AGREEMENT AND PLAN OF MERGER

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

-i-

TABLE OF CONTENTS
(continued)

-ii-

TABLE OF CONTENTS
(continued)

-iii-

TABLE OF CONTENTS
(continued)

-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