Document:

<PAGE>

                                  Exhibit 4.1

-------------------------------                             --------------------
  WARRANT CERTIFICATE NUMBER                                    CUSIP NUMBER

                                TEJON RANCH CO.
                    WARRANT CERTIFICATE FOR RIGHTS OFFERING
                  FOR HOLDERS OF RECORD ON ____________, 2000

-------------------------------                             --------------------
 SHARES ELIGIBLE TO SUBSCRIBE                                RECORD DATE SHARES

     Tejon Ranch Co. (the "Company") is conducting a rights offering (the
"Rights Offering") which entitles the holder of Company's common stock, $.0l par
value per share (the "Common Stock"), as of the close of business on
______________, 2000 (the "Record Date") to receive one transferable right
(each, a "Right") for each ______ shares of Common Stock held of record on the
Record Date.  Each Right entitles the holder thereof to subscribe for and
purchase one share of Common Stock (the "Basic Subscription Privilege") at a
subscription price of $____ per share.  If any shares of Common Stock are not
purchased by holders of Rights pursuant to the Basic Subscription Privilege (the
"Over-Subscription Shares"), any holder purchasing all of the shares of Common
Stock available to it may purchase an additional number of the Over-Subscription
Shares, if so specified in the subscription documents, subject to proration.  No
fractional shares or cash in lieu thereof will be issued or paid.  Set forth
above is the number of shares of Common Stock held by such holder, and the
number of shares to which each holder is entitled to subscribe pursuant to the
Basic Subscription Privilege.

     FOR A MORE COMPLETE DESCRIPTION OF THE TERMS AND CONDITIONS OF THE RIGHTS
OFFERING, PLEASE REFER TO THE PROSPECTUS DATED __________, 2000 (THE
"PROSPECTUS"), WHICH IS INCORPORATED HEREIN BY REFERENCE.  COPIES OF THE
PROSPECTUS ARE AVAILABLE UPON REQUEST FROM CHASEMELLON SHAREHOLDER SERVICES,
L.L.C. (TOLL FREE (800) 414-2879).  CAPITALIZED TERMS USED BUT NOT DEFINED
HEREIN SHALL HAVE THE RESPECTIVE MEANINGS ASCRIBED TO SUCH TERMS IN THE
PROSPECTUS.

     THIS SUBSCRIPTION ORDER FORM MUST BE RECEIVED BY CHASEMELLON SHAREHOLDER
SERVICES, L.L.C. WITH PAYMENT IN FULL BY 5:00 P.M. NEW YORK CITY TIME, ON
_____________, 2000 (UNLESS EXTENDED IN THE SOLE DISCRETION OF THE COMPANY) (AS
IT MAY BE EXTENDED, THE "EXPIRATION DATE").  ANY RIGHTS NOT EXERCISED PRIOR TO
THE EXPIRATION DATE WILL BE NULL AND VOID.  ANY SUBSCRIPTION FOR SHARES OF
COMMON STOCK IN THE RIGHTS OFFERING MADE HEREBY IS IRREVOCABLE.

     The Rights represented by this Rights Certificate may be exercised by duly
completing Form 1; and may be transferred, assigned, exercised or sold through a
bank or broker by duly completing Form 2; and may be sold through the
Subscription Agent by duly completing Form 3. Rights holders are advised to
review the Prospectus and instructions, copies of which are available from
ChaseMellon Shareholder Services, L.L.C., before exercising or selling their
Rights.
<PAGE>

SUBSCRIPTION PRICE:  $____ PER SHARE

     The registered owner whose name is inscribed hereon or assigns, is entitled
to subscribe for shares of Common Stock, par value $.0l per share (the "Common
Stock"), of Tejon Ranch Co. upon the terms and subject to the conditions set
forth in the Prospectus and instructions relating to the use hereof.

     THE RIGHTS CERTIFICATE IS TRANSFERABLE, AND MAY BE COMBINED OR DIVIDED (BUT
ONLY INTO RIGHTS CERTIFICATES EVIDENCING FULL RIGHTS) AT THE OFFICE OF
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.

     RIGHTS HOLDERS SHOULD BE AWARE THAT IF THEY CHOOSE TO EXERCISE OR TRANSFER
ONLY PART OF THEIR RIGHTS, THEY MAY NOT RECEIVE A NEW RIGHTS CERTIFICATE IN
SUFFICIENT TIME TO EXERCISE THE REMAINING RIGHTS EVIDENCED THEREBY.

                                       2
<PAGE>

                                     FORM 1

EXERCISE AND SUBSCRIPTION:  The undersigned hereby irrevocably exercises one or
more Rights to subscribe for shares of Common Stock as indicated below, on the
terms and subject to the conditions specified in the Prospectus, receipt of
which is hereby acknowledged.

     (a)  Number of shares subscribed for pursuant to the Basic Subscription
          Privilege
          ___ X $___ = $____ payment. (One Right needed to subscribe for one
          share.)

     (b)  Number of shares subscribed for pursuant to the Over-subscription
          Privilege
          ___ X $___ = $____ payment.

     (c)  Total Subscription (total number of shares on lines (A) and (B)
          multiplied by the subscription price) = $____ payment.

          METHOD OF PAYMENT (CHECK AND COMPLETE APPROPRIATE BOX(ES)):

          [_]  Check, bank draft, or money order payable to "ChaseMellon
               Shareholder Services, L.L.C., as Subscription Agent": or

          [_]  Wire transfer directed to The Chase Manhattan Bank, New York,
               NY, ABA No. 021000021-Attention: ChaseMellon Shareholder
               Services Reorg. Account ___________ (Tejon Ranch Co.)

     (d)  If the Rights being executed pursuant to the Basic Subscription
          Privilege do not account for all of the Rights represented by the
          Rights Certificate (check only one)

          [_]  Deliver to the undersigned a new Rights Certificate evidencing
               the remaining rights to which the undersigned is entitled.

          [_]  Deliver a new Rights Certificate in accordance with the
               undersigned's Form 2 instructions (which include any required
               signature guarantees).

          [_]  Sell the remaining unexercised Rights in accordance with the
               undersigned's Form 3 instructions.

          [_]  Do not deliver any new Rights Certificates to me.

          [_]  Check here if Rights are being exercised pursuant to the Notice
               of Guaranteed Delivery delivered to the Subscription Agent
               prior to the date hereof and complete the following:

               Name(s) of Registered Holder(s) _________________________________

               Window Ticket Number (if any) ___________________________________

               Date of Execution of Notice of Guaranteed Delivery ______________

               Name of Institution Which Guaranteed Delivery ___________________

                                       3
<PAGE>

*  If the aggregate Subscription Price enclosed or transmitted is insufficient
to purchase the total number of shares included in lines (a) and (b), or if the
number of shares being subscribed for is not specified, the Rights Holder that
exercised this Right Certificate shall be deemed to have subscribed for the
maximum amount of shares that could be subscribed for upon payment of such
amount.  If the number of shares to be subscribed for pursuant to the
Oversubscription Privilege is not specified and the amount enclosed or
transmitted exceeds in aggregate Subscription Price for all shares represented
by this Rights Certificate (the "Subscription Excess"), the Rights holder
exercising this Rights Certificate shall be deemed to have exercised the
Oversubscription Privilege to purchase, to the extent available, that number of
whole shares of Common Stock equal to the quotient abstained by dividing the
Subscription Excess by the Subscription Price, subject to the limit on the
number of shares as Rights holder may purchase pursuant to the Oversubscription
Privilege.  To the extent any portion of the aggregate Subscription Price
enclosed or transmitted remains after the foregoing procedures, such funds shall
be mailed to the subscriber without interest or deduction as soon as
practicable.

Subscriber's Signature ___________________________________

Telephone No. (    )
              ------------------------

                                       4
<PAGE>

                                     FORM 2

TO TRANSFER YOUR RIGHTS CERTIFICATE OR SOME OR ALL OF YOUR RIGHTS, OR TO
EXERCISE OR SELL RIGHTS THROUGH YOUR BANK OR BROKER:  For value received, Rights
represented by this Rights Certificate are hereby assigned to (please print name
and address and Taxpayer Identification Number or Social Security Number of
transferee in full):

Name:
         _________________________________
Address:
         _________________________________

         _________________________________

         _________________________________

         _________________________________
         Signature(s) of Transferee(s)

Signatures Guaranteed by:  __________________________________________

Proceeds from the sale of Rights may be subject to withholding of U.S. taxes
unless the Seller's certified U.S. taxpayer identification number (or
certificate regarding foreign state is on file with the Subscription Agent and
the seller is not otherwise subject to U.S. backup withholding.

                                       5
<PAGE>

                                     FORM 3

TO SELL SOME OR ALL OF YOUR UNEXERCISED RIGHTS THROUGH THE SUBSCRIPTION AGENT:

The undersigned hereby authorizes the Subscription Agent to sell Rights
represented by the Rights Certificate but not exercised thereby and to deliver
to the undersigned a check for the proceeds, if any, from the sale thereof, Less
any applicable brokerage commissions, taxes or other direct expenses of sale.
The Subscription Agent's obligation to execute orders is subject to its ability
to find buyers for the Rights.

                              __________________________________________
                              Subscriber's Signature

In order to sell Rights through the Subscription Agent, you must complete and
sign the substitute Form W-9 as provided in Section 8 of the instructions.

                                       6
<PAGE>

                                     FORM 4

DELIVERY INSTRUCTIONS:  Address for mailing of stock or new Subscription
Certificate or any cash payment in accordance with the Prospectus if other than
shown on this reverse hereof:

Name:    _________________________________

Address: _________________________________

         _________________________________

         _________________________________

                                       7<PAGE>

                                 Exhibit 10.1

                                TEJON RANCH CO.

                            STOCK PURCHASE AGREEMENT
                            ------------------------

THIRD AVENUE TRUST
767 Third Avenue
New York, NY  10017

Carl Marks Strategic Investments, L.P.
135 East 57th Street
New York, NY  10022

Dear Ladies and Gentlemen:

     Tejon Ranch Co., a Delaware corporation (the "Company"), proposes to
distribute, as soon as practicable after the Registration Statement, as defined
herein, becomes effective, to the holders of its Common Stock (the "Common
Stock") transferable rights (the "Rights") to purchase shares of Common Stock
having an aggregate purchase price of approximately (and not exceeding)
$30,000,000 (the "Subscription Shares").  The price per share at which the
Subscription Shares are offered will be determined by the Board of Directors of
the Company or a committee thereof and will represent a discount of
approximately 15%, but not more than 20% and not less than 10%, from the market
price of the Common Stock immediately prior to such distribution (the
"Subscription Price").  The Rights will be distributed by issuing to the
Company's stockholders transferable subscription warrants evidencing the rights
(the "Subscription Warrants").

     The market price of the Common Stock of the Company will be determined by
the Board of Directors or a committee thereof and will be based upon the closing
price or the average of the high and low sales prices for a single day or an
average of such prices for a period not exceeding 30 days prior to the day the
Subscription Price is determined.  The Rights will be distributed to
stockholders of record as of a date (the "Record Date") to be designated by the
Board of Directors of the Company or a committee thereof, such date to be within
ten days after the date the Registration Statement becomes effective, and the
offering will commence as soon as practicable after the effective date of the
Registration Statement.

     The Rights will expire at 5:00 P.M. on the last day of the subscription
period designated by the Board of Directors of the Company or a committee
thereof (the "Expiration Date"), which shall be not less than 16 days and not
more than 25 days after the mailing of the Subscription Warrants to the
stockholders.  The offer and sale of the Subscription Shares is referred to in
this Agreement as the "Rights Offering."

     Subject to the terms and conditions herein, the Company desires to sell,
and Third Avenue Trust (acting on behalf of Third Avenue Value Fund, Third
Avenue Small-Cap Value Fund and Third Avenue Real Estate Value Fund) and Carl
Marks Strategic Investments, L. P.
<PAGE>

(collectively the "Purchasers") desire to purchase additional shares of Common
Stock of the Company (the "Additional Shares") at a price per share equal to the
Subscription Price having an aggregate purchase price equal to the difference,
if any, between $30,000,000 and the aggregate price of Subscription Shares
purchased by rights holders in the Rights Offering.

     The Company proposes to file with the Securities and Exchange Commission
(the "Commission") a registration statement on Form S-3 including a preliminary
prospectus for the registration of the Rights and the Subscription Shares under
the Securities Act of 1933, as amended (the "1933 Act"), as well as such
amendments thereto, if any, and such amended preliminary prospectuses as may be
required.  Such registration statement (as amended, if applicable) and the final
prospectus relating to the Rights Offering constituting a part thereof
(including in each case all documents, if any, incorporated by reference
therein), as from time to time amended or supplemented pursuant to the 1933 Act,
are hereinafter referred to as the "Registration Statement" and the
"Prospectus," respectively.

     Section 1.  Purchase, Sale and Delivery of Additional Shares.
                 --------------------------------------------------

     (a) Subject to the terms herein, the Company agrees to sell to the
Purchasers and the Purchasers agree severally to purchase from the Company, at a
price per share equal to the Subscription Price, that portion of the
Additional Shares set forth below simultaneously with the closing of the
Rights Offering:
<TABLE>
<S>                                                                     <C>
Third Avenue Trust (on behalf of Third Avenue Value Fund)                 75.37252%
Third Avenue Trust (on behalf of Third Avenue Small-Cap Value              4.94975%
Fund)
Third Avenue Trust (on behalf of Third Avenue Real sEstate                  0.96768%
Value Fund)
Carl Marks Strategic Investments, L.P.                                    18.71006%
                                                                           --------
                                                                               100%
</TABLE>

Each of the Purchasers also agrees to exercise its basic rights, but shall not
exercise its over-subscription rights, (as the basic and over-subscription
rights are defined in the Registration Statement) with respect to any Rights
issued to it in the Rights Offering.  For purposes of this Agreement, each of
the three funds on whose behalf Third Avenue Trust is acting shall be deemed a
separate Purchaser.

     (b) Delivery of certificates for the Additional Shares shall be made at
the office of Gibson, Dunn & Crutcher LLP, 200 Park Avenue, New York, New York
10166-0193, or at such other place as shall be agreed upon by the Purchasers and
the Company, at 9:30 A.M., New York time, on the third business day after
Expiration Date, or such other time and date as shall be agreed upon by the
Purchasers and the Company (such time and date of payment and delivery being
herein called "Closing Time").

                                       2
<PAGE>

Certificates for the Additional Shares shall be in such denominations and
registered in such names as the Purchasers may request in writing at least
two business days before Closing Time.

     Payment for any Additional Shares shall be made to the Company in
immediately available funds to be delivered by wire transfer to the account of
the Company at or before the Closing Time, against delivery to the Purchasers of
certificates for the Additional Shares.

     (c) Payment for Subscription Shares being acquired upon exercise of Rights
by the Purchasers (and delivery of the certificates therefor) shall be made as
provided in the Prospectus.

     (d) Each Purchaser represents and warrants to the Company that it is
acquiring the Additional Shares for its own account for investment and not
with a view to distribution or resale thereof.  Each Purchaser acknowledges that
the offer and sale of the Additional Shares is being made in reliance on the
exemption afforded by Section 4(2) of the Securities Act of 1933 applicable to
transactions by an issuer not involving a public offering, that the Additional
Shares may be offered for resale or resold only if registered for resale under
that Act or sold in accordance with Rule 144 of the Securities and Exchange
Commission thereunder or in reliance upon another exemption from the
registration requirements of the Act and that the certificates evidencing the
shares will bear a legend to that effect unless and until the shares are
registered or the holding period imposed by Rule 144 expires.

     Section 2.  Representations and Warranties.
                 ------------------------------

     (a) The Company hereby represents and warrants to the Purchasers as
follows:  (i) the Company has all requisite corporate power and authority to
enter into this Agreement and to consummate the transactions set forth in
Section 1 hereof; (ii) the execution and delivery by the Company of this
Agreement, and the consummation by the Company of the transactions set forth in
Section 1 hereof, have been duly authorized by all necessary corporate action on
the part of the Company; (iii) this Agreement has been duly executed and
delivered by the Company and constitutes a valid and binding obligation of the
Company enforceable against the Company in accordance with its terms, except as
the enforceability hereof may be limited by bankruptcy, insolvency or other
similar laws affecting creditors' rights generally or general principles of
equity; (iv) no consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality, domestic or foreign, is
required by, or with respect to, the Company in connection with the execution
and delivery of this Agreement by the Company or the consummation by the Company
of the transactions set forth in Section 1 hereof (other than the filing and
effectiveness of the Registration Statement and the expiration of the waiting
period under the Hart-Scott-Rodino Antitrust Improvements Act); (v) the
execution and delivery of this Agreement by the Company and the consummation of
the transactions set forth in Section 1 hereof by the Company does not conflict
with, or result in a breach of, any law or regulation of any governmental
authority applicable to the Company or any material agreement to which the
Company is a party; and (vi) subject to the effectiveness of the Amendment, when
issued and

                                       3
<PAGE>

paid for in accordance with the provisions of Section 1 hereof, the shares of
Common Stock sold to the Purchasers pursuant to Section 1 hereof shall be duly
authorized, validly issued, fully paid, nonassessable, and free of any claims or
encumbrances, other than any claims or encumbrances resulting from actions taken
by any of the Purchasers with respect to the shares to be received by it
hereunder.

     (b) Each of the Purchasers hereby represents and warrants to the Company as
follows:  (i) it has all requisite trust or partnership power and authority to
enter into this Agreement and to consummate the transactions set forth in
Section 1 hereof; (ii) the execution and delivery by it of this Agreement, and
the consummation by it of the transactions set forth in Section 1 hereof, have
been duly authorized by all necessary corporate action on its part; (iii) this
Agreement has been duly executed and delivered by it and constitutes a valid and
binding obligation of it enforceable against it in accordance with its terms,
except as the enforceability hereof may be limited by bankruptcy, insolvency or
other similar laws affecting creditors' rights generally or general principles
of equity; (iv) no consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, is required by, or with respect to, it in connection with the execution
and delivery of this Agreement by it or the consummation by it of the
transactions set forth in Section 1 hereof (other than any filings pursuant to
Section 16(a) of, or Regulation 13D under, the Securities Exchange Act of 1934,
as amended, and the expiration of the waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act); (v) the execution and delivery of this Agreement by
it and the consummation by it of the transactions set forth in Section 1 hereof
does not conflict with, or result in a breach of, any law or regulation of any
governmental authority applicable to it or, at the Closing, any material
agreement to which it is a Party; and (vi) it will have at the Closing readily
available funds in an amount sufficient to satisfy its obligations hereunder.

     Section 3.  Covenants.
                 ---------

     (a) The Company will use commercially reasonable efforts to cause the
Registration Statement to become effective subject, however, to its right to
modify, postpone or cancel the Rights Offering.  The Company, Third Avenue
Trust, and Carl Marks Strategic Investments, L.P. will each use commercially
reasonable efforts to make all filings as may be necessary or desirable under
the Hart-Scott-Rodino Antitrust Improvements Act with respect to the Rights
Offering, including the purchase of any Additional Shares pursuant to this
Agreement.

     (b) The Company hereby agrees to pay or reimburse all out-of-pocket
expenses and fees reasonably incurred by the Purchasers in connection with their
performance under this Agreement and the Rights Offering (including reasonable
fees and expenses of legal counsel) up to a maximum of $125,000 in the aggregate
for all Purchasers (said amount to be divided among the Purchasers in such
proportions as they agree upon in writing before the Closing Date or, in the
absence of such an agreement, in the percentages set forth in Section 1).

                                       4
<PAGE>

     Section 4.  Conditions to the Closing.
                 -------------------------

     (a) The obligations of each of the Purchasers, on the one hand, and the
Company, on the other hand, to consummate their respective obligations pursuant
to Section 1 hereof are subject to the satisfaction on or prior to the
Expiration Date of each of the following conditions:

          (i) The Registration Statement shall have become effective not later
     than 5:30 P.M. on the Record Date; and at the Expiration Date no stop order
     suspending the effectiveness of the Registration Statement shall have been
     issued under the 1933 Act or proceedings therefor initiated or threatened
     by the Commission.

          (ii) Each of the representations and warranties of the other parties
     hereto contained in this Agreement shall be true and correct in all
     material respects, at and as of the Expiration Date.

          (iii)  The Rights Offering shall have been completed in conformity
     with all of the requirements related thereto provided in the Registration
     Statement and the Prospectus.

          (iv) The waiting period under the Hart-Scott-Rodino Antitrust
     Improvements act shall have expired (as such period may have been
     shortened).

     (b) The obligations of each of the Purchasers to consummate its obligations
pursuant to Section 1 hereof shall also be subject to the satisfaction on or
prior to the Expiration Date of each of the following conditions:

          (i) Material Adverse Change.  Since the respective dates as to which
              -----------------------
     information is given in the Registration Statement and the Prospectus (each
     in the form previously distributed to the Purchasers), there shall not have
     been any material adverse change in or affecting the business, prospects,
     financial position, stockholders' equity or results of operations of the
     Company and its subsidiaries taken as a whole except to the extent any such
     changes result from changes in general economic conditions or conditions in
     the industries in which the Company is engaged in business or the decline
     in prices of stocks generally.

          (ii) Legal Opinion.  Each of the Purchasers shall have received the
               -------------
     opinion, dated as of the date hereof, of Gibson, Dunn & Crutcher LLP,
     counsel for the Company, in form and substance satisfactory to their
     counsel, of the type typically rendered to underwriters in public offerings
     in the United States relating to incorporation and good standing,
     authorization of the Rights Offering and the issuance of shares of Common
     Stock in connection therewith, capitalization of the Company and
     effectiveness and compliance with regulatory requirements of the
     Registration Statement.

     (c) None of the Purchasers will sell, transfer or assign any of the Rights
issued to it in the Rights Offering other than to one another.

                                       5
<PAGE>

     5.  Registration of Shares.
         ----------------------

          Promptly after completion of the Rights Offering the Company shall
prepare and file a registration statement on Form S-3 with the Securities and
Exchange Commission to permit the resale by the Purchasers of the Additional
Shares purchased by them pursuant to this Agreement, and thereafter the Company
shall use commercially reasonable efforts to cause the registration statement to
become effective within a reasonable time after filing.  The plan of
distribution contemplated by the registration statement shall permit the offer
and sale of the Additional Shares to the public directly or through agents or
dealers on terms and conditions and at prices determined at the time of sale by
the Purchaser making the sale or as a result of negotiated transactions between
the buyer and seller, provided, however, that during the one year period after
the purchase of the Additional Shares the sales by each Purchaser shall be in
compliance with the volume of sale and manner of sale requirements of Rule 144
of the Securities and Exchange Commission under the Securities Act of 1933 for
so long during that period as such Purchaser is an "affiliate" of the Company.
Notwithstanding the foregoing, the Company shall not be obligated to take any
action to effect any such registration pursuant to this Section 5 if the Company
shall furnish to such Purchasers a certificate signed by the Chief Executive
Officer of the Company stating that, in the good faith judgment of the Board of
Directors, it would be detrimental to the Company or its stockholders for a
registration statement to be filed within the time period provided above.  In
that event the Company's obligations under this Section 5 to file the
registration statement and use commercially reasonable efforts to cause it to
become effective shall be deferred for a period not to exceed ninety (90) days
from the completion of the Rights Offering.

     6.  Expenses of Registration.  All Registration Expenses incurred in
         ------------------------
connection with the registration pursuant to Section 5 shall be borne by the
Company.  "Registration Expenses" shall include all registration, qualification
and filing fees, printing expenses, fees and disbursements of Company counsel
and independent certified public accountants, blue sky fees and expenses and the
reasonable fees and expenses of one special legal counsel (up to a maximum
aggregate amount of $10,000) to represent all Purchasers in participating in
such registration.  Registration Expenses shall not include any selling
commissions, discounts, stock transfer taxes or other expenses incurred by the
Purchasers in selling their Additional Shares.

     7.  Registration Procedures.  In connection with the registration pursuant
         -----------------------
to Section 5, the Company shall keep each Purchaser advised in writing as to the
initiation of the registration and any qualification or registration under state
blue sky laws and as to the completion thereof.  At its expense the Company
shall:

          (1) Prepare and file with the Commission a registration statement with
     respect to such securities on Form S-3 and use commercially reasonable
     efforts to cause such registration statement to become and remain effective
     for at least one year or until the distribution described in the
     registration statement has been completed; and

          (2) Furnish to the Purchasers participating in such registration such
     reasonable number of copies of the registration statement, final prospectus
     and such other documents as such Purchasers may reasonably request in order
     to facilitate the public offering of such securities.

                                       6
<PAGE>

          (3) Use commercially reasonable efforts to register and qualify the
     securities covered by such registration statement under such other
     securities or blue sky laws of such jurisdictions as shall be reasonably
     requested by the Purchasers.

          (4) Notify each Purchaser at any time when a prospectus relating to
     Additional Shares is required to be delivered under the Securities Act of
     the happening of any event as a result of which the prospectus included in
     such registration statement, as then in effect, includes an untrue
     statement of a material fact or omits to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading in the light of the circumstances then existing.

     8.  Indemnification.
         ---------------

          (a) The Company shall indemnify each Purchaser, each of its officers
and directors and partners, and each person controlling such Purchaser within
the meaning of Section 15 of the Securities Act of 1933 against all expenses,
claims, losses, damages or liabilities (or actions in respect thereof),
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement or prospectus, or any amendment or supplement thereto filed by the
Company pursuant to this Agreement or incident to any such registration or
qualification or registration under blue sky laws, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances in
which they were made, not misleading, or any violation by the Company of any
rule or regulation promulgated under the Securities Act of 1933 applicable to
the Company in connection with any such registration, qualification or
compliance, and the Company shall reimburse each such Purchaser, each of its
officers, directors and partners and each person controlling such Purchaser for
any legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action, as
such expenses are incurred, provided that the Company shall not be liable in any
such case to the extent that any such claim, loss, damage, liability or expense
arises out of or is based on any untrue statement or omission or alleged untrue
statement or omission made in such registration statement or prospectus or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by any Purchaser or controlling person and
specifically for use therein.

          (b) Each Purchaser shall indemnify the Company, each of its directors
and officers, each person who controls the Company within the meaning of Section
15 of the Securities Act of 1933, and each other such Purchaser, each of its
officers, directors and partners and each person controlling such Purchaser
within the meaning of Section 15 of the Securities Act, against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement or prospectus or amendment or
supplement thereto or any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, and will reimburse the Company, such Purchasers, such
directors, officers, partners or control persons for any legal or any other
expenses reasonably incurred in connection with investigating or defending any
such claim, loss, damage, liability or action, as such expenses are incurred, in
each case to the extent, but only to

                                       7
<PAGE>

the extent, that such untrue statement (or alleged untrue statement) or omission
(or alleged omission) is made in such registration statement or prospectus or
amendment or supplement thereto in reliance upon and in conformity with written
information furnished to the Company by an instrument duly executed by such
Purchaser and stated to be specifically for use therein. In no event shall any
indemnity under this Section 8(b) exceed the proceeds from the sale of
Additional Shares received by such Purchaser.

          (c) Each party entitled to indemnification under this Section 8 (each,
an "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not unreasonably be
withheld), and the Indemnified Party may participate in such defense at such
party's expense; provided, however, that an Indemnified Party (together with all
other Indemnified Parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and
expenses to be paid by the Indemnifying Party, if representation of such
Indemnified Party by the counsel retained by the Indemnifying Party would be
inappropriate due to actual or potential differing interests between such
Indemnified Party and any other party represented by such counsel in such
proceeding.  The failure of any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations under this
Section 8 unless the failure to give such notice is materially prejudicial to an
Indemnifying Party's ability to defend such action.

          (d) If the indemnification provided for in this Section 8 is held by a
court of competent jurisdiction to be unavailable to an Indemnified Party with
respect to any losses, claims, damages or liabilities referred to herein, the
Indemnifying Party, in lieu of indemnifying such Indemnified Party thereunder,
shall to the extent permitted by applicable law contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
the Indemnifying Party on the one hand and of the Indemnified Party on the other
in connection with the untrue statement or omission or alleged untrue statement
or omission that resulted in such loss, claim, damage or liability, as well as
any other relevant equitable considerations.  The relative fault of the
Indemnifying Party and of the Indemnified Party shall be determined by a court
of law by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates to
information supplied by the Indemnifying Party or by the Indemnified Party and
the parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission; provided, that in no event
shall any contribution by a Purchaser hereunder exceed the proceeds from the
sale of the Additional Shares received by such Purchaser.

          (e) The obligations of the Company and Purchasers under this Section 8
shall survive completion of any offering of Additional Shares in a
registration statement and the termination of this Agreement.  No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the

                                       8
<PAGE>

giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.

     9.  Information by Purchasers.  Each Purchaser shall furnish to the Company
         -------------------------
such information regarding such Purchaser, the Unsubscribed Shares held by them
and the distribution proposed by such Purchaser as the Company may request in
writing and as shall be required in connection with any registration,
qualification or compliance pursuant to Section 5.

     Section 10.  Notices.  Any notice required to be given hereunder shall be
                  -------
sufficient if in writing, and sent by facsimile transmission, by courier service
(with proof of service), hand delivery or certified or registered mail (return
receipt requested and first-class postage prepaid), addressed as follows:

     If to the Company, to:

          Tejon Ranch Co.
          P.O. Box 1000
          4436 Lebec Road
          Lebec, CA  93243
          Attention:  Robert A. Stine
          Telephone:  (661) 663-4220
          Telecopy:  (661) 248-3300

     with a copy to:

          Gibson, Dunn & Crutcher LLP
          333 South Grand Avenue
          Los Angeles, CA 90071
          Attention:  Roy Schmidt
          Telephone:  (213) 229-7160
          Telecopy:  (213) 229-6160

     If to Third Avenue Trust (on behalf of any of the three funds for which it
is acting):

          Third Avenue Trust
          767 Third Avenue
          New York, NY  10017
          Attention:  James Hall
          Telecopy:  (212) 906-1190
          Telecopy:  (212) 735-0003

                                       9
<PAGE>

     If to Carl Marks Strategic Investments, L.P., to:

          Carl Marks Management Company, L.P.
          135 East 57th Street
          New York, NY  10022
          Attention:  Robert C. Ruocco
          Telephone:  (212) 909-8425
          Telecopy:  (212) 980-2631

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.

     Section 11.  Parties.  This Agreement shall inure to the benefit of and be
                  -------
binding upon the Purchasers, the Company and their respective successors.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any person, firm or corporation, other than the Purchasers,
the Company and their respective successors, any legal or equitable right,
remedy or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the Purchasers, the Company and
their respective successors, and for the benefit of no other person, firm or
corporation. No purchaser of Additional Shares or Subscription Shares from the
Purchasers shall be deemed to be a successor by reason merely of such purchase.
Carl Marks Strategic Investments, L. P. shall have the right, by written notice
to the Company at any time prior to the purchase of the Additional Shares, to
assign its rights to purchase any or all of the Additional Shares allocated to
it under Section 1 hereof to an affiliated investment entity reasonably
acceptable to the Company; provided, however, that without the express written
consent of the Company no such assignment shall operate to release Carl Marks
Strategic Investments, L. P. of any of its obligations hereunder. Upon any such
assignment, such permitted assignee shall thereafter be deemed an Additional
Purchaser for all purposes of this Agreement and shall become bound hereto by
execution of an appropriate instrument to such effect.

     Section 12.  Governing Law and Time.  This Agreement shall be governed by
                  ----------------------
and construed in accordance with the laws of the State of California applicable
to agreements made and to be performed in said State.  Unless otherwise set
forth herein, specified times of day refer to New York City time.

     If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement among
the Purchasers and the Company in accordance with its terms.

     Executed as of this ___ day of October 2000.

                              Very truly yours,

                              TEJON RANCH CO.

                              By:
                                 -------------------------
                                 Title:

                                       10
<PAGE>

Accepted as of the date
first above written.
<TABLE>
<S>                                                 <C>
THIRD AVENUE TRUST                                  CARL MARKS STRATEGIC
(on behalf of Third Avenue Value Fund,              INVESTMENTS, L.P.
Third Avenue Small-Cap Value Fund and
Third Avenue Real Estate Value Fund)                By:  Carl Marks Management Company, L.P.,
                                                         General Partner

By:__________________________________               By: _______________________________________
   Title:                                               Title:  General Partner of Carl Marks
                                                                Management Company, L.P.

</TABLE>
                                       11

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