THIS SECURITY AGREEMENT AND STOCK PLEDGE ("Stock Pledge") is

entered into as of July 3, 1995, by and between HomeFed Corporation, a Delaware

corporation ("Borrower"), and Leucadia Financial Corporation, a Utah corporation

("Lender").



                  A. On October 22, 1992, Borrower filed in the United States

Court for the Southern District of California (the "Bankruptcy Court"), a

voluntary petition for relief under Chapter 11 of Title 11 of the United States

Bankruptcy Code, which was later consolidated with an involuntary bankruptcy

case initiated by certain holders of debentures on June 25, 1992, and is now

assigned Case No. 92-07591-A11 (the "Bankruptcy Case").



                  B. Borrower filed a Fourth Amended Plan of Reorganization (the

"Plan") in the Bankruptcy Case, which was approved by its creditors and

confirmed by the Bankruptcy Court by Order of Confirmation dated December 19,

1994 (which Confirmation Order was modified as of June 14, 1995), and this Stock

Pledge is made in order to facilitate implementation of the Plan.



                  C. Upon effectiveness of the Plan, Lender will be the largest

shareholder of Borrower. Lender worked with Borrower to create the Plan. It is

in the best interest of Lender and Borrower to enter into this Stock Pledge, and

to perform their other respective obligations under and otherwise act in

compliance with the Plan.



                  D. Upon the "Effective Date" of the Plan, Lender shall loan to

Borrower the sum of Twenty Million and 00/100 Dollars ($20,000,000) (the "Loan")

pursuant to the terms of a Loan Agreement between Lender and Borrower ("Loan

Agreement"), which the parties shall execute on the date first written above.

The Loan shall be evidenced by a Promissory Note ("Note") to be held by Lender.



                  E. This Stock Pledge is made pursuant to the Plan and the Loan

Agreement in order to provide security for timely repayment of the Loan

evidenced by the Note, and the performance by Borrower of its obligations under

the Loan Agreement.



                  F. Under the terms of the Loan Agreement, Lender shall have

the right to convert all or a portion of the Principal (as defined in the Loan

Agreement) into Common Stock (as defined in the Loan Agreement). Any such

conversion shall have no effect upon the enforceability of this Stock Pledge as

it relates to the Obligations (defined below).



                  G. This Stock Pledge, together with the Plan, the Loan

Agreement, the Note, the Payment Guaranties executed by each of the Subsidiaries

(defined below), the Security Agreements securing the Payment Guaranties, the

Deeds of Trust securing the performance of Borrower and the Subsidiaries, all

related financing statements, and all documents referred to herein or in any of

such other documents, are collectively referred to herein as the "Plan

Documents."

{PAGE}



                  NOW, THEREFORE, in consideration of the above recitals and the

mutual agreements and promises contained herein, and for other good and valuable

consideration, the receipt and sufficiency of which are hereby acknowledged, and

intending to be legally bound hereby, Borrower and Lender agree as follows:



Section 1.



                           Grant of Security Interest

                           --------------------------



                  Upon the terms of this Stock Pledge, for value received,

Borrower, whose name and mailing address are set forth above its signature at

the foot of this Stock Pledge, grants to Lender a security interest in the

Collateral (defined below), in order to secure the prompt payment and

performance in full of the Obligations (defined below) owed to Lender.



                                   Section 2.



                            Definition of Collateral

                            ------------------------



                  The term "Collateral" as used in this Stock Pledge shall mean

the property of Borrower described in both subparagraphs (a) and (b) below.

Collateral shall consist of "Stock Collateral" and "Non-Stock Collateral",

including any respective insurance payable by reason of loss or damage thereto,

described as follows:



                  (a) Stock Collateral shall consist of all of Borrower's right,

title and interest in and to (i) 400 shares of the outstanding common stock of

HomeFed Communities, Inc., a California corporation ("HomeFed Communities"),

which shares constitute all of the outstanding shares of HomeFed Communities and

are represented by a certificate of HomeFed Communities, and any and all

securities now or hereafter issued in substitution, exchange or replacement

therefor, or with respect thereto, and any and all warrants, options or other

rights to subscribe to or acquire any additional stock or securities of HomeFed

Communities; (ii) 20 shares of the outstanding common stock of HomeFed Resources

Corporation, a California corporation ("HomeFed Resources"), which shares

constitute all of the outstanding shares of HomeFed Resources and are

represented by a certificate of HomeFed Resources, and any and all securities

now or hereafter issued in substitution, exchange or replacement therefor, or

with respect thereto, and any and all warrants, options or other rights to

subscribe to or acquire any additional stock or securities of HomeFed Resources;

(iii) any and all other securities, and any and all warrants, options, or other

rights to subscribe to or acquire securities; and (iv) the cash and noncash

proceeds of the foregoing, including dividends. Collectively, HomeFed

Communities and HomeFed Resources, together with Northfork Communities, a

California general partnership ("Northfork") and Paradise Valley Communities No.

1, a California general partnership ("Paradise Valley"), are referred to herein

as the "Subsidiaries."



                  (b) Non-Stock Collateral shall consist of all of Borrower's

right, title and interest in and to any and all property of Borrower, including

partnership interests, other than that described in subparagraph (a), acquired

at any time, now existing or hereafter arising, and of any and all kinds

whatsoever, real or personal, tangible or intangible, or otherwise, and

including without limitation (i) accounts, deposit accounts, general

intangibles, chattel paper, instruments (whether negotiable or non--negotiable),

contract rights, and all rights of Borrower of every kind to the payment of

money, (ii) all cash and cash equivalents, bank accounts (whether special or

general), and collateral accounts, (iii) all equipment, furniture, fixtures,

machinery, tools, tooling, goods, inventory, raw materials, work in process,

finished goods and materials, and all accessories, parts, repossessions and

returns thereto or therefor, (iv) the cash and noncash proceeds, products,

increase, profits, additions, substitutions, replacements and accessions to,

for, of, and from all of the foregoing, including all cash and noncash proceeds

arising from the transfer of real property, and (v) all books and records of

Borrower with respect to all of the foregoing.







                                       2

{PAGE}



                                   Section 3.



                            Definition of Obligations

                            -------------------------



                  The term "Obligations" as used in this Stock Pledge shall mean

all present and/or future obligations of Borrower under the Loan Agreement and

under the Note and of Borrower and the Subsidiaries under the other Plan

Documents, and all other obligations of every kind or nature of Borrower or any

of its Subsidiaries from time to time owed to Lender, whether due or to become

due, matured or unmatured, liquidated or unliquidated, contingent or

noncontingent, including obligations of performance as well as obligations of

payment and including, without limitation, any and all expenses (including,

without limitation, counsel fees and expenses) incurred by Lender in enforcing

its rights under the Plan Documents, as well as interest that accrues after the

commencement of the bankruptcy or insolvency proceeding by or against Borrower.



                                   Section 4.



                   Warranties and Representations of Borrower

                   ------------------------------------------



                  Borrower warrants and represents and covenants that all of the

following are true:



                  (a) Ownership of Collateral. Borrower owns all right, title

and interest in and to, and has unrestricted power to encumber, all Collateral.

The Bankruptcy Court has confirmed Borrower's authority to execute and deliver

this Stock Pledge. No dispute, right of setoff, counterclaim, or defense exists

with respect to any Collateral and no person other than Borrower and Lender has

or claims any title, lien, encumbrance or other interest in any Collateral,

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