed to release the Escrow Fund by, and upon receipt of, (i) a copy of a written decision, order and/or instructions from a federal or state court, the appeals from
which have been exhausted or for which the time for appeal has expired, or (ii) an executed agreement between the Company and Parent. 
  
 3.2 Form of Payment. All money payable under this Agreement shall be paid by wire transfer of immediately available federal funds of the United
States. 
  
 3.3 Ownership. The parties agree that Parent
shall be treated as the “owner” of the Escrow Fund for federal and state income tax purposes and, as such, Parent shall be responsible for the payment of income taxes on the earnings in the Escrow Fund. 
  
 4. Escrow Agent. 
  
 (a) Except as expressly contemplated by this Agreement or by joint-written instructions from Parent and the Company, the
Escrow Agent shall not sell, transfer or otherwise dispose of, in any manner, all or any portion of the Escrow Fund, except pursuant to an order of a court of competent jurisdiction or a written instrument or agreement signed by each of Parent and
the Company. 
  
 (b) The duties and obligations of the Escrow
Agent shall be determined solely by this Agreement, and the Escrow Agent shall not be liable except for the performance of such duties and obligations as are specifically set forth in this Agreement. The Escrow Agent shall have no duties or
responsibilities under the Merger Agreement; all references in this Agreement to the Merger Agreement are for the convenience of the other parties hereto. 
  
 (c) In the performance of its duties hereunder, the Escrow Agent shall be entitled to rely upon any document, instrument or signature believed by it in
good faith to be genuine and signed by any party hereto or an authorized officer or agent thereof and shall not be required to investigate the truth or accuracy of any statement contained in any such document or instrument. The Escrow Agent may
assume that any person purporting to give any notice in accordance with the provisions of this Agreement has been duly authorized to do so. 
  
 (d) The Escrow Agent shall not be liable for any error of judgment, or any action taken, suffered or omitted to be taken, hereunder except in the case of
its gross negligence, bad faith or willful misconduct. 
  
 (e) The
Escrow Agent shall have no duty as to the collection or protection of the Escrow Fund or income thereon, nor as to the preservation of any rights pertaining thereto, beyond the safe custody of any such funds actually in its possession. 

 

 3 

 (f) As compensation for its services to be rendered under this Agreement, for each year or any portion
thereof, the Escrow Agent shall receive a fee in the amount specified in Schedule A to this Agreement and shall be reimbursed upon request for all expenses, disbursements and advances, including reasonable fees of outside counsel, if any,
incurred or made by it in connection with the preparation of this Agreement and the carrying out of its duties under this Agreement. All such fees and expenses shall be divided equally between and paid by each of Parent and the Company. 

 
 (g) Parent and the Company shall reimburse and indemnify the Escrow Agent
for, and hold it harmless against, any loss, liability or expense, including, without limitation, reasonable attorneys’ fees and costs, incurred without gross negligence, bad faith or willful misconduct on the part of the Escrow Agent arising
out of, or in connection with the acceptance of, or the performance of, its duties and obligations under this Agreement; provided that such loss, liability or expense shall be divided equally between Parent and the Company. 
  
 (h) The Escrow Agent may at any time resign by giving twenty business days
prior written notice of resignation to Parent and the Company. Parent and the Company may at any time jointly remove the Escrow Agent by giving ten business days prior written notice signed by each of them to the Escrow Agent. If the Escrow Agent
shall resign or be removed, a successor escrow agent, which shall be a bank or trust company having its principal executive offices in California or New York and assets in excess of $500 million, shall be appointed by Parent by a written instrument
executed by Parent and the Company and delivered to the Escrow Agent and to such successor escrow agent and, thereupon, the resignation or removal of the predecessor Escrow Agent shall become effective and such successor escrow agent, without any
further act, deed or conveyance, shall become vested with all right, title and interest to all cash and property held hereunder by such predecessor Escrow Agent, and such predecessor Escrow Agent shall, on the written request of Parent and the
Company, execute and deliver to such successor escrow agent all of its right, title and interest hereunder in and to the Escrow Fund and all of its other rights hereunder. If no successor escrow agent shall have been appointed within twenty business
days of a notice of resignation by the Escrow Agent, the Escrow Agent’s sole responsibility shall thereafter be to hold the Escrow Fund until the earlier of its receipt of designation of a successor escrow agent, joint written instructions by
Parent and the Company or termination of this Agreement in accordance with its terms. 
  
 5. Miscellaneous. 
  
 (a) Termination. This
Agreement shall terminate on the earlier to occur of (i) the Merger Date or (ii) release of the Deposit in accordance with Section 3.1(b) or 3.1(c). 
  
 (b) Attorneys’ Fees. If any action or proceeding relating to this Agreement or the enforcement of any provision of this Agreement is brought
against any party hereto (other than the Escrow Agent), the prevailing party shall be entitled to recover reasonable attorneys’ fees, costs and disbursements (in addition to any other relief to which the prevailing party may be entitled) before
and at trial at all appellate levels. 
  
 (c) Successors and
Assigns. This Agreement shall be binding upon each of the parties hereto and each of their respective permitted successors and assigns, if any. 
  

 4 

 (d) No Third Party Beneficiaries. This Agreement is for the sole benefit of Lima, Parent, the
Company and the Escrow Agent and their respective permitted successors and assigns, if any, and nothing in this Agreement, express or implied, is intended to confer, or shall be deemed to confer, any rights, benefits or remedies upon any other
person or entity under or by reason of this Agreement. 
  
 (e)
Notices. Any notice or other communication under this Agreement must be in writing and will be deemed given when it is delivered in person or sent by facsimile (with proof of receipt at the number to which it is required to be sent), on the
business day after the day on which it is sent by a major nationwide overnight delivery service to the following addresses (or such other address as may be specified after the date of this Agreement by the party to which the notice or communication
is sent): 
  
 If to Lima or Parent: 
  
 Lennar Corporation 
 24800 Chrisanta Drive 
 Mission Viejo, CA 92691 
 Attention: Mr. Jonathan Jaffe 
 Facsimile No.: (949) 598-8622 
  
 with a copy (which will not constitute notice) to: 
  
 Bilzin Sumberg Baena Price & Axelrod LLP 
 2500 Wachovia Financial Center 
 Miami, Florida 33131-2336 
 Attention: Brian L. Bilzin, Esq. 
 Facsimile No.: (305) 374-7593 
  
 LNR Property Corporation 
 1601 Washington Avenue 
 Suite 800 
 Miami Beach, Florida 33139 
 Attention: Mr. Jeffrey Krasnoff 
 Facsimile No.: (305) 695-5449 
  
 with a copy (which will not constitute notice) to:

  
 Clifford Chance LLP 
 200 Park Avenue 
 New York, New York 10166-0153 
 Attention: David W. Bernstein, Esq. 
 Facsimile No.: (212) 878-8375 
  

 5 

 If to the Company: 
  
 The Newhall Land and Farming Company 
 23823 Valencia Boulevard 
 Valencia, California 91355 
 Attention: Gary M. Cusumano 
 Facsimile No.: (661) 255-4200 
  
 with a copy (which will not constitute notice) to: 
  
 Paul, Hastings, Janofsky & Walker LLP 
 515 South Flower Street, 25th Floor 
 Los Angeles, California 90071 
 Attention: Kenneth R. Bender, Esq. 
 Facsimile No.: (213) 627-0705 
  
 if to the Escrow Agent, to: 
  
 Wells Fargo Bank, N.A. 
 Corporate Trust Services 
 707 Wilshire Boulevard, 17th Floor 
 Los Angeles, California 90017 
 Attention: Ms. Sandy Chan 
 Facsimile No.: (213) 614-3355 
  
 (f) Governing Law; Forum. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of California applicable to contracts executed in and to be performed in that state without regard to any conflicts of laws. 
  
 (g) Amendments. This Agreement may not be amended or modified except (i) by an instrument in writing signed by, or on
behalf of, Parent, the Company and the Escrow Agent or (ii) by a waiver in accordance with Section 5(h). 
  
 (h) Waiver. Any party hereto may (i) extend the time for the performance of any obligation or other act of any other party hereto or (ii) waive
compliance with any agreement or condition contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. Any waiver of any term or condition shall not
be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition, of this Agreement. The failure of any party to assert any of its rights, powers, privileges or
remedies hereunder, and any delay on the part of any party in exercising any right, power, privilege or remedy hereunder shall not constitute a waiver of any of such rights, powers, privileges or remedies. 
  
 (i) Severability. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic and legal substance of the
transactions contemplated by this Agreement is not affected 

  

 6 

 
in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced,
the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated by this Agreement be
consummated as originally contemplated to the fullest extent possible. 
  
 (j) Entire Agreement. Except as set forth in Section 4(b) hereof, this Agreement and the Merger Agreement constitute the entire agreement of the parties hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among Parent, the Company and the Escrow Agent with respect to the subject matter hereof. 
  
 (k) Interpretation. 
  
 (i) Whenever the words “include,” “includes” or “including” are used in this Agreement, they shall be deemed to be followed
by the words “without limitation.” 
  
 (ii) The words
“hereof,” “herein” and “herewith” and words of similar import shall, unless otherwise stated, be construed to refer to this Agreement as a whole and not to any particular provision of this Agreement, and article,
section, paragraph, exhibit and schedule references are to the articles, sections, paragraphs, exhibits and schedules of and to this Agreement unless otherwise specified. 
  
 (iii) The plural of any defined term shall have a meaning correlative to such defined term, and words denoting any gender
shall include both genders and the neuter. Where a word or phrase is defined herein, each of its other grammatical forms shall have a corresponding meaning. 
  
 (iv) A reference to any party to this Agreement or any other agreement or document shall include such party’s successors and permitted assigns.

  
 (v) A reference to any legislation or to any provision of any
legislation shall include any modification, amendment or re-enactment thereof, any legislative provision substituted therefor and all rules, regulations and statutory instruments issued thereunder or pursuant thereto. 
  
 (vi) The parties have participated jointly in the negotiation and drafting of
this Agreement. If an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of
the authorship of any provisions of this Agreement. 
  
 (vii) No
prior draft nor any course of performance or course of dealing shall be used in the interpretation or construction of this Agreement. 
  
 (viii) The descriptive headings in this Agreement are intended for reference purposes only and shall not be used in the interpretation or construction of
this Agreement. 
  

 7 

 (l) Counterparts. This Agreement may be executed in two or more counterparts, each of which when executed
shall be deemed to be an original but all of which when taken together shall constitute one and the same agreement. 
  
 [Signature Page Follows] 
  

 8 

 IN WITNESS WHEREOF, each party hereto has executed or has caused this Agreement to be executed by its officer thereunto
duly authorized as of the date first written above. 
  

	 THE NEWHALL LAND AND FARMING COMPANY

		
	 By:
	 	 Newhall Management Limited Partnership,
 Managing General Partner

			
	 	 	 By:
	 	 Newhall Management Corporation,
 Managing General Partner

				
	 	 	 	 	 By:
  
	 	 /s/ Gary M. Cusumano

	 	 	 	 	 	 	 Name: Gary M. Cusumano

	 	 	 	 	 	 	 Title: President and Chief Executive Officer

				
	 	 	 	 	 By:
  
	 	  
 /s/    Donald L.
Kimball

	 	 	 	 	 	 	 Name: Donald L. Kimball

	 	 	 	 	 	 	 Title: Vice President and Chief Financial Officer

	
	 LENNAR CORPORATION

		
	 By:
	 	 /s/    Bruce Gross

	 	 	 Name:
  
	 	 Bruce Gross

	 	 	 Title:
  
	 	 Vice President

	
	 LNR PROPERTY CORPORATION

		
	 By:
	 	 /s/    Shelly L. Rubin

	 	 	 Name:
  
	 	 Shelly L. Rubin

	 	 	 Title:
  
	 	 Vice President

  

 9 

	
	 NWHL INVESTMENT LLC

		
	 By:
	 	 /s/    Bruce Gross

	 	 	 Name:
  
	 	 Bruce Gross

	 	 	 Title:
  
	 	 Vice President

	
	 WELLS FARGO BANK, N.A.

		
	 By:
	 	 /s/    Sandy Chan

	 	 	 Name:
  
	 	 Sandy Chan

	 	 	 Title:
  
	 	 Vice President

 SCHEDULE A 
  
 Escrow Agent FeesJOINT OWNERSHIP AGREEMENT

 EXHIBIT 10.2 
  
 JOINT OWNERSHIP AGREEMENT 
  
 This is an Agreement dated as of July 21, 2003 between Lennar Corporation, a Delaware corporation (“Lennar”), and LNR Property Corporation, a
Delaware corporation (“LNR” and, together with Lennar, the “Owners”), regarding (a) the ownership and funding of NWHL Investment LLC (the “Company”), a Delaware limited liability company, (b) matters related to the
acquisition by the Company of Newhall Land and Farming Company (“Newhall”), a California limited partnership, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) dated as of July 21, 2003 among Newhall, Lennar,
LNR, the Company and NWHL Acquisition L.P. (“Acquisition”), a California limited partnership, and (c) relationships between the Owners and the Company after the Company acquires Newhall. The agreement between the Owners is as follows:

  
 ARTICLE 1 
  
 OWNERSHIP AND FUNDING OF THE COMPANY 
  
 1.1 Ownership of the Company. Lennar and LNR each will own, directly
or indirectly, 50% of the member units of the Company (“Units”), unless and until one of them transfers Units, or the LLC issues Units to other persons (in which case Lennar and LNR each will own 50% of the total number of Units owned by
the two of them) as permitted by the Limited Liability Company Agreement of the Company (the “LLC Agreement”). Unless and until one of the Owners transfers Units to an entity other than a subsidiary without the other Owner transferring at
approximately the same time the same number of Units to an entity other than a subsidiary, any time the Company sells or otherwise issues Units to, or acquires Units from, one of the Owners, the Owners will cause the Company to sell or otherwise
issue the same number of Units to, or acquire the same number of Units from, the other Owner, unless otherwise agreed to by the Owners. 
  
 1.2 Execution of Limited Liability Company Agreement. (a) Lennar and LNR NWHL Holdings, Inc. (“LNR NWHL”), an indirect wholly owned
subsidiary of LNR, each is executing, effective as of the date of this Agreement, the Limited Liability Company Agreement of the Company. Each reference in Articles 1 and 2 of this Agreement to the Owners or to LNR that relates to the LLC Agreement,
the ownership of Units or memberships in the Company, or to 

 obligations to contribute funds to, or the right to receive funds from, the Company shall refer, in the case of
references to the Owners, to Lennar and LNR NWHL, and in the case of references to LNR, to LNR NWHL. 
  
 (b) LNR unconditionally guarantees that LNR NWHL will fulfill all its obligations under the LLC Agreement and all the obligations of LNR under Articles 1
and 2 of this Agreement (except to the extent LNR fulfills those obligations itself). 
  
 (c) LNR will not sell or otherwise transfer, or permit any subsidiary to sell or otherwise transfer, any shares of stock of, or other ownership interests in, LNR NWHL, or, any stock of or other ownership interests in
any subsidiary of LNR that owns shares of stock of, or other ownership interests in, LNR NWHL, and LNR will prevent LNR NWHL from issuing any shares of its stock, in each case other than to a direct or indirect wholly owned subsidiary of LNR, unless
prior to the sale or other transfer, or the share issuance, LNR NWHL has transferred its units or other ownership interests in the Company to LNR or another direct or indirect wholly owned subsidiary of LNR, and LNR or that other wholly owned
subsidiary has become a member of the Company and has agreed to fulfill all the obligations of LNR NWHL under the LLC Agreement or under this Agreement that have not already been fulfilled and, if the transfer is to a subsidiary, LNR and that
subsidiary have agreed that this paragraph will apply to stock of, or other ownership interests in, that subsidiary to the same extent that at the date of this Agreement it applies to stock of, or other ownership interests in, LNR NWHL. LNR may,
however, pledge or otherwise grant security interests in the shares of LNR NWHL or in any subsidiary that owns shares of, or other ownership interests in, LNR NWHL to secure LNR’s obligations with regard to its principal corporate line of
credit (which, at the date of this Agreement, is under a Third Amended and Restated Revolving Credit Agreement, dated as of November 27, 2002, with lenders for which Bank of America, N.A. is administrative agent). 
  
 1.3 Initial Contribution. On the date of this Agreement, Lennar and
LNR each has contributed $2.5 million to the Company, by paying that amount to Newhall, which sums in total constituted the $5 million Initial Deposit required by the Merger Agreement. 
  
 1.4 Additional Contributions. Unless the Company terminates the Merger Agreement prior to the Due Diligence
Termination Date described in Section 3.3 of the Merger Agreement, Lennar and LNR each will make additional contributions to the Company as follows: 
  

 2 

 (a) On the first business day after the Due Diligence Termination Date, Lennar and LNR each will deliver
to the Wells Fargo Bank, N.A. (the “Escrow Agent”), as escrow agent, the sum of $12.5 million, which sums in total will constitute the payment required by clause (ii) of Section 1.9 of the Merger Agreement. The sum paid by each Owner to
the Escrow Agent will constitute a contribution by that Owner to the capital of the Company. 
  
 (b) When and if the Company is required to provide the Distributing Agent under the Merger Agreement with the balance of the Merger Consideration in accordance with Section 1.11(a) of the Merger Agreement, Lennar and
LNR each will contribute to the capital of the Company, either by providing funds to the Company or by sending funds by wire transfer directly to the Distributing Agent, the sum equal to 50% of (i) the Merger Consideration that is required to be
delivered to the Distributing Agent, minus (ii) any portion of the Merger Consideration that is borrowed by the Company or otherwise obtained by the Company other than through contributions from its members (including any portion of the Merger
Consideration that is provided by LNR in payment of the purchase price of the Income Producing Properties (defined in Paragraph 4.1) in accordance with Paragraph 4.1(b)(3)). 
  
 (c) Whenever the Owners are required to pay an amount (or to cause the Company or Newhall to pay an amount) under Section
1.13 of the Merger Agreement to the holder of an Award, Lennar and LNR each will contribute to the Company, whether by providing funds to the Company or by making payments directly to the holder of the Award, 50% of the sum the Owners are required
to pay, or cause the Company or Newhall to pay, to the holder of the Award. 
  
 (d) Whenever the Owners are, or the Company or Newhall is, required to make any payment under the Merger Agreement (including any payment of withholding tax as a result of payments made under the Merger Agreement) in
addition to those described in Paragraph 1.3 or subparagraph (a) through (c) of this Paragraph, Lennar and LNR each will provide, either by contributing funds to the Company or by making a portion of the payment directly, 50% of the funds the
Company’s Executive Committee (the “Executive Committee”) determines that the Company’s members must make as contributions to the Company in order to enable the Company to make that payment. 
  
 (e) Whenever the Executive Committee determines that the Company’s
members must contribute funds to the Company to enable the Company to pay expenses related to the 
  

 3 

 organization and formation of the Company or the acquisition or operations of Newhall, or any related transaction or
event, including but not limited to pay legal and accounting fees and expenses, or to fund the ongoing activities of the Company or Newhall, each of the Owners will contribute to the capital of the Company the percentage of the sum the Executive
Committee determines that the Company’s members must contribute to the Company (reduced by any amounts contributed by members other than the Owners) that equals the number of Units held by that Owner as a percentage of the total number of Units
held by both Owners. The Company will not pay (and therefore the Owners will not be required to make contributions to the Company with regard to) any expenses, including but not limited to legal, accounting or investment banking fees and expenses,
incurred separately by Lennar or LNR in connection with the negotiation of this Agreement and the LLC Agreement, or in connection with any transactions or relationships between Lennar or LNR, on the one hand, and the Company or Newhall or any of its
subsidiaries, on the other. Any due diligence performed by Lennar or LNR during the Due Diligence Period under the Merger Agreement will be deemed to be on behalf of the Company and the costs of that due diligence will be deemed to be a cost of the
acquisition of Newhall, to be reimbursed by the Company out of funds contributed by the Owners. 
  
 1.5 Refunds of Payments Under Merger Agreement. If either the Initial Deposit or the Additional Deposit paid under the Merger Agreement is refunded
to the Company, the Company receives a Termination Fee or a Special Termination Fee under Section 7.1(i) or Section 8.1 of the Merger Agreement or the Company receives any other payment from Newhall under the Merger Agreement, promptly after the
Company receives that payment, the Company will distribute 50% of the amount it has received to each of Lennar and LNR, except that if any payment is made partially to the Company and partially directly to Lennar or LNR, the Company will distribute
to Lennar and to LNR the respective amounts that will cause the total amount of the payment received by each of Lennar and LNR (including both the amount paid directly to it and the amount distributed to it by the Company) to equal 50% of the total
amount received by Lennar and LNR together (including both amounts paid directly to each of them and amounts distributed to each of them by the Company). 
  
 1.6 Guarantees. If the Owners are required to guaranty any borrowings by, or other obligations of, the Company or Newhall, or if the Executive
Committee authorizes the Company to request that the Owners guaranty any borrowings by the Company or Newhall in order to reduce the cost of borrowings or for any other reason, each of Lennar and LNR Property Corporation will guaranty those
borrowings or other obligations. Depending on requirements of 
  

 4 

 the lenders or other persons to which guaranties are given, guaranties may be several as to all or specified portions of
the borrowings or other obligations, may be joint and several as to all or specified portions of the borrowings or other obligations, or may be on any other basis, provided that neither Lennar nor LNR Property Corporation will be required to
guaranty borrowings by the Company or Newhall unless the other guarantor guarantees the same borrowings on essentially the same terms. 
  
 1.7 Consequences of Failure to Make Required Contribution to the Company. If either Owner fails to make a contribution to the Company or any other
payment as required by this Agreement, the other Owner will have, in addition to any other rights it may have at law or otherwise, all the rights provided in the LLC Agreement as the result of that failure. 
  
 ARTICLE 2 
  
 EQUALIZATION OF PAYMENTS 
  
 2.1 Contribution by Owners. If either Owner is required to make any payment under the Merger Agreement or as a guarantor of obligations of the
Company or of Newhall (including as a guarantor of borrowings by the Company or Newhall), or otherwise is required to pay for expenses of the Company or Newhall, the other Owner will pay to the Owner that made the payment the sum such that each of
the Owners will bear the percentage of the costs of the payments made by both of them that equals the number of Units held by that Owner as a percentage of the total number of Units held by both Owners. 
  
 2.2 Contribution by Other Unit Holders. The obligations of Lennar and
LNR under Paragraph 2.1 relate solely to the two of them. If anyone other than Lennar and LNR holds Units, the obligations of Lennar and LNR under Paragraphs 1.4(e) and 2.1 will be after taking account of any payments made by those other holders of
Units, including any contributions made by those holders of Units under any agreements to which they are parties. 
  
 ARTICLE 3 
  
 ACTIONS REGARDING ACQUISITION OF NEWHALL 
  
 3.1
Merger Agreement. Each of the Owners has executed the Merger Agreement. Unless and until the Merger Agreement is terminated, except as agreed to by both Owners, each of the Owners will fulfill all its obligations under the Merger Agreement.

  

 5 

 3.2 Efforts to Cause Newhall Acquisition to Be Completed. Unless and until the Merger Agreement is
terminated or the Executive Committee determines that the Company should refuse to complete the Merger because a condition in Section 6.2 of the Merger Agreement was not satisfied, each of Lennar and LNR will do all things that are reasonably within
its power to cause the acquisition of Newhall in accordance with the Merger Agreement to be completed, except to the extent otherwise agreed by both Owners. 
  
 3.3 Due Diligence. Lennar and LNR will cooperate fully with one another in conducting due diligence regarding Newhall and its subsidiaries during
the period prior to the Due Diligence Termination Date under the Merger Agreement. Among other things, Lennar and LNR each will keep the other of them fully informed of all steps it is taking to conduct due diligence, and of all material information
it obtains while conducting due diligence regarding Newhall and its subsidiaries. 
  
 3.4 Determination Whether to Terminate Merger Agreement. (a) Not later than the day before the Due Diligence Termination Date under the Merger Agreement (the “Due Diligence Termination Date”), Lennar
and LNR (through LNR NWHL) will cause the Executive Committee to meet and to consider whether the Company should notify Newhall that the Company is terminating the Merger Agreement in accordance with Section 7.1(c) of the Merger Agreement because
the Company is not satisfied with the results of its due diligence investigation of Newhall. Lennar and LNR (through LNR NWHL) will cause the Executive Committee to conduct a final vote not later than the day before the Due Diligence Termination
Date regarding whether to notify Newhall that the Company is terminating the Merger Agreement under Section 7.1(c) and, if the Executive Committee votes to give that notice to Newhall, Lennar and LNR (through LNR NWHL) will cause the Company to give
that notice not later than the Due Diligence Termination Date. 
  
 (b) If at any time on or before the Merger Date under the Merger Agreement (the “Merger Date”), either of the Owners requests that the Executive Committee meet to determine whether the Company should terminate the Merger Agreement
under any paragraph of Section 7.1 of the Merger Agreement other than Paragraph (c), the Owners will cause that meeting to be held and will cause the Executive Committee to determine at that meeting whether the Company should terminate the Merger
Agreement. 
  

 6 

 3.5 Determination Regarding Conditions to Merger. If either of the Owners notifies the other of
them on or before the Merger Date that it believes that a condition in Section 6.2 or 6.3 of the Merger Agreement has not been satisfied, and is not likely to be satisfied, each of the Owners will do all things that are necessary to cause the
Executive Committee to meet and to determine at that meeting whether, assuming the condition in fact is not fulfilled, the Company should refuse to complete the Merger, or the Company should waive the condition. 
  
 ARTICLE 4 
  
 TRANSACTIONS REGARDING NEWHALL PROPERTIES 
  
 4.1 LNR Purchase of Income Producing Properties. (a) Lennar and LNR will attempt in good faith to agree as promptly
as practicable, and in any event before the Merger Date, upon a price at which, on the Merger Date, the Company will cause Newhall to sell to LNR, immediately after the Merger becomes effective, the properties listed on Schedule 4.1 (the
“Income Producing Properties”). This price will be the price allocated by the Owners to the Income Producing Properties as part of the allocation of the Merger Consideration among all the assets and properties of Newhall in determining the
amount of the Merger Consideration, unless the Board of Directors of Lennar or of LNR determines in good faith, whether after consultation with an investment banking firm or other expert advisor or otherwise, that, if the Income Producing Properties
are sold to LNR at the price allocated to them as part of the allocation of the Merger Consideration and the Valencia Base Sale Prices and the Valencia Base Option Prices (both defined in Paragraph 4.2(a)) are the prices allocated to the properties
to which they relate as part of the allocation of the Merger Consideration, (i) the sale of the Committed Valencia Residential Properties (defined in Paragraph 4.2(a)) to Lennar at the resulting price per acre (or other unit of measure) provided in
Paragraph 4.2(c), (ii) the grant to Lennar of an option to purchase the Option Valencia Residential Properties (defined in Paragraph 4.2(a)) at the resulting option exercise price, and on the other terms, provided in Paragraph 4.2(d), and (iii) the
sale of the Income Producing Properties to LNR at the price allocated to them, taken together, would not be fair to Lennar or to LNR, as the case may be, from a financial point of view. 
  
 (b) (1) If Lennar and LNR agree upon a price at which the Company will cause Newhall to sell the Income Producing Properties
to LNR, as promptly as practicable after that price is agreed upon, (i) Lennar and LNR will sign a document instructing the Company to 
  

 7 

 cause Newhall to sell the Income Producing Properties to LNR at that price on the Merger Date (assuming the Merger
occurs), or as soon after the Merger Date as is practicable, (ii) each Owner will deliver to the other of them a certificate stating that its Board of Directors has approved the determination of the price at which Newhall will sell the Income
Producing Properties to LNR, and that that approval was given (A) in accordance with the requirements of its by-laws (including any requirement of approval by a committee consisting of directors who have no relationship with the other Owner) and (B)
after such consultation with an investment banker or other expert advisor, and receipt of such opinion from that investment banker or other expert advisor, as its Board of Directors (or an appropriate committee of its Board of Directors) deemed
necessary, and (iii) the Owners will cause the Company to cause Newhall to enter into an agreement with LNR on the Merger Date relating to the sale of the Income Producing Properties to LNR, which will contain terms, in addition to price, that are
customary for sales of properties similar to the Income Producing Properties in the geographic area where the Income Producing Properties are located, which agreement will be subject to approval by the Executive Committee. 
  
 (2) Although the Company will not own Newhall until the Merger Date, Lennar
and LNR each will use its best efforts to cause Newhall to do, before the Merger Date, everything that must be done to make it possible for Newhall to transfer the Income Producing Properties to LNR on the Merger Date (including, but not limited to,
delivering deeds and other transfer documents into escrow and obtaining any required governmental or other consents). If the sale of the Income Producing Properties cannot be completed on the Merger Date, Lennar and LNR each will use its best
efforts to cause the sale of the Income Producing Properties to be completed as promptly as practicable after the Merger Date. 
  
 (3) If the sale of the Income Producing Properties takes place on the Merger Date, LNR will pay the purchase price for the Income Producing Properties by
providing an amount equal to the purchase price to the Distribution Agent under the Merger Agreement to be included in the Merger Consideration. If the sale of the Income Producing Properties takes place after the Merger Date, LNR will pay the
purchase price for the Income Producing Properties to Newhall. 
  
 4.2 Lennar Purchases of Valencia Residential Properties. (a) Lennar and LNR each will attempt in good faith to agree as promptly as practicable, and in any event not later than the Merger Date, upon a schedule of prices (the
“Valencia Base Sale Prices”) per acre (or other unit 
  

 8 

 of measure) as of June 1, 2004 for the properties described on Schedule 4.2-A(1) (the “Committed Valencia
Residential Properties”) and a schedule of prices (the “Valencia Base Option Prices) per acre (or other unit of measure) as of June 1, 2004 for the properties described on Schedule 4.2-A(2) (the “Option Valencia Residential
Properties”). 
  
 (b) The Valencia Base Sale Prices and the
Valencia Base Option Prices will be the prices per acre (or other unit of measure) allocated by the Owners to the Committed Valencia Residential Properties and the Option Valencia Residential Properties (together, the “Valencia Residential
Properties”) as part of the allocation of the Merger Consideration among all the assets and properties of Newhall in determining the amount of the Merger Consideration, unless the Board of Directors of Lennar or of LNR determines in good faith,
whether after consultation with an investment banking firm or other expert advisor or otherwise, that, if the Income Producing Properties are sold to LNR at the price allocated to them as part of the allocation of the Merger Consideration and the
Valencia Base Sale Price and the Valencia Base Option Price are the prices allocated to the properties to which they relate as part of the allocation of the Merger Consideration, (i) the sale of the Committed Valencia Residential Properties to
Lennar at the resulting price per acre (or other unit of measure) provided in subparagraph (c), (ii) the grant to Lennar of an option to purchase the Option Residential Properties at the resulting option exercise price, and on the other terms,
provided in subparagraph (d), and (iii) the sale of the Income Producing Properties to LNR at the price allocated to them, taken together, would not be fair to Lennar or to LNR, as the case may be, from a financial point of view. 
  
 (c) If Lennar and LNR agree upon a schedule of Valencia Base Sale Prices and
a schedule of Valencia Option Sale Prices, as soon as practicable after those schedules are agreed upon, (i) Lennar and LNR will sign a document instructing the Company to cause Newhall to (A) sell the Committed Valencia Residential Properties to
Lennar promptly after they are in bluetop condition (as that term is defined on Schedule 4.2-C), for the agreed upon Valencia Base Sale Prices increased at the rate of 5% per annum for the period between June 1, 2004 and the day on which the
Committed Valencia Residential Properties are sold to Lennar and (B) grant Lennar an option (the “Valencia Residential Property Option”) to purchase the Option Valencia Residential Properties on the terms provided in subparagraph (d), (ii)
each Owner will deliver to the other of them a certificate stating that its Board of Directors has approved the determination of the Valencia Base Sale Prices and the Valencia Base Option Prices, and that that approval was given (A) in accordance
with the requirements of its by-laws 
  

 9 

 (including any requirement of approval by a committee consisting of directors who have no relationship with the other
Owner) and (B) after such consultation with an investment banker or other expert advisor, and receipt of such opinion from that investment banker or other expert advisor, as its Board of Directors (or an appropriate committee of its Board of
Directors) deemed necessary, (iii) the Owners will cause the Company to cause Newhall to enter into an agreement with Lennar on the Merger Date relating to the sale of the Committed Valencia Residential Properties to Lennar, which will contain
terms, in addition to price and time of sale, that are customary for sales of unimproved homesites in bluetop condition in the geographic area where the Committed Valencia Residential Properties are located, which agreement will be subject to
approval by the Executive Committee, and (iv) the Owners will cause the Company to cause Newhall to enter into an option agreement (the “Option Agreement”) with Lennar on the Merger Date containing the terms of the Valencia Residential
Property Option, which Option Agreement will be subject to approval by the Executive Committee. 
  
 (d) The terms of the Valencia Residential Property Option will be as follows: 
  
 (1) The option exercise price per acre (or other unit of measure) will be the Valencia Base Option Price
increased at the rate of 5% per annum for the period between June 1, 2004 and the day on which particular Option Valencia Residential Properties are sold to Lennar upon exercise of the Valencia Residential Property Option plus a profit participation
(on the terms set forth on Schedule 4.2-D) equal to 50% of Net Profits from sales or other dispositions of Residences in excess of 8% of Gross Revenue, and 50% of Net Proceeds from sales of Unimproved Lots. 
  
 (2) The Valencia Residential Property Option will expire 90
days after the day on which Newhall notifies Lennar that a tentative map relating to the development of the Option Valencia Residential Properties has been approved by the applicable land use authority, any appeals from that approval have been
resolved, and the time to file further appeals has expired. If the Valencia Residential Property Option is exercised, Lennar will purchase Option Valencia Residential Properties promptly after they are in bluetop condition. 
  
 (3) If the Valencia Residential Property Option is
exercised, the terms of the purchase of Option Valencia Residential Properties, other than price, will be 
  

 10 

 substantially the same as those relating to the sale of the Committed Valencia Residential Properties to
Lennar in accordance with subparagraph (c). 
  
 (4) If Lennar exercises the Valencia Residential Property Option, it will be required to purchase all the Option Valencia Residential Properties on the terms of the Valencia Residential Property Option. 
  
 (5) If Lennar does not exercise the Valencia Residential
Property Option, it will be required to pay Newhall, on the day when the Valencia Residential Property Option expires, an amount equal to 5% of the Valencia Base Option Price for all the Option Valencia Residential Properties. 
  
 (6) If Lennar does not exercise the Valencia Residential
Property Option, it will not be permitted to purchase any of the Option Valencia Residential Properties, unless Newhall, with the approval of the Executive Committee, offers Option Valencia Residential Properties for sale for a price that is less
than 95% of the option exercise price (without taking account of the profit participation), in which case Lennar may bid for those Option Valencia Residential Properties on the same basis as any other potential purchaser. 
  
 (7) In order to ensure that Lennar will make the payment
described in subparagraph (5) if it is required to do so, when Newhall and Lennar enter into the Option Agreement, Lennar will deliver to Newhall a letter of credit from a bank reasonably acceptable to the Company in the amount of that payment,
which may be drawn upon if the payment is not made when it is due. 
  
 4.3 Effort to Agree upon Prices. If the Board of Directors of Lennar or LNR determines in good faith that, if the Income Producing Properties are sold to LNR at the price allocated to them as part of the allocation of the Merger
Consideration and the Valencia Base Sale Price and the Valencia Base Option Price are the prices allocated to the properties to which they relate as part of the allocation of the Merger Consideration, (i) the sale of the Committed Valencia
Residential Properties to Lennar at the resulting price per acre (or other unit of measure) provided in subparagraph 4.2(c), (ii) the grant to Lennar of an option to purchase the Option Residential Properties at the resulting option exercise price,
and on the other terms, provided in subparagraph 4.2(d), and (iii) the sale of the Income Producing Properties to LNR at the price allocated to them, taken together, would not be fair to Lennar or 
  

 11 

 to LNR, as the case may be, from a financial point of view, LNR and Lennar will use their respective best efforts to
agree upon prices that their respective Boards of Directors will determine would be fair to the applicable one of Lennar or LNR from a financial point of view. However, neither LNR nor Lennar will be under a legal obligation to agree to any price.
 
  
 4.4 Sale of Income Producing Properties if Owners
Do Not Agree Upon Price. If the Owners do not agree on or before the Merger Date upon the price at which Newhall will sell the Income Producing Properties to LNR, or if the Executive Committee does not approve the other terms of the agreement by
which Newhall will sell the Income Producing Properties to LNR (other than because of the unreasonable refusal by Lennar to cause its representatives on the Executive Committee to vote to approve that form of agreement), the Owners will cause the
Company to cause Newhall to offer the Income Producing Properties for sale as promptly as practical after the Merger Date in a commercially reasonable fashion. LNR will have the right to bid for the Income Producing Properties (or, if individual
Income Producing Properties are offered separately, to bid for some or all of the individual Income Producing Properties) on the same basis as other potential purchasers. 
  
 4.5 Sale of Valencia Residential Properties If Owners Do Not Agree Upon Price. If the Owners do not agree before the
Merger Date upon the price per acre (or other unit of measure) on which Lennar will purchase the Committed Valencia Residential Properties, and will have the option to purchase the Option Valencia Residential Properties, or if the Executive
Committee does not approve the other terms of the agreement by which Newhall will sell the Committed Valencia Residential Properties to Lennar or the terms of the Option Agreement (other than because of the unreasonable refusal by LNR to cause its
representatives on the Executive Committee to vote to approve the forms of agreement), the Owners will cause the Company to cause Newhall to do as promptly as practicable the work that is required to cause the Valencia Residential Properties to be
in bluetop condition and to offer the Valencia Residential Properties for sale as promptly as practicable after they are in bluetop condition in a commercially reasonable fashion. Lennar will have the right to bid for Valencia Residential Properties
(or, if portions of the Valencia Residential Properties are offered separately, to bid for some or all of the portions of the Valencia Residential Properties) when they are offered for sale on the same basis as other potential purchasers.

  
 ARTICLE 5 
  
 ONGOING PROPERTY TRANSACTIONS 
  

 12 

 5.1 Lennar First Opportunity to Purchase Residential Property. (a) If at any time, the Executive
Committee approves a sale by Newhall of property that is primarily suitable for single family home or similar residential development (“Residential Property”), whether as part of its approval of an annual business plan or otherwise, the
Owners will cause the Company to cause Newhall to grant to Lennar the first opportunity to purchase that property at the price or prices, and on the other terms (which may include profit participations of the type described on Schedule 4.2-D or
other types of profit participations), approved by the Executive Committee, provided that at no time will Lennar have the first opportunity to purchase property, or any other right to purchase property, that at that time constitutes more than 49% of
Newhall’s total assets. 
  
 (b) The first opportunity Newhall
offers to Lennar to purchase Residential Property will be on the following terms: 
  
 (1) Newhall will not offer the Residential Property to anyone other than Lennar until at least 30 days after it offers it to Lennar in a
an Offer that contains the principal terms on which Newhall is offering the Residential Property to Lennar. 
  
 (2) If Lennar agrees within 30 days after it receives the Offer to purchase the Residential Property that is the subject of the Offer for
the price, and on the other principal terms, contained in the Offer, Newhall will sell that Residential Property to Lennar for that price and on those other principal terms. 
  
 (3) If Lennar does not agree within 30 days after it receives the Offer to purchase the Residential
Property that is the subject of the Offer for the price, and on the other principal terms, contained in the Offer, Newhall may, during the period of one year after the end of the 30 day period, sell that Residential Property to other purchasers for
the price specified in the Offer or a price that is at least 95% of the price per acre (or other unit of measure) specified in the Offer (without taking account of any profit participation). 
  
 (4) During the period when Newhall is offering the
Residential Property to purchasers other than Lennar in accordance with subparagraph (3) for a price that is at least 95% of the price specified in the Offer, Lennar may not bid to purchase that Residential Property. 
  

 13 

 (5) If Newhall, with the approval of the Executive Committee, determines to offer the
Residential Property for sale for a price that is less than 95% of the price per acre (or other unit of measure) specified in the Offer (without taking account of any profit participation), Newhall may not offer the Residential Property to anyone
other than Lennar until it has made a new offer to Lennar on the terms described in subparagraphs (1) through (4). 
  
 5.2 LNR First Opportunity to Purchase Commercial Property. (a) If at any time the Executive Committee approves a sale by Newhall of property that
is primarily suitable for development as the site of commercial, industrial or multi-family rental apartment buildings (“Commercial Property”), whether as part of its approval of an annual business plan or otherwise, the Owners will cause
the Company to cause Newhall to grant to LNR the first opportunity to purchase that property at the price or prices, and on the other terms (which may include profit participations of the type described on Schedule 4.2-D or other types of profit
participations) approved by the Executive Committee, provided that at no time will LNR have the first opportunity to purchase property, or any other right to purchase property, that at that time constitutes more than 49% of Newhall’s total
assets. 
  
 (b) The first opportunity Newhall offers to LNR to
purchase Commercial Property will be on the following terms: 
  
 (1) Newhall will not offer the Commercial Property to anyone other than LNR until at least 30 days after it offers it to LNR in a an Offer that contains the principal terms on which Newhall is offering the Commercial
Property to LNR. 
  
 (2) If LNR agrees within 30
days after it receives the Offer to purchase the Commercial Property that is the subject of the Offer for the price, and on the other principal terms, contained in the Offer, Newhall will sell that Commercial Property to LNR for that price and on
those other principal terms. 
  
 (3) If LNR does
not agree within 30 days after it receives the Offer to purchase the Commercial Property that is the subject of the Offer for the price, and on the other principal terms, contained in the Offer, Newhall may, during the period of one year after the
end of the 30 day period, sell that Commercial Property to other purchasers for the price specified in the Offer or a price that is at least 95% of the price specified in the Offer (without taking account of any profit participation). 
  

 14 

 (4) During the period when Newhall is offering the Commercial Property to purchasers
other than LNR in accordance with subparagraph (3) for a price that is at least 95% of the price specified in the Offer, LNR may not bid to purchase that Commercial Property. 
  
 (5) If Newhall, with the approval of the Executive Committee, determines to offer the Commercial Property
for sale for a price that is less than 95% of the price specified in the Offer (without taking account of any profit participation), Newhall may not offer the Commercial Property to anyone other than LNR until it has made a new offer to Lennar on
the terms described in subparagraphs (1) through (4). 
  
 5.3
Other Arrangements. In addition to granting Lennar and LNR the rights of first opportunity described in Paragraphs 5.1 and 5.2, the Company may from time to time cause or permit Newhall to enter into arrangements to sell Residential Property
to Lennar, or to sell Commercial Property to LNR, or to grant Lennar or LNR options, rights of first refusal or other rights to purchase Residential Property or Commercial Property, as the case may be, that other developers have proposed to acquire,
on terms at least as favorable to Newhall as those proposed by the other developers, or to enter into other arrangements to sell Residential Property to Lennar or Commercial Property to LNR, which arrangements may include profit participations of
the type described on Schedule 4.2-D, or other types of profit participations, by Newhall or the Company. Any arrangement by which Newhall would sell property to Lennar or to LNR or grant Lennar or LNR an option, right of first refusal or other
right to acquire property, other than as described in Paragraphs 5.1 and 5.2, will require approval of the Executive Committee as provided in the LLC Agreement, including a determination that the price at which Newhall will sell the property to
Lennar or LNR is not less than the fair market value of the property at the time of the sale or at the time Newhall and the applicable one of Lennar or LNR agree to the terms of the sale. 
  
 ARTICLE 6 
  
 AGREEMENTS NOT TO COMPETE 
  
 6.1 Lennar Agreement Not to Compete. Lennar will not, and will cause its subsidiaries not to, engage with regard to any property owned by Newhall
on the Merger Date, or anyplace within 5 miles of any property owned by Newhall on the Merger Date, directly, as a 
  

 15 

 participant in a joint venture, ground lessor or otherwise, in (i) developing, constructing, owning or operating office
buildings, shopping centers or other commercial or industrial buildings or residential rental apartment buildings on that property, or (ii) providing mortgage financing for the construction or ownership of buildings on that property of the type
described in clause (i). However, Lennar will not be prevented from (A) owning or leasing an office building in which it occupies the majority of the usable office space and leasing or subleasing the remainder of the office space in that building,
(B) owning as a passive investor, without any involvement in operations or management, an interest of less than 10% in a publicly traded operating company that is engaged in one or more of the activities described in the first sentence of this
Paragraph, or (C) owning an interest in, and possibly managing, an entity of which Lennar and LNR, directly or through subsidiaries, have ownership interests that (x) are equal with regard to Lennar and LNR, and (y) together are a majority of all
the ownership interests. 
  
 6.2 LNR Agreement Not to
Compete. LNR will not, and will cause its subsidiaries not to, engage with regard to any property owned by Newhall on the Merger Date, or anyplace within 5 miles of any property owned by Newhall on the Merger Date, directly, as a participant in
a joint venture or otherwise, in (i) building or selling single family detached or attached homes or residential condominium units on that property, (ii) developing all or a portion of the property as the sites of homes or residential condominium
units, (iii) providing first mortgage financing for the purchase of homes or residential condominium units on that property, or (iv) providing first mortgage re-financing of loans secured by homes or residential condominium units on that property.
However, LNR will not be prevented from (A) developing properties acquired upon default of mortgages for reasonable periods after foreclosure until there can be orderly dispositions of the properties, (B) selling as condominium units apartments in
residential multi-family buildings which are acquired by LNR or its subsidiaries and which, at the time LNR or its subsidiaries acquired the buildings, or acquired mortgages secured by the buildings, were being operated as rental buildings, (C)
acquiring securities backed by residential mortgages, even if some of the mortgages relate to homes built on that property, (D) providing financing to homebuilders or land developers, acquiring the homebuilders or their properties upon default with
regard to the financing, and overseeing the operations of the homebuilders or land developers and development of their properties for reasonable periods after default until there can be orderly dispositions of the homebuilders or land developers or
their properties, (E) owning as a passive investor, without any involvement in operations or management, an interest of less than 10% in a publicly traded operating company that is engaged in one or more of the 
  

 16 

 activities described in the first sentence of this Paragraph, (F) acquiring commercial paper or other debt instruments of
entities engaged in one or more of the activities described in the first sentence of this Paragraph for investment, and without any intention of becoming involved in the operations or management of the issuer of the commercial paper of other debt
instruments, or (G) owning an interest in, and possibly managing, an entity of which Lennar and LNR, directly or through subsidiaries, have ownership interests that (x) are equal with regard to Lennar and LNR, and (y) together are a majority of all
the ownership interests. 
  
 6.3 Activities of Jointly Owned
Entities No action taken by any entity of which Lennar and LNR have equal ownership interests that together are a majority of all the ownership interests will be a breach of the obligations of either Lennar or LNR under this Article. 

 
 6.4 Consents to Prohibited Activities. Either Lennar or LNR may
consent to the other of them engaging, in a specific instance with regard to a specific property or other asset, in an activity which would otherwise be prohibited by the applicable one of Paragraph 6.1 or 6.2 if (i) the party engaging in the
activity (the “Acting Party”) has offered to sell the property or other asset to the other party (the “Consenting Party”) for the lesser of the price paid by the Acting Party for the property or other asset or the fair market
value of the property or other asset and (ii) the Board of Directors of the Consenting Party has, by resolution adopted in accordance with any provision of its by-laws relating to transactions between Lennar and LNR, (A) determined that the
Consenting Party does not want to acquire the property or other asset for the price offered by the Acting Party, (B) determined that the Acting Party’s engaging in the activity with regard to the property or other asset will not materially
adversely affect any activities in which the Consenting Party is engaged, and (C) approved the Consenting Party’s consenting to the Acting Party’s engaging in the activity with regard to the property or other assets. 
  
 6.5 Curing Violations. If Lennar or LNR violates the applicable one of
Paragraph 6.1 or 6.2 with regard to a specific property or asset, (i) the other of them may not institute any action or proceeding seeking injunctive relief, damages or any other type of relief because of the violation until at least 90 days after
it has given notice of the violation to the violating party and (ii) the violating party will be relieved of all liability with regard to the violation if the violating party either (A) discontinues the violation within the 90 day period or (B)
within the 90 day period offers to sell the property or other asset to the other Owner for the lesser of the amount the violating party paid for property or other asset or the fair market value of the property or other asset and, if that offer is
not accepted within 30 days after it is made, the violating party 
  

 17 

 disposes of the property or other asset, or discontinues the violation, within 120 days after the end of the 30 day
period. 
  
 ARTICLE 7 
  
 NEWHALL DEVELOPMENT OF PROPERTIES 
  
 7.1 Owners Efforts to Cause Newhall Properties to be Developed. Lennar
and LNR each will do all things that are commercially reasonable (including causing its representatives on the Company’s Executive Committee to vote to authorize any commercially reasonable expenditures of money) to cause Newhall to develop its
properties so that portions of them can be sold for residential development and portions of them can be sold for commercial development on a time schedule approved by the Company’s Executive Committee (as it may be modified from time to time).
Without limiting what is said in the preceding sentence, Lennar and LNR will cause the Company to cause Newhall to install, or cause the installation of, roads, sewage and other utilities, and to build, or cause the building of, educational and
recreational facilities, as contemplated by any master plans or other governmentally approved land use plans relating to properties owned by Newhall, and in all other ways to cause properties owned by Newhall to be put in bluetop condition and
otherwise to be suitable to be sold as sites of single family home or similar residential communities or as sites of commercial, industrial or multi-family rental apartment buildings consistent with the applicable business plan and the time schedule
approved by the Executive Committee (as they may be modified from time to time).  
  
 ARTICLE 8 
  
 MANAGEMENT AGREEMENTS

  
 8.1 Management Agreements. Lennar will enter into a
Management Agreement with the Company, subject to approval by the Executive Committee, under which Lennar will provide overall management of the Company for a fee, and on other terms, provided in that Management Agreement. Lennar also may provide
management services to the Company or to Newhall in connection with the planning, development, marketing and disposition of Residential Property, and related matters, and LNR may render management services to the Company or to Newhall with regard to
the planning, development, marketing and sale of Commercial Property, and related matters. Any management services rendered by an Owner to the Company or 
  

 18 

 Newhall will be rendered for fees, and on other terms, contained in a management agreement approved by the Executive
Committee. 
  
 ARTICLE 9 
  
 MISCELLANEOUS 
  
 9.1 Expenses. Each Owner will pay its own expenses in connection with the transactions that are the subject of this
Agreement, including legal fees and expenses. 
  
 9.2 Parties.
This Agreement will bind, and be for the benefit of, the Owners and their respective successors and permitted assigns. It will not be for the benefit of any other person, including the Company, Newhall or any person other than the Owners who may
become an owner of the Company. 
  
 9.3 Subsidiaries. Any
reference in this Agreement to Lennar, LNR or Newhall will include their respective subsidiaries, except that any consents to actions of the Owners under this Agreement must be given by the Owners themselves and any references to actions by the
Board of Directors of an Owner are to action by the Board of Directors of the Owner itself. 
  
 9.4 Termination of Agreement. This Agreement will terminate on the day when (i) either Owner no longer owns directly or indirectly at least 25% of the outstanding Units (or other equity interests in the
Company) or (ii) the Company no longer owns directly or indirectly a majority of the ownership interests in Newhall or any successor that acquires all or substantially all the assets of Newhall. After that day, neither Owner will have any further
rights or obligations under this Agreement. However, (A) any agreement between either Owner and the Company or Newhall that is entered into before this Agreement terminates will remain in effect notwithstanding the termination of this Agreement, and
the Owner and the applicable one of the Company and Newhall will have the same rights and obligations with regard to that agreement that they would have had if this Agreement had not terminated, and (B) termination of this Agreement will not affect
any liability any Owner may have because of a breach of this Agreement that occurs before this Agreement terminates.  
  
 9.5 Assignment. Subject to the provisions of Paragraphs 1.2 and 9.3 regarding subsidiaries, neither this Agreement nor any right of any party under
it may be assigned. 
  

 19 

 9.6 Remedies. Each of the Owners acknowledges that if it breaches this Agreement, the other of
them will be irreparably harmed by that breach in a manner in which cannot readily be compensated by monetary damages. Therefore, each Owner agrees that if it breaches or threatens to breach this Agreement, the other of them or the Company will be
entitled, in addition to any other remedies to which it may be entitled, to injunctive relief to prevent the threatened breach or any further breaches of this Agreement or to specific performance of the provisions of this Agreement. 
  
 9.7 Actions and Proceedings. Each of the Owners (i) agrees that any
action or proceeding relating to this Agreement (a “Proceeding”) may be brought in any Federal or state court sitting in the State of Florida, (ii) consents to the jurisdiction and venue of each court specified in clause (i) in each
Proceeding, (iii) agrees not to seek a change of venue of any Proceeding from any court specified in clause (i), whether because of inconvenience of the forum or for any other reason (but nothing in this subparagraph will prevent a party from
removing a proceeding from a state court specified in clause (i) to a Federal court specified in clause (i)), and (iv) agrees that process in any Proceeding may be served upon it by registered mail or in any other manner permitted by the rules of
the court in which the proceeding is brought. 
  
 9.8 Entire
Agreement. This Agreement and the LLC Agreement contain the entire agreement between the Owners regarding the subject matter of this Agreement, all prior negotiations, understandings and agreements between them (including those contained in a
Term Sheet distributed to the Owners’ respective Boards of Directors on or about July 18, 2003) are superseded by this Agreement, and there are no representations, warranties, understandings or agreements concerning the subject matter of this
Agreement other than those expressly set forth in this Agreement or in the LLC Agreement. 
  
 9.9 Captions. The Article and Paragraph headings of this Agreement are for reference only, and do not affect the meaning or interpretation of this Agreement. 
  
 9.10 Notices. Any notice or other communication required or permitted
to be given under this Agreement must be in writing and will be deemed effective on the day when it is delivered in person or sent by facsimile (with acknowledgement of receipt at the number to which it is required to be sent), on the business day
after the day on which it is sent by a major nationwide overnight delivery service, or on the fifth business day after the day on which it is 
  

 20 

 mailed by first class mail from within the United States of America, addressed as follows (or to such other address as
the party to which the notice or other communication is sent may have specified in the manner provided in this subparagraph): 
  
 If to Lennar: 
  
 Lennar Corporation 
 700 N.W. 107th Avenue 
 Miami, Florida 33172 
 Attention: General Counsel 
 Facsimile No. 305-229-6650 
  
 If to LNR 
  
 LNR Property Corporation 
 1601 Washington Avenue 
 Miami Beach, Florida 33139 
 Attention: General Counsel 
 Facsimile No.: 305-695-5719 
  
 9.11 Amendments. This Agreement may be amended only by a document in writing signed by both of the Owners. 
  
 9.12 Counterparts. This Agreement may be executed in two or more
counterparts, or with counterpart signature pages, some of which may contain the signatures of fewer than both of the parties or may contain facsimile signatures of one of the parties. Each of those counterparts will be deemed to be an original, but
all of them together will constitute one and the same agreement. 
  

 21 

 IN WITNESS WHEREOF, each of the Owners has executed this Agreement as of the date shown on the first
page. 
  
 LENNAR CORPORATION 
  

		
	 By:
	 	 /s/    Bruce Gross

	 Title:
	 	Vice President

  
 LNR
PROPERTY CORPORATION 
  

		
	 By:
	 	  
 /s/    Shelly Rubin

	 Title:
	 	Vice President

  

 22 

 SCHEDULE 4.1 
  
 INCOME PRODUCING PROPERTIES 
  

	 Asset

	 	 Property Type

	 	 Square Feet/Rooms(1)

	 Valencia Town Center(2)
	 	Regional Mall	 	            735,179
	 VTC-Entertainment(3)
	 	Lifestyle Center	 	            128,750
	 Hyatt(4)
	 	Full Service Hotel	 	            244
	 River Oaks
	 	Power Center	 	            284,228
	 Northpark Village Square
	 	Neighborhood Center	 	            127,595
	 Hilton Garden Inn(5)
	 	Extended Stay Hotel	 	            152
	 Spectrum Club
	 	Health Club	 	            53,517
	 Newhall’s Headquarters
	 	Office	 	            43,000
	 The Greens
	 	Ground Lease	 	            174,240
	 El Torito
	 	Ground Lease	 	            69,696
	 Hamburger Hamlet
	 	Ground Lease	 	            54,014
	 Wendy’s
	 	Restaurant	 	            3,835
	 Trader Joe’s
	 	Specialty Retail	 	            8,189
	 Red Lobster
	 	Ground Lease	 	            50,094

	(1)	 	Ground Leases presented as land square footage; River Oaks square footage includes building square footages for Mervyn’s and Target which are on ground leases.

	(2)	 	Newhall’s entire partnership interest and fee interests in land owned by Newhall. 

	(3)	 	Includes Newhall’s lessee’s interest in master lease with CalSTRS. 

	(4)	 	Includes the lessor’s interest in the master lease from Newhall to VTC Hotel Company, which is wholly-owned by Thomas Dierkman and Gary Cusamano, and all of the capital stock
owned by Thomas Dierkman and Gary Cusamano in VTC Hotel Company. 

	(5)	 	Newhall’s entire partnership interest. 

  

 23 

 SCHEDULE 4.2-A(1) 
  
 COMMITTED VALENCIA RESIDENTIAL PROPERTIES 
  

	 	  	Home
Site Size

	  	 # Of
 Home Sites

	  	 Average
 Home Size

	  	 Projected
Takedown
 Date

	 Westcreek C
	  	 	  	 	  	 	  	 
	 Traditional
	  	4,000	  	110	  	2,813	  	Q3 05
	 Det Cluster
	  	NA	  	109	  	2,161	  	Q3 05
	 Sm Cluster
	  	NA	  	113	  	1,402	  	Q3 05
	 River Park
	  	 	  	 	  	 	  	 
	 45 X 110
	  	4,950	  	95	  	2,677	  	Q1 06
	 50 X 110
	  	5,500	  	95	  	2,806	  	Q1 06
	 55 X 110
	  	6,050	  	93	  	3,042	  	Q2 06
	 60 X 110A
	  	6,600	  	72	  	3,275	  	Q2 06
	 	  	 	  	
	  	 	  	 
	 	  	TOTAL	  	687	  	 	  	 
	 	  	 	  	
	  	 	  	 

  

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 SCHEDULE 4.2-A(2) 
  
 OPTION VALENCIA RESIDENTIAL PROPERTIES 

	 	  	Home
Site Size

	  	 # Of
 Home Sites

	  	 Average
 Home Size

	  	 Projected
Takedown
 Date

	 Westcreek C
	  	 	  	 	  	 	  	 
	 Det Cluster
	  	NA	  	84	  	2,643	  	Q2 06
	 Det Cluster
	  	NA	  	70	  	1,803	  	Q3 05
	 Westcreek B
	  	 	  	 	  	 	  	 
	 46 X 100
	  	4,600	  	67	  	2,528	  	Q2 06
	 40 X 100
	  	4,000	  	78	  	2,216	  	Q2 06
	 46 X 75
	  	3,450	  	61	  	1,816	  	Q3 06
	 46 X 75
	  	3,450	  	82	  	2,018	  	Q3 06
	 Westcreek A
	  	 	  	 	  	 	  	 
	 50 x 100
	  	5,000	  	82	  	2,829	  	Q3 06
	 55 x 100
	  	5,500	  	99	  	3,127	  	Q4 06
	 	  	 	  	
	  	 	  	 
	 	  	TOTAL	  	623	  	 	  	 
	 	  	 	  	
	  	 	  	 

  

 25 

 SCHEDULE 4.2-C  
  
 DEFINITION OF “IN BLUETOP CONDITION” 
  
 A residential property is in “bluetop condition” when: 
  

	1.	 	The Final Tract Map for conveyancing and financing, and approval of a tentative tract map for the homesites, have been obtained. 

  

	2.	 	The property is graded by licensed contractors in accordance with the approved grading plan for the property, with a tolerance of ±0.2’. 

  

	3.	 	Certification of line and grade has been obtained from the civil engineer of record. 

  

	4.	 	Certification of soil compaction has been obtained from the soils engineer of record. 

  

	5.	 	Temporary road access and temporary construction utilities to the Property are in place and bonding has been obtained (or work completed) with regard to (i) all off tract work
required as a condition of approval of the approved tentative tract map for the homesites to the extent completion of that off tract work is a condition to obtaining building permits and/or occupancy permits for the homesites, (ii) grading of
backbone streets and rights of way in accordance with the approved grading plan, and (iii) utilities being brought to the boundary of the property. A property will be in blue top condition even though bonded work still has to be completed.

  

 26 

 SCHEDULE 4.2-D 
  
 TERMS OF PROFIT PARTICIPATION 
  

  
 DEFINITIONS 
  
 1.01 “Gross Revenue”
means the total gross revenue (including proceeds of insurance, condemnation or otherwise) generated in connection with the sale or other disposition of Residences, including or net of, without limitation, refunds, rebates and reimbursements for
deposits made, or earned in connection with Permitted Costs, charges for modifying plans for Residences, any premium charged for the location, view, or special features of any Lot and any and all charges for extras, options or upgrades
(collectively, “Modifications and Upgrades”) to any Residence, whether such amounts are collected through or outside of escrow. Any consideration received by Lennar in connection with the sale or other disposition of a Residence in a form
other than cash will be valued at its fair market value and considered part of Gross Revenue. 
  
 1.02 “Net Profit” means the amount by which the Gross Revenue exceeds the combined total of all Permitted Costs. 
  
 1.03 “Permitted Costs” means Direct Costs, Soft Costs, Sales Incentive Costs and Land Cost, after deducting all Excluded Costs. No cost will be
included in more than one category of cost. 
  
 1.04 “Land
Cost” means the purchase price paid by Lennar to the Company or its affiliate for Lots. If the Land Cost for each Lot on a property is not separately stated, the Land Cost for each Lot will be the total cost of acquiring the property divided by
the number of Lots on the property. 
  
 1.05 “Direct
Costs” means, and is specifically limited to, costs incurred and paid by Lennar for: (i) the construction of Residence on Lots; (ii) fees for services provided by engineers, surveyors and architects to the extent such services are directly
related to the actual construction of single-family dwelling units on the Lots; (iii) building permits and inspections directly related to the actual construction of single-family dwelling units on the Lots; and (iv) Modifications and Upgrades (as
defined above) to any Lot or Residence. Lennar shall, within fifteen days after receipt of a written request from the Company, or, if there is no request, at the same time Lennar delivers the applicable Quarterly Accounting (defined below), provide
to the Company an itemized schedule of all Direct Costs claimed by Lennar, together with supporting documentation reasonably acceptable to the Company, substantiating Direct Costs claimed. Direct Costs shall not include Land Cost, Sales Incentive
Costs or Soft Costs. 
  
 1.06 “Soft Costs” means all
costs actually incurred by Lennar in the construction, marketing and sale of Residences, excluding Direct Costs, Sales Incentive Costs and Land Cost. Soft Costs shall include, without limitation, the following costs as they relate specifically to
the construction, sale and marketing of Residences: All site indirect costs; overhead or charges for salaries or compensation for personnel; office space overhead or related expenses; rental or purchase costs for machinery and equipment;
depreciation of capitalized expenditures; real and personal property taxes and assessments; insurance expenses; 
  

 27 

 interest and other financing expenses; sales and/or marketing expenses, costs and commissions; the cost of performing
warranty work (either through creation of warranty reserves or when work is done); legal fees and expenses; general business taxes and licensing costs; closing and other costs incurred in connection with the sale or other disposition of Residences;
and all other costs customarily treated as “soft costs” in the home building industry. The parties agree that it will be conclusively presumed that Soft Costs equal 20% of Gross Revenue. 
  
 1.07 “Sales Incentive Costs” means the actual costs incurred by
Lennar in connection with offering to a member of the home-buying public special incentives, offers and rebates as an inducement to purchase Residences, in lieu of reductions in the prices of the Residences and in addition to Lennar’s marketing
and advertising program and costs. 
  
 1.08 “Excluded
Costs” are costs incurred by Lennar which will not be included in Direct Costs, Soft Costs, Sales Incentive Costs or Land Cost, and will not be deducted from Gross Revenue for the purpose of calculating Net Profit. Excluded Costs are the
following: 
  
 (a) The cost of work performed on land other than
Lots; 
  
 (b) Amounts paid to any partner, member or shareholder
of Lennar, whether as a fee for performing services as a general contractor, development manager, construction manager, or managing partner, member or officer, as interest or a return on invested funds, loans or capital contributions or otherwise,
except to the extent such payment is reimbursement for expenditures by such partner, member or shareholder which would qualify as Direct Costs, Soft Costs, Land Costs or Sales Incentive Costs if they were paid by Lennar, or unless specifically
approved in writing by the Company (which approval may be withheld in the Company’s sole and absolute discretion); 
  
 (c) Furnishings of representative model homes built by Lennar, to the extent they are not included in any sale of the model; 
  
 (d) Warranty costs, including for a warranty program and for warranty work,
in excess of a “per door” warranty allowance customary in the industry for Residences of similar quality and price; 
  
 (e) Any personnel cost or expense which is not related to field labor, field supervision or other personnel working in the field, on the job site or in an
office dedicated to the project; 
  
 (f) Salaries and payroll
additives of Lennar’s home and branch office executives, officers, department heads and staff in directing, administering and supervising development; the services of any purchasing department, sales manager or marketing support staff in the
home and branch offices; all employee bonuses (excluding bonuses paid to field superintendents and then only to the extent such bonuses are normal in the residential construction industry and are fairly allocated among the projects on which the
superintendent has worked); general legal and accounting fees; and the operating expenses of Lennar’s home and branch offices such as rent, utilities, insurance, stationery, office machines and other office related expenses; 
  

 28 

 (g) Amounts paid to any affiliate or subsidiary of Lennar to the extent the amounts exceed the costs that
would have been incurred had Lennar obtained the goods or services from a third party on an arms’ length basis; and 
  
 (h) Costs (other than the purchase price) associated with the acquisition of the Lots from the Company, including, without limitation, legal fees,
consultant fees, diligence costs, and closing costs. 
  
 1.09
“Lot” means a homesite on the property that is the subject of the profit participation. 
  
 1.10 “Residence” means a single-family dwelling unit that is constructed on a Lot (including the land on which the dwelling unit is constructed
or that is included in the sale of the dwelling unit). 
  
 1.11
“Unimproved Lot” means a Lot that has not been improved with a Residence. 
  
 PROFIT PARTICIPATION; AMOUNT AND TERMS 
  
 2.01 Amount. 
  
 (a) Lennar shall
pay to the Company at the times described below, a profit participation (“Profit Participation”) equal to (i) 50% of Lennar’s Net Profits in excess of 8% of Gross Revenue from the construction and sale or disposition of Residences,
plus (ii) 50% of the Net Proceeds from sales of Unimproved Lots. “Net Proceeds” means the price received for the Unimproved Lots (including the fair market value of any noncash consideration), less the purchase price paid for the
Unimproved Lots, the amounts actually expended by Lennar for architectural and engineering plans for the construction of Residences on the Unimproved Lots, if any, prepaid fees, physical work on the Unimproved Lots and reasonable and customary third
party brokerage and closing costs actually incurred by Lennar in connection with the sale of the Unimproved Lots. When there is a sale or transfer of Unimproved Lots by Lennar to an affiliate and a subsequent sale of those Unimproved Lots by that
affiliate, for purposes of determining the Net Proceeds from the sale of the Unimproved Lots, the purchase price for the Unimproved Lots that are sold will be a “carryover” of the purchase price paid by Lennar for the Unimproved Lots,
without markup. No costs associated with the sale or transfer from Lennar to its affiliate will be included as a deduction for the purposes of determining Net Proceeds. 
  
 2.02 Delivery of Sale Documents. Within ten days after the end of each month, Lennar shall submit to the
Company a copy of the purchase documents and closing statements relating to all the sales of Residences and Unimproved Lots during the preceding month. 
  
 2.03 Payment of Profit Participation. Concurrently with the delivery to the Company of each Quarterly Accounting required by Section 2.04,
Lennar shall pay to the Company the Profit Participation to which the Company is entitled as shown on the Quarterly Accounting. 
  
 2.04 Quarterly Reconciliation of Residence Profit. Within thirty days after the end of the first calendar quarter in which Lennar sells the
first Unimproved Lot or the first Residence, and within thirty days after the end of each calendar quarter thereafter until the Final Accounting (as defined below) is complete, Lennar shall prepare and submit to the 
  

 29 

 Company an interim accounting with all applicable calculations (each, a “Quarterly Accounting”) showing the
Gross Revenue generated from the sale of Residences, and all other components of Net Profit necessary to determine Net Profits during the quarter, the Net Proceeds generated from sales of Unimproved Lots during the quarter, and the resulting Profit
Participation, if any, payable to the Company. Lennar shall set forth in each Quarterly Accounting the justification (including support documentation) for any adjustments to be made to the installments of Profit Participation already paid by Lennar,
including whether and by what amount the Company has been overpaid or underpaid with respect to amounts attributable to the Profit Participation payable through the period covered by the Quarterly Accounting. If any Quarterly Accounting shows
that the Company has been underpaid, then Lennar shall pay to the Company the amount of such underpayment within 30 days after delivery of the Quarterly Accounting. If the Quarterly Accounting shows, and the support documentation evidences, that the
Company has been overpaid, the Company shall pay Lennar the amount of such overpayment within 30 days after delivery of the Quarterly Accounting and written notification from Lennar of the overpayment. 
  
 2.06 Final Reconciliation. Within 90 days after the close of
escrow on the last Lot (whether improved with a Residence or as part of an Unimproved Lot sale), Lennar shall deliver to the Company a complete accounting and computation, with all supporting documentation (to the extent it has not previously been
provided), setting forth the total Profit Participation to which the Company is entitled (the “Final Accounting”). If the Final Accounting shows that Lennar’s payments of installments of the Profit Participation are, in the aggregate,
less than the total amount owed, Lennar shall pay the Company the deficiency within 30 days after delivery of the Final Accounting. If the Final Accounting shows, and the support documentation evidences, that the Company has received installments of
Profit Participation that, in the aggregate, exceed the total amount owed by the Company, the Company shall reimburse Lennar for the amount of such overpayments within 30 days after delivery of the Final Accounting and written notice from Lennar of
the overpayment. 
  
 2.07 Audits. The Company shall
have the right within three months after it receives a Quarterly Accounting, and within one year after it receives the Final Accounting, to cause the Company’s independent public accounting firm to audit: (i) Lennar’s books and records for
the purpose of verifying the determination of the Profit Participation; and (ii) the books and records of any affiliate of Lennar who sells or otherwise provides any items or services in connection with any Modification and Upgrade. The
“audit” may be a review or other form of examination that does not constitute an audit in accordance with generally accepted auditing standards. The Company shall pay for all such audits. However, if the deficiency determined by an audit
to be due and payable to the Company with regard to a Quarterly Accounting or the Final Accounting exceeds 5% of the Profit Participation reported by Lennar to the Company in the Quarterly Accounting or Final Accounting, then Lennar shall reimburse
the Company for the reasonable costs and expenses of the audit. If an audit determines that the amount to which the Company was entitled as a result of its Profit Participation with regard to a period was greater or less than the amount Lennar paid
the Company with regard to that period, Lennar will pay the amount of the deficiency to the Company, or the Company will refund the amount of the overpayment to Lennar, within 30 days after the accounting firm that conducts the audit delivers to the
Company and to Lennar their report of the results of the audit. Lennar shall maintain all books and records applicable to the Profit Participation and its calculation until the expiration of the applicable audit period. 
  

 30

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