AMENDED AND RESTATED LOAN AGREEMENT          EXHIBIT 10.4
                       -----------------------------------


DATE:     November 30, 1995


PARTIES:  Borrower:  CONTINENTAL HOMES HOLDING CORP., a
                     Delaware corporation.

          Borrower   7001 North Scottsdale Road
          Address:   Suite 2050
                     Scottsdale, Arizona 85253

          Bank:      BANK ONE, ARIZONA, NA, a national
                     banking association formerly known as
                     THE VALLEY NATIONAL BANK OF ARIZONA.

          Bank Address: Western Region Real Estate
                        P.O. Box 29542
                        Phoenix, Arizona 85038
                        Attention: Dept. A-383

AGREEMENT: For good and valuable  consideration,  the receipt and sufficiency of
which are hereby acknowledged, Borrower and Bank agree as follows:

1.  SCHEDULE OF TERMS.

    2.                Commitment Amount:   $15,000,000.00.

    3.1.1.; 3.2       Commitment Expiration Date:  November 30, 1996.

    3.2 and 5.1.6  Purpose of Advances:  Working  capital and general  corporate
purposes to be applied (i) to pay costs and  expenses  incurred in the  ordinary
course of Borrower's  primary lines of business  consisting of the  acquisition,
development  and   subdivision  of  land  for   residential   purposes  and  the
construction  and sale of residential  dwellings to the general public;  (ii) to
pay interest due under the Note,  the Unused  Commitment  Fee and the Commitment
Fee;  (iii) to pay  amounts  due under the Set Aside  Agreement;  or (iv) to pay
amounts due to be reimbursed  to Bank for letters of credit  issued  pursuant to
this  Agreement.  Advances  shall not be available  for  purposes not  described
above.

    3.6.1. Commitment Fee: $75,000.00.

    3.6.2  Unused Commitment Fee Rate: 1/4% per annum.

2.  DEFINITIONS. In this Agreement, the following terms shall have the following
meanings:

    "Acquisition  Debt" means (i) Debt or Preferred Stock of any Person existing
at the time such Person  becomes a  Subsidiary  of Borrower,  including  but not
limited to Debt or Preferred Stock incurred or created in connection with, or in
contemplation  of, such Person  becoming a Subsidiary of Borrower (but excluding
Debt of such Person which is extinguished,  retired or repaid in connection with
such Person becoming a Subsidiary of Borrower), (ii) Debt incurred or created by
any  Subsidiary  of Borrower in  connection  with the  transaction  or series of
transactions  pursuant to which such Person  became a Subsidiary  of Borrower or
(iii) Debt incurred or created by any Subsidiary of Borrower in connection  with
the  acquisition  of  substantially  all of the assets of an  operating  unit or
business  of another  Person,  provided  that,  in the case of Debt  incurred or
created  pursuant to clause (ii) or (iii) hereof,  such  Subsidiary had no other
prior assets or operations prior to such  acquisition,  transaction or series of
transactions other than Credit Extensions/Contributions permitted by Section 7.9
or made by a Person other than Borrower or any of its Subsidiaries.

    "Adjusted Debt" means all Debt of Borrower on a consolidated  basis plus all
accounts payable and other accrued expenses of Borrower on a consolidated basis,
excluding Debt arising from "mortgage  banking and title operations" of CHMC and
Travis  Title,  and  excluding  the  indebtedness  of Borrower  evidenced by the
Convertible  Notes and the  Subordinated  Notes,  all as shown on a consolidated
balance sheet of Borrower prepared in accordance with GAAP and approved by Bank.

    "Adjusted  Debt to Net Worth  Ratio" of any Person means the ratio of all of
such Person's then outstanding Adjusted Debt, on a consolidated basis, excluding
Mortgage Debt, to Net Worth at the end of the fiscal  quarter ended  immediately
preceding the date of determination.

    "Advance" means an advance under the Commitment.

    "Affiliate" of any Person means (i) any other Person  directly or indirectly
controlling  or  controlled by or under direct or indirect  common  control with
such Person and (ii) any other Person that beneficially owns at least 10% of the
voting  common  stock  of such  Person.  For the  purposes  of this  definition,
"control"  when used with  respect to any  Person  means the power to direct the
management and policies of such Person, directly or indirectly,  whether through
the  ownership of voting  securities,  by contract or  otherwise;  and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.

    "Agreement"  means  this  Loan  Agreement  as it may be  amended,  modified,
extended, renewed, restated, or supplemented from time to time.

    "Approvals and Permits" means each and all approvals, authorizations, bonds,
consents,   certificates,    franchises,   licenses,   permits,   registrations,
qualifications,  and other  actions  and rights  granted by or filings  with any
Persons necessary,  appropriate, or desirable for ownership or lease by Borrower
of its assets and property or for the conduct of the business and  operations of
Borrower.

    "Bank Facility"  means,  collectively,  one or more  commitments from one or
more banks or other lending institutions to lend funds together with any and all
agreements,  documents and instruments from time to time delivered in connection
therewith as such  commitment or any such  agreements,  documents or instruments
may  be  in  effect  or  amended,  amended  and  restated,   renewed,  extended,
restructured,  supplemented  or  otherwise  modified  from  time to time and any
credit agreement,  loan agreement,  note purchase agreement,  indenture or other
agreement, document or instrument refinancing,  refunding or otherwise replacing
such Bank Facility, whether or not with the same agent, trustee,  representative
lenders or holders, and, subject to the proviso to the next succeeding sentence,
irrespective  of any  changes  in the  terms  and  conditions  thereof.  Without
limiting the generality of the foregoing, the term "Bank Facility" shall include
any amendment,  amendment and restatement,  renewal,  extension,  restructuring,
supplement or modification to any Bank Facility and all refundings, refinancings
and replacements of any Bank Facility, including any agreement (i) extending the
maturity of any Debt incurred thereunder or contemplated thereby, (ii) adding or
deleting  borrowers or guarantors  thereunder,  provided that such borrowers and
issuers  include  one or  more  of  Borrower  and  its  Subsidiaries  and  their
respective successors and assigns,  (iii) increasing the amount of Debt incurred
thereunder  or available to be borrowed  thereunder,  provided  that on the date
thereof such Debt would not be  prohibited  by clause (b) of the  definition  of
Permitted Debt, or (iv) otherwise altering the terms and conditions thereof in a
manner not prohibited by the terms of this Agreement.

    "Beneficial  Owner" means as defined in Rule 13d-3, as in effect on the date
of the execution of this  Agreement,  promulgated  by the  Commission  under the
Exchange Act.

    "Borrower Loan Documents" means the Loan Documents  executed or delivered by
Borrower from time to time.

    "Business  Day" means a day of the year on which  banks are not  required or
authorized to close in Phoenix, Arizona.

    "Capital  Stock"  of  any  Person  means  any  and  all  shares,  interests,
participations  or other  equivalents  (however  designated) of capital stock of
such Person and all warrants or options to acquire such capital stock.

    "Carlsbad  Property" means the 417 acres owned by the Carlsbad Subsidiary in
Carlsbad, California, located in San Diego County.

    "Carlsbad Subsidiary" means Rancho Carillo, Inc., a Delaware corporation and
a Subsidiary of Borrower.

    "CHI" means Continental Homes, Inc., a Delaware corporation and a Subsidiary
of Borrower.

    "CHICC"  means  CHI  Construction  Company,  an  Arizona  corporation  and a
Subsidiary of CHI.

    "Change in Control"  means that any Person,  together with its Affiliates or
associates, is or becomes the Beneficial Owner, directly or indirectly,  through
a purchase, merger or other acquisition transaction,  of shares of capital stock
of  Borrower  entitling  such  person to  exercise in excess of 50% of the total
voting  power of all shares of capital  stock of  Borrower  entitled  to vote in
elections of directors.

    "CHMC" means CH Mortgage Company, a Colorado  corporation  formerly known as
American Western Mortgage Company and a Subsidiary of CHI.

    "Collateral"  means the  property,  interests  in  property,  and  rights to
property securing any or all Obligations from time to time.

    "Commission" means The Securities and Exchange Commission.

    "Commitment"  means the  agreement  of Bank in Sections 3.1 and 3.2 to issue
Letters of Credit and to make Advances  pursuant to the terms and  conditions in
the Letter of Credit Agreements and herein.

    "Commitment Amount" has the meaning specified in Section 1.

    "Consolidated  Interest  Expense" of any Person means,  for any period,  the
aggregate  amount of interest which, in accordance with GAAP,  would be included
on an income  statement for such Person and its  Subsidiaries  on a consolidated
basis,  whether expensed  directly,  or included as a component of cost of goods
sold, or allocated to joint  ventures or otherwise  (including,  but not limited
to, imputed interest included on capitalized lease obligations, all commissions,
discounts  and other fees and charges owed with respect to letters of credit and
bankers'   acceptance   financing,   the  net  costs   associated  with  hedging
obligations,  amortization  of other  financing fees and expenses,  the interest
portion of any deferred payment obligation, amortization of discount or premium,
if any, and all other non-cash  interest  expense),  excluding  interest expense
related to such Person's  mortgage banking  operations,  plus the product of (x)
the sum of (i) cash  dividends  paid on any Preferred  Stock of such Person plus
(ii) cash dividends,  the principal  amount of any debt  securities  issued as a
dividend,  the liquidation value of any Preferred Stock issued as a dividend and
the fair market value (as determined by such Person's board of directors in good
faith) of any other  non-cash  dividends,  in each case,  paid on any  Preferred
Stock of any Subsidiary of such Person (other than a  wholly-owned  Subsidiary),
times (y) a fraction, the numerator of which is one and the denominator of which
is one minus the then current effective  aggregate federal,  state and local tax
rate of such Person, expressed as a decimal.

    "Consolidated  Interest  Incurred" of any Person means, for any period,  (a)
the  aggregate  amount of interest  which,  in  accordance  with GAAP,  would be
included  on an income  statement  for such  Person  and its  Subsidiaries  on a
consolidated  basis,  whether expensed  directly,  or included as a component of
cost of goods sold, or allocated to joint ventures or otherwise (including,  but
not limited to, imputed interest included on capitalized lease obligations,  all
commissions,  discounts  and other fees and charges owed with respect to letters
of credit and  bankers'  acceptance  financing,  the net costs  associated  with
hedging  obligations,  amortization  of other  financing fees and expenses,  the
interest portion of any deferred payment obligation, amortization of discount or
premium,  if any, and all other non-cash interest  expense),  excluding interest
expense related to such Person's  mortgage  banking  operations,  plus or minus,
without  duplication,  (b) the difference between capitalized  interest for such
period and the interest  component  of cost of goods sold for such period,  plus
(c) the product of (x) the sum of (i) cash dividends paid on any Preferred Stock
of such  Person  plus  (ii) cash  dividends,  the  principal  amount of any debt
securities  issued as a dividend,  the liquidation  value of any Preferred Stock
issued as a dividend and the fair market value (as  determined  by such Person's
board of directors in good faith) of any other non-cash dividends, in each case,
paid on any  Preferred  Stock of any  Subsidiary  of such  Person  (other than a
wholly-owned  Subsidiary),  times (y) a fraction,  the numerator of which is one
and the denominator of which is one minus the then current  effective  aggregate
federal, state and local tax rate of such Person, expressed as a decimal.

         "Consolidated Net Income" of any Person, for any period,  means the net
income (loss) of such Person and its Subsidiaries for such period, determined on
a  consolidated   basis,  in  accordance  with  GAAP,   provided  that,  without
duplication,  (i) the net income of any Person, other than a Subsidiary which is
consolidated  with such Person,  in which such Person or any of its Subsidiaries
has a joint  interest with a third party shall be included only to the extent of
the amount of dividends or distributions actually paid in cash to such Person or
a Subsidiary during such period, (ii) the net income of any Person acquired in a
pooling  of  interests  transaction  for any  period  prior  to the date of such
acquisition  shall be excluded,  (iii) the net income of any  Subsidiary of such
Person shall be excluded to the extent such  Subsidiary is prohibited,  directly
or indirectly,  from distributing such net income or any portion thereof to such
Person and (iv) all  extraordinary  gains and losses (after taxes) that would be
included on an income statement for such Person on a consolidated basis for such
period shall be excluded.

    "Consolidated  Non-cash  Charges" of any Person means,  for any period,  the
aggregate  depreciation,  amortization  and other  non-cash  charges (other than
reserves or expenses  established in  anticipation  of future cash  requirements
such as reserves  for taxes and  uncollectible  accounts) of such Person and its
Subsidiaries,  on a  consolidated  basis,  for such  period,  as  determined  in
accordance with GAAP, provided that Consolidated  Non-cash Charges shall exclude
(i)  any  charges  that  are  not  included  for  the  purpose  of   determining
Consolidated  Net Income,  (ii) any charges that are included for the purpose of
determining  Consolidated Interest Expense or Consolidated Tax Expense and (iii)
any  charges  representing   capitalized  selling,  general  and  administrative
expenses that are expensed during such period as cost of goods sold.

    "Consolidated  Tax  Expense"  of any  Person  means,  for  any  period,  the
aggregate  of the tax  expense  of such  Person  and its  Subsidiaries  for such
period, determined on a consolidated basis, in accordance with GAAP.

    "Convertible  Notes"  means  Borrower's  $35,000,000.00  6-7/8%  Convertible
Subordinated  Notes due 2002,  issued in connection with the  Convertible  Notes
Indenture.

    "Convertible Notes Indenture" means that certain Indenture,  dated March 15,
1992, between Borrower and Manufacturers and Traders Trust Company,  as trustee,
with respect to the Convertible Notes.

    "Coverage  Ratio" of any Person means the ratio of such  Person's  EBITDA to
its  Consolidated   Interest  Incurred  for  the  four  fiscal  quarters  ending
immediately prior to the date of determination.  Notwithstanding  clause (ii) of
the definition of Consolidated  Net Income,  if the Debt which is being Incurred
is Acquisition  Debt, the Coverage Ratio shall be determined after giving effect
to both the  Consolidated  Interest  Incurred  related to the Incurrence of such
Acquisition  Debt and the EBITDA (x) of the Person becoming a Subsidiary of such
Person  or  (y)  in  the  case  of an  acquisition  of  assets  that  constitute
substantially all of an operating unit or business, relating to the assets being
acquired by such Person.

    "Credit Extensions/Contributions" means any direct or indirect advance, loan
or other  extension  of credit or capital  contribution  to, or any  purchase or
acquisition  of capital  stock,  bonds,  notes,  debentures or other  securities
issued or owned by, any other Person, including, without limitation, payments by
Borrower or any of its  Subsidiaries  to a Person other than  Borrower or any of
its Subsidiaries in connection with an acquisition in which  Acquisition Debt is
Incurred.

    "Debt" means, as to any Person, without duplication, (a) any indebtedness of
such Person for borrowed money, (b) all indebtedness of such Person evidenced by
bonds, debentures,  notes, letters of credit, drafts or similar instruments, (c)
all  indebtedness of such Person to pay the deferred  purchase price of property
or services,  but not including accounts payable and accrued expenses arising in
the ordinary course of business,  (d) all capitalized  lease obligations of such
Person,  (e) all Debt of others  secured by a Lien on any asset of such  Person,
whether or not such Debt is assumed by such Person or guaranteed by such Person,
(f) Redeemable Stock, and (g) all Debt of others guaranteed by such Person.  The
amount of Debt of any Person at any date  pursuant  to clauses  (a)-(d)  and (f)
above  shall be as would  appear as a  liability  upon a  balance  sheet of such
Person prepared on a consolidated basis in accordance with GAAP.

    "EBITDA" for any Person, for any period,  means,  without  duplication,  the
Consolidated  Net  Income  of  such  Person  plus,  to the  extent  deducted  in
calculating  Consolidated  Net Income,  the sum of (a) Consolidated Tax Expense,
(b) Consolidated Interest Expense and (c) Consolidated Non-cash Charges.

    "ERISA" means the Employee  Retirement  Income  Security Act of 1974 and the
regulations and published interpretations  thereunder, as in effect from time to
time.

    "Event of Default" has the meaning  specified in the Note and the other Loan
Documents.

    "Exchange Act" means The Securities Exchange Act of 1934, as amended.

    "Existing Debt" means all of the Debt of Borrower and its Subsidiaries  that
is outstanding on the date of this Agreement and listed on Schedule I hereto.

    "GAAP" means generally accepted accounting principles consistently applied.

    "Governmental  Authority"  means any government,  any court, and any agency,
authority, body, bureau, department, or instrumentality of any government.

    "Guaranty" or "Guaranties" means individually and collectively,  the payment
guaranties of Guarantors of even date herewith.

    "Guarantors" means both of the following: CHICC and CHI.

    "Incur,"  "Incurred,"  "Incurring,"  "Incurrence"  means with respect to any
Person, that such Person has directly or indirectly created, incurred,  assumed,
guaranteed, or otherwise become liable for any Debt or other obligation.

    "Indenture" means that certain Indenture, dated as of August 1, 1992 between
Borrower and Fidelity Bank, National  Association,  as Trustee,  with respect to
the Public Notes,  as amended by that First  Supplemental  Indenture dated March
22, 1994.

    "Intangible  Assets" of any Person means such  Person's  goodwill,  patents,
trademarks,   copyrights,  and  all  other  items  which  would  be  treated  as
intangibles on the  consolidated  balance sheet of Borrower and its Subsidiaries
prepared in accordance with GAAP.

    "Letter of Credit  Agreement"  means Bank's  standard form  Application  and
Agreement for Commercial Letter of Credit,  Bank's standard form Application for
Standby  Letter of Credit  and  Standby  Letter  of Credit  Agreement,  or other
standard  application  and  agreement  for letters of credit in use by Bank from
time to time.

    "Letters of Credit" means the letters of credit in Bank's standard form from
time to time issued pursuant to Section 3.1.

    "Lien or Encumbrance" and "Liens and Encumbrances" mean, respectively,  each
and all of the  following:  (i) any  lease  or  other  right  to use;  (ii)  any
assignment  as  security,  conditional  sale,  grant in trust,  lien,  mortgage,
pledge, security interest,  title retention arrangement,  other encumbrance,  or
other interest or right securing the payment of money or the  performance of any
other liability or obligation,  whether voluntarily or involuntarily created and
whether arising by agreement, document, or instrument, under any law, ordinance,
regulation,  or rule (federal,  state,  or local),  or otherwise;  and (iii) any
option,  right of first  refusal,  other right to acquire,  or other interest or
right.

    "Liquidity"  means with respect to any Person,  the amount of that  Person's
unencumbered  cash and  unencumbered  cash  equivalents  (including  amounts  on
deposit with Bank  pursuant to Section 6.14 hereof) as  determined in accordance
with GAAP,  plus,  in the case of  Borrower,  (i) the portion of the  Commitment
Amount that is undisbursed  and available for  disbursement  at the time of each
determination  of Liquidity,  (ii) the amount of the Warehouse  Facility that is
undisbursed and available for disbursement at the time of each  determination of
Liquidity, and (iii) the amount of other Bank Facilities that is undisbursed and
available for disbursement at the time of each determination of Liquidity.

    "Loan  Documents"  means  this  Agreement,  the Note,  the  Letter of Credit
Agreements  executed and delivered by Borrower in connection with the Letters of
Credit from time to time,  the Set Aside  Agreement,  and any other  agreements,
documents, or instruments from time to time evidencing,  guarantying,  securing,
or otherwise relating to the Note, as they may be amended,  modified,  extended,
renewed, or supplemented from time to time.

    "Loan Party" means Borrower, the Guarantors, and each other Person that from
time to time is or becomes  obligated to Bank under any Loan  Document or grants
any Collateral.

    "Material  Adverse  Change"  means  any  change  in  the  assets,  business,
financial condition, operations, prospects, or results of operations of any Loan
Party or any other event or condition that in the reasonable opinion of Bank (i)
could  affect  the  likelihood  of  performance  by any Loan Party of any of the
Obligations,  (ii) could  affect the ability of any Loan Party to perform any of
the Obligations, (iii) could affect the legality, validity, or binding nature of
any  of  the  Obligations  or  any  Lien  or  Encumbrance  securing  any  of the
Obligations,  or (iv)  could  affect  the  priority  of any Lien or  Encumbrance
securing any of the Obligations.

    "Mortgage  Debt" means such mortgage  banking debt as would be listed on the
consolidated balance sheet of Borrower prepared in accordance with GAAP.

    "Net Worth" of any Person  means,  at any date,  the  aggregate  of capital,
surplus and retained earnings of such Person as would be shown on a consolidated
balance  sheet of such Person  prepared  in  accordance  with GAAP,  adjusted to
exclude (to the extent included) investments by such Person and its Subsidiaries
in joint ventures and the amount of equity attributable to Affiliates other than
Subsidiaries of such Person, and, solely for purposes of determining  Borrower's
compliance  with the covenant set forth in Section  6.12.3,  adjusted to include
(to the extent  excluded),  in Borrower's  case,  the  indebtedness  of Borrower
evidenced by the Convertible Notes and the Subordinated Notes.

    "Non-Recourse  Debt" means Debt or other  obligations to the extent that the
liability for such Debt or other  obligations does not extend to Borrower or any
of its  Subsidiaries  (other than the  Subsidiary  incurring  such Debt or which
holds title to any property  securing such Debt) for any  deficiency,  including
liability by reason of any agreement by Borrower or any of its  Subsidiaries  to
maintain the financial  condition of, keep-well or otherwise  support the credit
of the Subsidiary incurring such Debt.

    "Note" means the Amended and Restated  Promissory  Note,  dated of even date
herewith, of Borrower payable to Bank, as it may be amended, modified, extended,
renewed, restated, or supplemented from time to time.

    "Obligations"  means  the  obligations  of the Loan  Parties  under the Loan
Documents  (including,  without limitation,  the obligation to pay Reimbursement
Amounts and amounts under the Set Aside Agreement).

         "Permitted Debt" means:

                  (a) Debt evidenced by the Public Notes;

                  (b) Debt Incurred under or in respect of this Agreement or any
         other Bank Facility  (including  any  guarantees  related  thereto) for
         working  capital or  general  corporate  purposes,  Debt  evidenced  by
         letters of credit (including  letters of credit issued pursuant to this
         Agreement),  and  guarantees  of Debt of the Great  Singing Hills joint
         venture in excess of amounts committed on the date of the Indenture and
         which are Incurred after the date of the  Indenture;  provided that the
         aggregate  amount of all such Debt  outstanding at any time pursuant to
         this clause (b) may not exceed $30,000,000;

                  (c) Debt Incurred by CHMC under the Warehouse Facility;

                  (d)  Debt of  Borrower  to any of its  Subsidiaries  or of any
         Subsidiary  of  Borrower  to  Borrower  or to any other  Subsidiary  of
         Borrower,  provided  that such Debt is evidenced  by a promissory  note
         that  is  not  pledged  to  any  Person   (other  than  to  secure  the
         Obligations);

                  (e) Existing Debt (without duplication of Debt indicated under
         clauses (a)-(d) above) of Borrower and its Subsidiaries;

                  (f) Non-Recourse  Debt Incurred by the Carlsbad  Subsidiary in
         an amount not to exceed $18,000,000 at any time outstanding;

                  (g) Debt in respect  of  performance,  completion,  guarantee,
         surety and similar bonds or banker's  acceptances  provided by Borrower
         or any of its Subsidiaries in the ordinary course of business;

                  (h) Purchase Money Obligations incurred in the ordinary course
         of  business  in an  amount  not  exceeding  $5,000,000.00  at any time
         outstanding;

                  (i)  Acquisition  Debt of a Subsidiary of Borrower  which,  if
         Incurred by  Borrower,  would be  permitted  pursuant to Section  7.5.2
         hereof;

                  (j) Refinancing Debt; and

                  (k)  Debt   evidenced  by  the   Convertible   Notes  and  the
         Subordinated Notes.

    "Permitted  Exceptions" with respect to Borrower and its Subsidiaries  means
(i) Liens and Encumbrances securing the Obligations; (ii) Liens and Encumbrances
securing the Warehouse Facility, provided that such Liens and Encumbrances shall
not extend to any assets other than the  mortgages,  promissory  notes and other
collateral  that  secures   mortgage  loans  made  by  CHMC;   (iii)  Liens  and
Encumbrances  on assets of Borrower or any  Subsidiary of Borrower  securing the
Bank Facility;  provided that the Liens and  Encumbrances  granted in respect of
the Bank  Facility  shall  not  extend  to  assets  having  a book  value in the
aggregate in excess of two times the amount  committed  under the Bank Facility;
(iv) Liens and Encumbrances  securing Non-Recourse Debt incurred by the Carlsbad
Subsidiary;  provided that such Liens shall not extend to any assets of Borrower
or any of its  Subsidiaries  other than the Carlsbad  Subsidiary;  (v) Liens and
Encumbrances  for taxes,  assessments  or  governmental  charges or claims  that
either (a) are not yet  delinquent  or (b) are being  contested in good faith by
appropriate   proceedings  and  as  to  which  appropriate  reserves  have  been
established or other  provisions  have been made in accordance  with GAAP;  (vi)
statutory  Liens and  Encumbrances  of landlords and carriers',  warehousemen's,
mechanics',   suppliers',   materialmen's,   repairmen's   or  other  Liens  and
Encumbrances  imposed by law and  arising in the  ordinary  course of  business;
(vii)  Liens and  Encumbrances  (other than any Lien or  Encumbrance  imposed by
ERISA)  deposits  made in the  ordinary  course of business in  connection  with
workers'  compensation,   unemployment  insurance  and  other  types  of  social
security;  (viii) Liens and Encumbrances incurred or deposits made to secure the
performance of tenders, bids, leases,  statutory obligations,  surety and appeal
bonds,  progress  payments,  government  contracts and other obligations of like
nature  (exclusive of obligations  for the payment of borrowed  money),  in each
case,  incurred in the ordinary course of business;  (ix) attachment or judgment
Liens and Encumbrances not giving rise to an Event of Default or Unmatured Event
of Default; (x) easements, rights-of-way, restrictions and other similar charges
or  encumbrances  not materially  interfering  with the ordinary  conduct of the
business  of  Borrower  or any of its  Subsidiaries;  (xi)  leases or  subleases
granted to others not materially  interfering  with the ordinary  conduct of the
business of Borrower or any of its  Subsidiaries;  (xii) Liens and  Encumbrances
with respect to Acquisition  Debt;  provided that such Liens and Encumbrances do
not extend to any other  assets of Borrower  or the assets of any of  Borrower's
other Subsidiaries;  (xiii) Liens securing  Refinancing Debt; provided that such
Liens only extend to the assets  securing  the Debt being  refinanced,  and such
refinanced  Debt was previously  secured and such Liens and  Encumbrances do not
extend to any other  assets of  Borrower  or to the assets of  Borrower's  other
Subsidiaries;   (xiv)  Liens  securing  Purchase  Money  Obligations  (including
capitalized  lease  obligations);  (xv)  Liens  existing  on the  date  of  this
Agreement;  and  (xvi)  any  contract  to sell an asset  provided  such  sale is
otherwise permitted under this Agreement (and the foregoing shall not constitute
a consent of Bank to a sale or obligate Bank to consent to a sale).

    "Permitted  Payments"  means,  with  respect  to  Borrower  or  any  of  its
Subsidiaries, (i) the redemption,  repurchase or other acquisition or retirement
of any shares of any class of  Capital  Stock in  exchange  for  (including  any
exchange  pursuant  to the  exercise  of a  conversion  right  or  privilege  in
connection  with  which  cash is paid in  lieu  of the  issuance  of  fractional
shares),  or out of the proceeds of a  substantially  concurrent  issue and sale
(other than to a Subsidiary)  of, shares of Capital Stock (other than Redeemable
Stock) of Borrower,  provided that the proceeds of any such issuance and sale of
shares of capital stock of Borrower  shall not be included in  determination  of
amounts  available  for  Restricted   Payments,   (ii)  any  dividend  or  other
distribution  on any shares of its  Capital  Stock  payable by a  Subsidiary  to
Borrower  or  another  of  its  Subsidiaries,   or  (iii)  any  wages  or  other
compensation paid by Borrower or any of its Subsidiaries to their employees.

    "Person" means any individual, corporation,  partnership, association, trust
or other entity or organization, including a government or political subdivision
or agency or instrumentality thereof.

    "Preferred  Stock"  means,  with respect to any Person,  any and all shares,
interests,  participations  or other  equivalents  (however  designated) of such
Person's  preferred or preference  stock whether now outstanding or issued after
the date of this Agreement, and including,  without limitation,  all classes and
series of preferred or preference stock.

    "Public Notes" means Borrower's $110,000,000.00 12% Senior Notes due 1999.

    "Purchase Money  Obligations"  means Debt of any Person secured by Liens (i)
on  property  purchased,   acquired,  or  constructed  by  such  Person  or  its
Subsidiaries  after the date of the Indenture and used in the ordinary course of
business by such Person and (ii)  securing the payment of all or any part of the
purchase price or  construction  cost of such assets and limited to the property
so acquired and  improvements  thereof;  provided  that such Debt is incurred no
later than 90 days after the  acquisition of such property or completion of such
construction or improvements.

    "Redeemable Stock" means, with respect to any Person, any class or series of
Capital  Stock of such  Person  that is  redeemable  at the option of the holder
(except  pursuant to a change in control  provision that does not (i) cause such
Capital Stock to become redeemable in circumstances which would not constitute a
Change in Control and (ii) require Borrower to pay the redemption price therefor
prior to the repayment in full of all Obligations, the expiration of all Letters
of Credit,  and the  expiration of the  Commitment),  or is subject to mandatory
redemption or otherwise matures prior to the final stated maturity of the Public
Notes.

    "Refinancing Debt" means Debt that refunds, refinances or extends the Public
Notes,  Existing  Debt (other than Existing Debt repaid with the net proceeds of
Advances  pursuant to this  Agreement) or other Debt incurred by Borrower or its
Subsidiaries pursuant to the terms of the Indenture and this Agreement, but only
to the extent that (i) the  Refinancing  Debt is subordinated to the Obligations
and the Public Notes to the same extent as the Debt being  refunded,  refinanced
or extended,  if at all, (ii) the Refinancing Debt is scheduled to mature either
(a) no earlier than the Debt being  refunded,  refinanced  or  extended,  or (b)
after the maturity date of the Public Notes,  (iii) the portion,  if any, of the
Refinancing Debt that is scheduled to mature on or prior to the maturity date of
the  Public  Notes has a  Weighted  Average  Life to  Maturity  at the time such
Refinancing  Debt is  Incurred  that is equal to or  greater  than the  Weighted
Average Life to Maturity of the portion of the Debt being  refunded,  refinanced
or extended  that is scheduled to mature on or prior to the maturity date of the
Public Notes, (iv) the obligor of such Refinancing Debt shall be Borrower or the
same obligor as the Debt being  refunded,  refinanced  or extended,  and (v) the
gross  proceeds of such  Refinancing  Debt is an amount that is equal to or less
than the  aggregate  principal  amount  then  outstanding  under the Debt  being
refunded, refinanced or extended.

    "Reimbursement Amount" means the amount Borrower is obligated to pay to Bank
under a Letter of Credit  Agreement  in  respect  of a draft  drawn or drawn and
accepted under the respective Letter of Credit, which amount shall be the amount
of the draft or acceptance and all costs, expenses, fees, and other amounts then
payable by Borrower to Bank under the Letter of Credit Agreements.

    "Restricted  Payments" means, with respect to any Person (i) any dividend or
other  distribution  on any  shares  of  such  Person's  Capital  Stock  (except
dividends or  distributions  in  additional  shares of Capital  Stock other than
Redeemable  Stock),  (ii) any payment on account of the purchase,  redemption or
other  acquisition  of (a) any shares of such Person's  Capital Stock or (b) any
option, warrant or other right to acquire shares of such Person's Capital Stock,
(iii) any Credit  Extensions/Contributions to Affiliates Incurred after the date
of the  Indenture;  provided,  that for purposes of this provision an individual
shall not be deemed to be an  Affiliate  of Borrower or any of its  Subsidiaries
solely  because  such   individual  is  employed  by  Borrower  or  any  of  its
Subsidiaries or, (iv) any principal payment, redemption,  repurchase, defeasance
or  other   acquisition  or  retirement   (other  than  the  retirement  of  any
Subordinated Notes upon conversion of such of the Subordinated Notes pursuant to
the terms of the Subordinated  Notes  Indenture),  prior to scheduled  principal
payment or scheduled maturity,  of Debt of Borrower or its Subsidiaries which is
subordinated  in right of payment to the  Public  Notes and the Note,  provided,
however, that with respect to Borrower and its Subsidiaries, Restricted Payments
shall not include (a) any payment  described in clause (i),  (ii) or (iii) above
made to Borrower or any of its Subsidiaries  (other than the Carlsbad Subsidiary
(in the case of clause (iii)) or any of its Subsidiaries  which has liability in
respect of Acquisition Debt) by Borrower or any of its Subsidiaries,  or (b) any
underwritten  call of the Subordinated  Notes or other Debt of Borrower which is
convertible  into Capital  Stock (other than  Redeemable  Stock) but only to the
extent Borrower is not required to make any redemption or principal  payments in
respect of Debt subject to such  underwritten  call (other than  redemption  and
principal  payments  which are covered by the net proceeds  received by Borrower
from a concurrent  sale of Capital  Stock (other than  Redeemable  Stock) to the
underwriters effecting such underwritten call).

    "Set Aside Agreement" has the meaning set forth in Section 3.5.

    "Set Aside Amount" has the meaning set forth in Section 3.5.

    "Standard  Number of Days" means the standard number of days  established by
Bank from  time to time to allow for  delivery  to Bank of  drafts  drawn  under
Letters  of Credit  presented  to  financial  institutions  other  than Bank for
delivery to Bank.  Bank may change such number of days at any time and from time
to time in its absolute and sole  discretion  without notice to Borrower and may
have a  different  number of days for  commercial  letters of credit and standby
letters of credit.

    "Subordinated  Notes" means  Borrower's  $86,250,000.00  6-7/8%  Convertible
Subordinated  Notes due 2002,  issued in connection with the Subordinated  Notes
Indenture.

    "Subordinated  Notes Indenture" means that certain  Indenture dated November
1, 1995  between  Borrower  and  Manufacturers  and Traders  Trust  Company,  as
trustee, with respect to the Subordinated Notes.

    "Subsidiary" and  "Subsidiaries"  mean, with respect to any Person,  (i) any
corporation  of which a majority of the capital  stock  having  ordinary  voting
power to elect a majority of the board of directors or other Persons  performing
similar  functions is at the time directly or indirectly owned by such Person or
one or more of the other  Subsidiaries of that Person or a combination  thereof,
or (ii) any partnership or joint venture at least a majority of the voting power
of which is at the time  directly or  indirectly  owned by such Person or one or
more of the other  Subsidiaries  of that Person or a  combination  or  successor
thereof.

    "Tangible  Net Worth" of any Person means such  Person's Net Worth less such
Person's Intangible Assets.
    "Unmatured  Event of Default" means any condition or event that with notice,
passage of time, or both would be an Event of Default.

    "Warehouse  Facility"  means the Second  Amended  and  Restated  Warehousing
Credit and Security Agreement dated as of July 1, 1995 between Bank and CHMC, as
the same may be amended, modified,  extended, renewed, restated and supplemented
from time to time.

    "Weighted  Average  Life to  Maturity"  means,  when  applied to any Debt or
portion  thereof,  if  applicable,  at any date, the number of years obtained by
dividing  (i) the then  outstanding  principal  amount of such  Debt or  portion
thereof,  if  applicable,  into  (ii)  the  sum  of  the  products  obtained  by
multiplying  (a) the amount of each then  remaining  installment,  sinking fund,
serial  maturity or other required  payment of principal,  including  payment at
final maturity,  in respect thereof,  by (b) the number of years  (calculated to
the nearest  one-twelfth)  that will elapse  between such date and the making of
such payment.

3. LETTERS OF CREDIT AND LOAN FACILITY.

    3.1 Letters of Credit.

         3.1.1  Issuance  of  Letters  of  Credit.  Subject  to  the  terms  and
conditions of this Agreement and the Letter of Credit  Agreements and subject to
the policies,  procedures,  and requirements of Bank in effect from time to time
for issuance of Letters of Credit  (including,  without  limitation,  payment of
letter of credit fees), Bank agrees to issue, from time to time on or before the
Commitment  expiration  date  specified  in  Section 1,  Letters of Credit  upon
request by and for the account of Borrower,  provided that as to each  requested
Letter of Credit  Borrower has delivered to Bank a completed and executed Letter
of Credit  Agreement,  and  provided  further that the date that is the Standard
Number  of Days  after the last date for  payment  of drafts  drawn or drawn and
accepted under a requested Letter of Credit is before the Commitment  expiration
date  specified  in Section 1. Each  reference  in this  Agreement to "issue" or
"issuance"  or other forms of such words in relation to Letters of Credit  shall
also include any extension or renewal of a Letter of Credit.  Upon occurrence of
an Event of Default or an Unmatured Event of Default,  Bank, in its absolute and
sole discretion and without notice,  may suspend the commitment to issue Letters
of Credit.  In addition,  upon  occurrence of an Event of Default,  Bank, in its
absolute and sole discretion and without notice, may terminate the commitment to
issue Letters of Credit.

         3.1.2 Issuance Procedure.  To obtain a Letter of Credit, Borrower shall
complete and execute a Letter of Credit Agreement and submit it to the letter of
credit department of Bank and to the address of Bank specified on the first page
of this  Agreement.  In no event shall Bank have any  obligation  to act upon an
oral  request  for a Letter of Credit or any  request  that  otherwise  does not
conform to Bank's  policies  and  procedures.  Upon  receipt of a completed  and
executed  Letter of Credit  Agreement,  Bank will  process  the  application  in
accordance  with the  policies,  procedures,  and  requirements  of Bank then in
effect.  If the  application  meets the  requirements  of Bank and is within the
policies of Bank then in effect, Bank will issue the requested Letter of Credit;
provided, however, that unless otherwise agreed by Bank in its sole and absolute
discretion  Borrower  shall be  entitled to request  that Bank issue  Letters of
Credit only in connection with, and as security for, the construction of offsite
improvements  by  Borrower  for  residential  subdivisions  being  developed  by
Borrower in the ordinary course of Borrower's business.

         3.1.3  Reimbursement  of Bank for Payment of Drafts  Drawn or Drawn and
Accepted  Under Letters of Credit.  The obligation of Borrower to reimburse Bank
for  payment  by Bank of drafts  drawn or drawn and  accepted  under a Letter of
Credit shall be as provided in the respective Letter of Credit  Agreement.  Bank
will notify  Borrower of payment by Bank of a draft drawn or drawn and  accepted
under a Letter of Credit  and of the  respective  Reimbursement  Amount and will
give Borrower the election (i) to pay the  Reimbursement  Amount pursuant to the
respective Letter of Credit Agreement or (ii) to pay the Reimbursement Amount by
Bank making an Advance subject to the terms and conditions of this Agreement and
applying  the  proceeds  of the  Advance  to pay the  Reimbursement  Amount.  If
Borrower  does not  communicate  to Bank its election  within two Business  Days
after notification by Bank of payment of the draft or acceptance, Borrower shall
be deemed to have  elected  to pay the  Reimbursement  Amount by Bank  making an
Advance  hereunder,  provided that if the terms and conditions in this Agreement
for an Advance  hereunder are not  satisfied,  Borrower  shall be deemed to have
elected  to pay the  Reimbursement  Amount  pursuant  to the  Letter  of  Credit
Agreement.  Each  Advance to pay a  Reimbursement  Amount will be dated the date
that Bank pays the respective  draft or acceptance and will accrue interest from
and after such date. If Borrower is to pay the Reimbursement  Amount pursuant to
the Letter of Credit Agreement,  Borrower shall also pay to Bank interest on the
Reimbursement  Amount from and including the date Bank pays the respective draft
or  acceptance  at the  Interest  Rate  (as  defined  in  the  Note)  until  the
Reimbursement  Amount  and such  interest  are paid in  full,  provided  that if
Borrower  fails to pay the  Reimbursement  Amount and accrued  interest  thereon
within  five (5) days after  notification  by Bank to Borrower of payment of the
respective draft or acceptance,  interest  thereafter will accrue at the Default
Rate (as such term is defined in the Note).  Such interest  shall be computed on
the basis of a 360-day year and accrue on a daily basis for the actual number of
days elapsed. Notwithstanding the above, if Borrower elects or is deemed to have
elected  to pay the  Reimbursement  Amount  pursuant  to the  Letter  of  Credit
Agreement and fails to pay the Reimbursement  Amount and interest thereon within
five (5) days after notification by Bank to Borrower,  Bank, in its absolute and
sole  discretion  and without  notice to Borrower and  regardless of whether the
terms and conditions in this  Agreement for Advances are satisfied,  may make an
Advance  under  this  Agreement  in the amount of the  Reimbursement  Amount and
accrued  interest  thereon  and apply the  proceeds  of such  Advance to pay the
Reimbursement Amount and accrued interest.

    3.2 Loan Facility.  Subject to the terms and  conditions of this  Agreement,
Bank  agrees to make  Advances  to  Borrower  from time to time on or before the
Commitment  expiration  date specified in Section 1. Proceeds of Advances may be
used  only to pay  Reimbursement  Amounts  due to Bank  under  Letter  of Credit
Agreements, amounts due to Bank under the Set Aside Agreement, and for any other
purposes  described  in  Section  1.  Advances  shall be on a  revolving  basis.
Advances  prepaid  may be  re-borrowed  subject to the terms and the  conditions
herein.  Although the outstanding principal of the Note may be zero from time to
time,  the Loan  Documents  shall  remain  in full  force and  effect  until the
Commitment terminates,  all Letters of Credit have expired or are drawn in full,
all drafts  drawn or drawn and  accepted  under all  Letters of Credit have been
paid in  full,  and all  Obligations  are  paid  and  performed  in  full.  Upon
occurrence  of an  Event of  Default,  an  Unmatured  Event  of  Default  or the
violation of any of the financial covenants set forth in Section 6.12.1,  6.12.2
or 6.12.3 hereof (regardless of whether such violation  otherwise is an Event of
Default  or  Unmatured  Event  of  Default),  Bank,  in its  absolute  and  sole
discretion and without notice,  may suspend the commitment to make Advances.  In
addition,  upon the occurrence of an Event of Default, Bank, in its absolute and
sole  discretion  and without  notice,  may  terminate  the  commitment  to make
Advances. The obligation of Borrower to repay Advances is evidenced by the Note.

    3.3  Requests for Letters of Credit and  Advances.  Letters of Credit may be
issued and Advances may be made, in accordance with the terms hereof, by Bank at
the  written  request  of  the  Person  or  Persons  designated  in a  signature
authorization form delivered to Bank from time to time by Borrower.  Such Person
or Persons are hereby  authorized  by Borrower to request  Letters of Credit and
Advances,  to execute and  deliver  Letter of Credit  Agreements,  and to direct
disposition  of the proceeds of Advances  until written notice of the revocation
of such  authority  is  received  from  Borrower  by  Bank  and  Bank  has had a
reasonable time to act upon such notice.  Bank shall have no duty to monitor for
Borrower  or to report to  Borrower  the use of Letters of Credit or proceeds of
Advances.  Advances  shall be disbursed by Bank into an account of Borrower with
Bank,  provided,  however,  that Advances to pay Reimbursement  Amounts shall be
paid to Bank.

    3.4 Limit on Letters of Credit and Advances.  Anything in the Loan Documents
to the contrary notwithstanding,  the sum from time to time of (i) the aggregate
amount of outstanding and undrawn Letters of Credit,  (ii) the aggregate  amount
of  outstanding  and unpaid  drafts drawn and accepted  under Letters of Credit,
(iii) the aggregate amount of unpaid Reimbursement  Amounts,  (iv) the Set Aside
Amount less any portion of the Set Aside  Amount that has been  advanced by Bank
pursuant to this Agreement and thereafter repaid by Borrower, and (v) the amount
of outstanding  and unpaid Advances shall not exceed the Commitment  Amount.  In
addition,  anything in the Loan Documents to the contrary  notwithstanding,  the
sum from time to time of the amounts  described in clauses (i), (ii),  (iii) and
(iv) of the immediately preceding sentence shall not exceed ten percent (10%) of
the Commitment Amount.

    3.5 Set Aside  Agreement.  Borrower and Bank have entered into (or may enter
into after execution  hereof) a Set Aside Agreement (the "Set Aside  Agreement")
in  connection  with a loan from  Bank to  Surprise  Village  North  L.L.C.  and
Continental  Traditions  L.L.C.,  which loan  relates to certain  real  property
located in Surprise,  Arizona. Pursuant to the terms of the Set Aside Agreement,
Borrower agreed to "set aside" a portion of the Commitment  Amount in the sum of
$1,500,000.00  (the "Set Aside Amount") for purposes of paying  certain  release
prices as more fully described therein.  Bank, from time to time in its sole and
absolute discretion and without notice to Borrower and regardless of whether the
terms and conditions in this  Agreement for Advances are satisfied,  may make an
Advance  under this  Agreement in the amount owed under the Set Aside  Agreement
and apply the proceeds of such Advance to pay such amount.

    3.6 Fees. As additional consideration for the Commitment, Borrower agrees to
pay to Bank the  following  fees,  which shall be earned by Bank on the date due
under the Loan Documents and shall be non-refundable to Borrower:

         3.6.1  Commitment Fee. A fee for the Commitment in the amount set forth
in Section 1, payable on or before the date hereof.

         3.6.2 Unused  Commitment Fee. An unused  commitment fee computed at the
rate per annum set forth in  Section 1 on the unused  portion of the  Commitment
Amount, calculated from the date hereof and payable monthly in arrears. For each
month (or portion thereof),  the unused commitment fee shall be equal to (a) the
Commitment Amount minus (b) the "average monthly outstandings" for the month (or
portion  thereof)  with  respect  to which the  unused  commitment  fee is being
computed,  with the resulting number  multiplied by (c) one-twelfth  (1/12th) of
the annual fee. As used herein,  "average monthly outstandings" means the sum of
the outstanding  amount of the Advances on each day during the month (or portion
thereof for which the fee is being  computed)  with  respect to which the unused
commitment  fee is being  computed,  divided by the number of days in that month
(or portion  thereof).  If the Unused  Commitment Fee is being computed for less
than a full month,  the percentage used in clause (c) above shall be computed on
a daily basis for the number of days for which the fee is being computed.

         3.6.3 Attorneys' Costs, Expenses, and Fees. Attorneys' costs, expenses,
and fees for  Bank's  counsel  in the amount  specified  by Bank,  payable on or
before the date hereof.

4. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS AGREEMENT AND THE COMMITMENT.

    4.1 Conditions  Precedent to Closing and Commitment.  This Agreement and the
Commitment  shall  become  effective  only upon  satisfaction  of the  following
conditions precedent, as determined by Bank in its absolute and sole discretion:

         4.1.1 Representations and Warranties Accurate.  The representations and
warranties by each Loan Party in the Loan Documents are correct on and as of the
date of this Agreement as though made on and as of such date.

         4.1.2 No Event of Default or Unmatured  Event of Default.  No condition
or event has  occurred  that is an Event of  Default  or an  Unmatured  Event of
Default.

         4.1.3 No  Material  Adverse  Change.  No  Material  Adverse  Change has
occurred.

         4.1.4  Receipt of  Documents.  Bank has  received  the  following  duly
executed by the parties  thereto and in form and substance  satisfactory to Bank
in its absolute and sole discretion.
              4.1.4.1 Loan Documents. The Loan Documents.
              4.1.4.2 Corporate or Partnership Documents. If any Loan Party is a
corporation,  limited liability company,  or a partnership,  certified copies of
(a) resolutions of its board of directors, members, or partners, as the case may
be, authorizing such Loan Party to execute, deliver, and perform pursuant to its
Loan Documents and to grant to Bank the Liens and  Encumbrances  provided in the
Loan  Documents  and  certifying  the names and  signatures  of the  officers or
partners,  as the case may be, of such Loan Party authorized to execute the Loan
Documents on behalf of such Loan Party, (b) the certificate of incorporation and
bylaws, articles of organization, limited liability company operating agreement,
or  partnership  agreement,  as the  case  may be,  of such  Loan  Party,  (c) a
certificate of good standing as a corporation,  limited  liability  company,  or
limited  partnership,  as the case  may be,  from  such  Loan  Party's  State of
organization,  and if not Arizona,  a certificate of  qualification as a foreign
corporation,  limited liability company, or limited partnership, as the case may
be, authorized to transact  business in the State of Arizona,  from the State of
Arizona.

         4.1.5  Completion  of  Filings.  Bank  has  received  evidence  of  the
completion  of all filings to  establish  or  maintain  the  perfection  and the
priority of the Liens and Encumbrances granted in the Loan Documents.

         4.1.6 Payment of Costs,  Expenses,  and Fees. All costs,  expenses, and
fees to be paid by the Loan  Parties  on or  before  the  effectiveness  of this
Agreement shall have been paid in full.

         4.1.7  Opinion  Letter.  Bank has  received a  favorable  opinion  from
Borrower's  in-house counsel in form and substance  satisfactory to Bank and its
counsel.

         4.1.8  Financial  Statements.  Bank has received  financial  statements
including,  without limitation,  a balance sheet, cash flow statement and income
statement,  of Borrower  and each other Loan Party (or  consolidated  statements
reflecting  such  information  with  respect  to  Borrower  and the  other  Loan
Parties), certified by Borrower and each other Loan Party.

         4.1.9 Commitment Fee. Borrower has paid the Commitment Fee.

         4.1.10 Other Items.  Bank has received such other items or documents as
Bank may require.

         4.2  Conditions  Precedent  to Advances  and the Issuance of Letters of
Credit.  Bank's  obligation to make Advances or to issue Letters of Credit shall
become effective only upon satisfaction by Borrower, at Borrower's sole cost and
expense, of the conditions  precedent set forth in Section 4.1 and the following
conditions precedent with respect to each Advance or Letter of Credit.

              4.2.1  Representations  and Warranties.  The  representations  and
warranties  by the Loan Parties in the Loan  Documents  are correct on and as of
the date of each  Advance or the date of issuance  of each Letter of Credit,  as
applicable,  as though  made on and as of such date and after  giving  effect to
such Advance or issuance.

              4.2.2  No  Event  of  Default  or  Unmatured   Event  of  Default:
Compliance with Certain Financial Covenants.  No condition or event has occurred
that is an Event of Default or an  Unmatured  Event of Default  both  before and
after giving effect to such Advance or issuance.  Borrower is in compliance with
the financial  covenants set forth in Section  6.12.1,  6.12.2 and 6.12.3 hereof
both before and after giving effect to such Advance or issuance.

              4.2.3 No Material  Adverse Change.  No Material Adverse Change has
occurred.

              4.2.4 Draw Request. With respect to any Advance, Bank has received
a draw request in the form of Exhibit A hereto from Borrower,  not less than one
(1)  Business  Day  prior to the date  for  which  such  Advance  is  requested,
specifying   the  amount  of  the  Advance   requested  and  supported  by  such
documentation as Bank may require.

              4.2.5  Letters  of Credit.  With  respect to any Letter of Credit,
Borrower shall have complied with the terms and conditions of Section 3 hereof.

              4.2.6 Other Items. Bank has received such other items or documents
as Bank may require.

Borrower hereby authorizes Bank, and Bank reserves the right in its absolute and
sole  discretion,  to verify any documents and information  submitted to Bank in
connection  with  this  Agreement.  Bank may  elect,  in its  absolute  and sole
discretion,  to waive any of the foregoing conditions precedent. Any such waiver
shall be  effective  only if (i) it is in  writing  executed  by  Bank,  (ii) it
specifically identifies the condition precedent, and (iii) it states whether the
condition  precedent is waived as a  requirement  of the  effectiveness  of this
Agreement,  the  effectiveness of the Commitment,  and/or as a requirement for a
particular  Advance or Letter of Credit. Any such waiver shall be limited to the
condition(s)  precedent  specifically  described  therein  and the  requirements
therein.  Delay or failure by Bank to insist on satisfaction of any condition of
an  Advance  or  issuance  of a Letter of  Credit  shall not be a waiver of such
condition precedent or any other .condition precedent.  If Borrower is unable to
satisfy any condition  precedent of an Advance or a Letter of Credit, the making
of the Advance or issuance of the Letter of Credit shall not preclude  Bank from
thereafter  declaring  the  condition or event  causing such  inability to be an
Event of Default.

5. BORROWER REPRESENTATIONS AND WARRANTIES.

    5.1 Closing Representations and Warranties. Borrower represents and warrants
to Bank as of the date of this Agreement:

         5.1.1 Corporate,  Limited Liability Company,  or Partnership  Existence
and Authorization. If Borrower is a corporation, a limited liability company, or
a partnership, Borrower is validly existing, and in the case of a corporation or
limited  liability  company  is  in  good  standing,   under  the  laws  of  the
jurisdiction  of its formation or  organization  and has the requisite power and
authority  to  execute,  deliver,  and  perform  Borrower  Loan  Documents.  The
execution, delivery, and performance by Borrower of Borrower Loan Documents have
been duly  authorized  by all  requisite  action by or on behalf of Borrower and
will not  conflict  with,  or result in a violation of or a default  under,  the
certificate of incorporation and bylaws, the limited liability company operating
agreement,  or the  partnership  agreement of  Borrower,  as the case may be. If
Borrower  is not  formed or  organized  under the laws of the State of  Arizona,
Borrower is qualified to do business as a foreign corporation, limited liability
company, or partnership, as the case may be, and in the case of a corporation or
limited  liability  company is in good  standing,  under the law of the State of
Arizona.

         5.1.2  No  Approvals.  No  approval,   authorization,   bond,  consent,
certificate,  franchise, license, permit, registration,  qualification, or other
action or grant by or filing with any Person is required in connection  with the
execution, delivery, or performance by Borrower of Borrower Loan Documents.

         5.1.3  No  Conflicts.  The  execution,  delivery,  and  performance  by
Borrower of Borrower  Loan  Documents  will not  conflict  with,  or result in a
violation of or a default under: any applicable law, ordinance,  regulation,  or
rule  (federal,  state,  or  local);  any  judgment,  order,  or  decree  of any
arbitrator,  other  private  adjudicator,  or  Governmental  Authority  to which
Borrower  is a party or by which  Borrower  or any of the assets or  property of
Borrower is bound; any of the Approvals or Permits; or any agreement,  document,
or  instrument to which  Borrower is a party or by which  Borrower or any of the
assets or  property of Borrower is bound  (including,  without  limitation,  any
agreement,  document or  instrument in  connection  with the Public  Notes,  the
Convertible  Notes,  the  Subordinated  Notes,  any Bank  Facility and any other
Existing  Indebtedness).  This Agreement and the  Commitment  constitute a "Bank
Facility" as that term is defined in the Indenture;  the Obligations  constitute
"Permitted Debt" as that term is defined in the Indenture;  the Obligations rank
pari passu with the Public Notes and are senior to the Convertible Notes and the
Subordinated Notes.

         5.1.4  Execution  and  Delivery  and Binding  Nature of  Borrower  Loan
Documents.  The Borrower Loan Documents have been duly executed and delivered by
or on behalf of Borrower.  The Borrower  Loan  Documents are legal,  valid,  and
binding  obligations  of Borrower,  enforceable  in accordance  with their terms
against Borrower,  except as such  enforceability  may be limited by bankruptcy,
insolvency,  moratorium,  reorganization,  or  similar  laws  and  by  equitable
principles of general application.

         5.1.5 Accurate  Information.  All information in any loan  application,
financial  statement,  certificate,  or other document and all other information
delivered by or on behalf of Borrower to Bank in  obtaining  the  Commitment  is
correct and complete,  and there are no omissions  therefrom  that result in any
such  information  being  incomplete,  incorrect,  or  misleading as of the date
thereof. There has been no Material Adverse Change as to Borrower since the date
of such information.  All financial  statements  heretofore delivered to Bank by
Borrower  were prepared in accordance  with the  requirements  set forth in this
Agreement  and  accurately  present  the  financial  condition  and  results  of
operations  of  Borrower as at the dates  thereof  and for the  periods  covered
thereby.

         5.1.6 Purpose of Advances.  The purpose of the Advances is as set forth
in Section 1.

         5.1.7  Legal  Proceedings:  Hearings,  Inquiries,  and  Investigations.
Except as disclosed to Bank in writing prior to the date of this Agreement,  (i)
no legal  proceeding  is pending or, to best  knowledge of Borrower,  threatened
before any arbitrator,  other private adjudicator,  or Governmental Authority to
which  Borrower  is a party or by which  Borrower  or any assets or  property of
Borrower may be bound or affected that if resolved  adversely to Borrower  could
result in a Material  Adverse  Change,  and to the best  knowledge  of Borrower,
there  exist no facts that would  form any basis for any of the  foregoing,  and
(ii) no hearing, inquiry, or investigation relating to Borrower or any assets or
property  of  Borrower  is  pending  or,  to the  best  knowledge  of  Borrower,
threatened by any Governmental Authority.

         5.1.8 No Event of Default or  Unmatured  Event of Default.  No Event of
Default and no Unmatured  Event of Default has occurred  and is  continuing.  No
event of  default  or event  which  with  notice or lapse of time or both  would
become an event of default has  occurred or is  continuing  with  respect to the
Public Notes, the Convertible Notes, the Subordinated  Notes, any Bank Facility,
or any other Debt of Borrower.

         5.1.9 Approvals and Permits: Assets and Property. Borrower has obtained
and there are in full force and effect all Approvals and Permits.  Borrower owns
or leases all assets and  property  necessary  for conduct of the  business  and
operations  of  Borrower.  Such assets and property are not subject to any Liens
and Encumbrances, other than Permitted Exceptions.

         5.1.10 Taxes.  Borrower has filed or caused to be filed all tax returns
(federal,  state,  and local)  required to be filed by Borrower and has paid all
taxes and other amounts shown thereon to be due (including,  without limitation,
any interest and penalties).

         5.1.11 ERISA. Borrower is in compliance with ERISA. No Reportable Event
or Prohibited  Transaction  (as defined in ERISA) or termination of any plan has
occurred  and no notice of  termination  has been filed with respect to any plan
established  or  maintained  by Borrower and subject to ERISA.  Borrower has not
incurred  any  material  funding  deficiency  within the meaning of ERISA or any
material  liability to the Pension  Benefit  Guaranty  Corporation in connection
with any such plan  established  or  maintained  by Borrower.  Borrower is not a
party to any Multiemployer Plan (as defined in ERISA).

         5.1.12  Environmental  Matters.  The  information in any  environmental
questionnaire  delivered  to Bank is  accurate  and  complete  with no  material
omissions  therefrom as of the date thereof.  To the best  knowledge of Borrower
after due investigation, Borrower is in compliance in all material respects with
all environmental, all health, and all safety laws, ordinances, regulations, and
rules (federal, state, and local) applicable to Borrower, the assets or property
of Borrower, the business or operations of Borrower, or the products or services
of  Borrower.  Borrower  does not  have  any  material  existing  or  contingent
liability in connection with any disposal, generation, manufacture,  processing,
production, release, storage, transportation, treatment, or use of any hazardous
or toxic substance or waste.

         5.1.13 Investment Company Act. Borrower is not an "investment  company"
or a company  controlled by an  "investment  company"  within the meaning of the
Investment Company Act of 1940, as amended.  Borrower is not a "holding company"
within  the  meaning of the  Public  Utility  Holding  Company  Act of 1935,  as
amended.

         5.1.14  Margin  Securities.  Borrower is not engaged in the business of
extending  credit for the purpose of purchasing or carrying margin stock (within
the  meaning of  Regulation  U issued by the Board of  Governors  of the Federal
Reserve  System),  and no proceeds of Advances will be used to purchase or carry
any margin  stock or extend  credit to others for the purpose of  purchasing  or
carrying margin stock or for any purpose that -violates or is inconsistent  with
Regulation X of the Board of Governors.

    5.2  Representations and Warranties Upon Requests for Advances or Letters of
Credit.  Each  request  for  an  Advance  or  a  Letter  of  Credit  shall  be a
representation  and  warranty by Borrower to Bank that the  representations  and
warranties  in this  Section 5 are  correct  and  complete as of the date of the
Advance  or the  issuance  of the  Letter  of  Credit  and that  the  conditions
precedent  in  Section  4 are  satisfied  as of the date of the  Advance  or the
issuance of the Letter of Credit.

    5.3  Representations  and Warranties Upon Delivery of Financial  Statements,
Documents and Other Information.  Each delivery by Borrower to Bank of financial
statements,  other  documents,  or information  after the date of this Agreement
(including, without limitation, documents and information delivered in obtaining
an Advance or Letter of Credit) shall be a representation and warranty that such
financial statements,  other documents,  or information is correct and complete,
that there are no omissions therefrom that result in such financial  statements,
other documents, or information being incomplete, incorrect, or misleading as of
the date thereof,  and that such  financial  statements  accurately  present the
financial  condition  and  results of  operations  of  Borrower  as at the dates
thereof and for the periods covered thereby.

6. BORROWER  AFFIRMATIVE  COVENANTS.  Until the  Commitment  terminates in full,
until all Letters of Credit  expire or are drawn in full until all drafts  drawn
or drawn and accepted  under  Letters of Credit are paid in full,  and until the
Obligations are paid and performed in full,  Borrower  agrees that,  unless Bank
otherwise agrees in writing in Bank's absolute and sole discretion:

    6.1 Corporate,  Limited  Liability  Company,  or Partnership  Existence.  If
Borrower  is a  corporation,  a limited  liability  company,  or a  partnership,
Borrower shall continue to be validly existing, and in the case of a corporation
or a  limited  liability  company  in  good  standing,  under  the  law  of  the
jurisdiction  of its  organization  or  formation.  If Borrower is not formed or
organized under the laws of the State of Arizona,  Borrower shall continue to be
qualified to do business as a foreign corporation, limited liability company, or
partnership,  as the case may be,  and in the case of a  corporation  or limited
liability company to be in good standing, under the law of the State of Arizona.

    6.2 Books and  Records;  Access By Bank.  Borrower  will  maintain a single,
standard, modern system of accounting (including,  without limitation, a single,
complete,  and  accurate  set of books  and  records  of its  assets,  business,
financial condition, operations, property, prospects, and results of operations)
in accordance  with good  accounting  practices.  During business hours Borrower
will give  representatives  of Bank  access  to all  assets,  books,  documents,
property,  and records of  Borrower  and will  permit  such  representatives  to
inspect such assets and property and to audit, copy, examine,  and make excerpts
from such books, documents, and records.

    6.3 Information and Statements. Borrower shall furnish to Bank:

         6.3.1  Monthly  Financial  Statements.  As soon as available and in any
event within  thirty (30) days after the end of each calendar  month,  a balance
sheet, statements of income and, at Bank's request,  reconciliation of net worth
of Borrower and each  Guarantor  for the  immediately  preceding  month,  all in
reasonable detail and certified by the chief financial officers of Borrower, and
each Guarantor, subject, however, to year-end audit adjustments.

         6.3.2 Quarterly Financial  Statements.  As soon as available and in any
event  within  forty-five  (45) days  after  the end of each of the first  three
quarters in each fiscal year,  unaudited  consolidated  financial  statements of
Borrower  and  its  Subsidiaries  (including,   without  limitation,  cash  flow
reports),  as contained in its Form 10-Q quarterly reports to the Commission for
the relevant three, six and nine month periods.

         6.3.3 Annual  Financial  Statements.  As soon as  available  and in any
event within ninety (90) days after the end of each fiscal year of Borrower, (i)
the  consolidated  (and,  if  required  by Bank,  the  consolidating)  financial
statements of Borrower and its Subsidiaries as contained in its Form 10-K annual
report to the Commission,  and (ii) copies of the consolidated (and, if required
by Bank, the consolidating) balance sheet of Borrower and its Subsidiaries as of
the end of such fiscal year, and statements of income and retained  earnings and
a statement of cash flow of Borrower for such fiscal year,  in each case setting
forth in comparative form the figures for the preceding fiscal year of Borrower,
all in reasonable  detail,  prepared in accordance  with GAAP,  which  financial
statements  shall  be  audited  by  independent   certified  public  accountants
satisfactory  to  Bank,  and  accompanied  by an  unqualified  opinion  of  such
accountants with respect to such financial statements.  As soon as available and
in any event  within ten (10) days prior to the  beginning  of each fiscal year,
Borrower  shall  furnish  to Bank a budget,  and cash flow  projection  for that
fiscal year.

         6.3.4 Officer's  Certificate.  Together with each delivery of financial
statements  pursuant  to  Sections  6.3.1  through  6.3.3  above,  an  officer's
certificate  of  Borrower  and each  Guarantor  stating  that the  signers  have
reviewed the terms of this  Agreement  and have made, or caused to be made under
their  supervision,  a review  in  reasonable  detail  of the  transactions  and
conditions of Borrower and each Guarantor  during the accounting  period covered
by such  financial  statements,  and that  such  review  has not  disclosed  the
existence during or at the end of such accounting  period,  and that the signers
do  not  have  knowledge  of  the  existence  as of the  date  of the  officer's
certificate,  of any Event of Default or  Unmatured  Event of Default or, if any
Event of Default or Unmatured Event of Default existed or exists, specifying the
nature and period of the existence  thereof and what action  Borrower has taken,
is  taking,  and  proposes  to take with  respect  thereto.  Together  with each
quarterly financial statement required pursuant to Section 6.3.2, Borrower shall
provide an officer's certificate in the form of Exhibit B hereto with respect to
compliance  with the  financial  and other  covenants set forth in any documents
relating to the Public Notes,  any documents  relating to any Bank Facility,  or
this Agreement.

         6.3.5  Filings,  Etc.  As and when  filed,  copies  of all  regular  or
periodic  financial and other  reports,  if any, which Borrower or any Guarantor
shall file with the Commission or any other Governmental Authority.

         6.3.6 Sales  Reports.  As soon as  available  and in any event at least
once each  month,  sales,  inventory  and backlog  reports on each  homebuilding
Subsidiary of Borrower.

         6.3.7  Required  Backup.  Upon  request  by Bank  from  time  to  time,
"consolidating" statements and other detail required by Bank with respect to any
of the financial statements described in Sections 6.3.1 through 6.3.3 above.

         6.3.8 Other Information. Such other information concerning Borrower and
the assets, business, financial condition,  operations, property, prospects, and
results of operations of Borrower as Bank reasonably requests from time to time.

         6.4  Law;  Judgments;  Material  Agreements;   Approvals  and  Permits.
Borrower  shall  comply  with  all  laws,  ordinances,  regulations,  and  rules
(federal,  state,  and  local) and all  judgments,  orders,  and  decrees of any
arbitrator,  other  private  adjudicator,  or Government  Authority  relating to
Borrower or the assets, business,  operations, or property of Borrower. Borrower
shall comply in all material respects with all material  agreements,  documents,
and  instruments to which Borrower is a party or by which Borrower or any of the
assets or property of Borrower is bound or affected.  Borrower  shall obtain and
maintain in full force and effect all  Approvals  and  Permits and shall  comply
with all conditions and requirements of all Approvals and Permits.


<PAGE>



         6.5 Taxes and Other  Indebtedness.  Borrower will pay and discharge (i)
before delinquency all taxes,  assessments,  and governmental  charges or levies
imposed  upon it,  upon its  income  or  profits,  or upon any of its  assets or
property (except to the extent permitted to be contested  pursuant to clause (v)
of the  definition  of Permitted  Exceptions),  (ii) when due all lawful  claims
(including,  without  limitation,  claims for labor,  materials,  and supplies),
that, if unpaid,  might become a Lien or  Encumbrance  upon any of its assets or
property, and (iii) when due all its other Debt.

         6.6 Assets and Property. Borrower will maintain, keep, and preserve all
of its assets and property (tangible and intangible)  necessary or useful in the
proper  conduct  of its  business  and  operations  in good  working  order  and
condition, ordinary wear and tear excepted.

         6.7 Insurance.  In addition to any insurance  required under any of the
other Loan Documents,  Borrower shall maintain workmen's compensation insurance,
product and public liability insurance, insurance on its assets and property now
or  hereafter  owned,  and such other forms of  insurance as is customary in the
industry of Borrower, against such casualties, risks, and contingencies, in such
amounts,  and with such insurance  companies as are satisfactory to Bank, in its
reasonable discretion.  Borrower shall deliver to Bank from time to time as Bank
may request,  schedules setting forth all insurance then in effect and copies of
policies.

         6.8 Environmental Laws. Without limiting the generality of Section 6.4,
Borrower shall comply with all  environmental,  all health, and all safety laws,
ordinances,   regulations,  and  rules  (federal,  state,  local,  and  foreign)
applicable to Borrower,  the business or  operations of Borrower,  the assets or
property of Borrower,  or the products or services of Borrower.  Borrower  shall
not dispose of, generate, manufacture,  process, produce, release, transport, or
treat or otherwise  store or use any  hazardous or toxic  substances  or wastes.
Borrower  shall notify Bank  immediately of any  environmental  inquiry or claim
from any  Governmental  Authority  or other  Person  relating to Borrower or any
assets, property, business, operations, product, or service of Borrower.

         6.9 ERISA.  Borrower  will fund each  Defined  Benefit Plan and Defined
Contribution Plan (as such terms are defined in ERISA) so that there is never an
Accumulated  Funding  Deficiency  (as  defined  in Section  412 of the  Internal
Revenue Code of 1986, as amended).

         6.10 Further Assurances.  Borrower shall promptly execute, acknowledge,
and  deliver  and,  as  appropriate,  cause to be duly filed and  recorded  such
additional  agreements,  documents,  and  instruments and do or cause to be done
such  other  acts as Bank may  reasonably  request  from  time to time to better
assure,  perfect,  preserve,  and protect the interest of Bank in the Collateral
and the rights and remedies of Bank under the Loan Documents.

         6.11 Costs and Expenses of  Borrower's  Performance  of  Covenants  and
Satisfaction  of Conditions.  Borrower will perform all of its  obligations  and
satisfy all conditions under the Loan Documents at its sole cost and expense.

         6.12  Financial  Covenants.  Except as otherwise  noted,  all financial
computations  shall  be made in  accordance  with  GAAP.  Until  the  Commitment
terminates  in full,  until all  Letters of Credit  expire or are drawn in full,
until all drafts drawn or drawn and accepted under Letters of Credit are paid in
full, and until the Obligations are paid and performed in full,  Borrower agrees
that,  unless  Bank  otherwise  agrees in  writing in Bank's  absolute  and sole
discretion,  as of the end of  each  quarterly  fiscal  period,  Borrower  shall
maintain:

              6.12.1  Tangible  Net Worth.  A minimum  Tangible Net Worth in the
amount of $90,000,000.00.

              6.12.2 Liquidity. A minimum Liquidity of $5,000,000.00.

              6.12.3  Adjusted Debt to Net Worth Ratio.  An Adjusted Debt to Net
Worth Ratio of not more than 1.50 to 1.

         6.13 Clean-Up.  With respect to (i) the six-month period  commencing on
November  30,  1995 and  ending  on May 31,  1996,  Borrower  shall not have any
Advances outstanding pursuant to this Agreement for a period of at least fifteen
(15) or thirty (30)  consecutive  days,  (as elected by  Borrower)  and (ii) the
period  commencing on June 1, 1996 and ending on the Commitment  expiration date
specified  in  Section  1,  Borrower  shall  not have any  Advances  outstanding
pursuant to this  Agreement for a period of at least thirty (30) or fifteen (15)
consecutive  days (as  elected  by  Borrower,  such that the  period  elected by
Borrower  in clause  (ii) is  different  than the period  elected by Borrower in
Clause (i)).

         6.14  Compensating  Balances.  Borrower  shall at all times maintain on
deposit  with  Bank  (i)  free,  collected,   non-interest-bearing  compensating
balances  in the amount of not less than  $500,000.00  and (ii) such  additional
compensating  balance  deposits  (which  may  be  interest  bearing)  as  may be
necessary to cause the total  deposits  maintained  at Bank  (including  amounts
maintained  pursuant to clause (i) of this  sentence)  to be equal to or greater
than two-thirds of the total deposits  maintained by Borrower with all financial
institutions.

         6.15  Appraisals.  Bank shall have the right,  which Bank may  exercise
from time to time, to obtain  appraisals of Borrower's  real estate assets.  All
such  appraisals  shall  be in form and  reflect  values  satisfactory  to Bank.
Borrower shall cooperate in any such appraisals and Borrower shall pay all costs
and expenses,  including appraisal and appraisal review fees incurred or charged
by Bank in connection  therewith;  provided that Borrower  shall be obligated to
pay such  costs and  expenses  only if and to the  extent  such  appraisals  are
required  (i) by the  consistent  application  of Bank's  internal  policies and
procedures  that are generally  applicable to secured or unsecured loans made by
Bank to Persons  engaged in  businesses  similar  to that of  Borrower,  (ii) by
applicable  laws, rules and regulations or (iii) in connection with the exercise
of Bank's rights under Section 8 hereof.

7. BORROWER NEGATIVE COVENANTS.  Until the Commitment  terminates in full, until
all  Letters of Credit  expire or are drawn in full,  until all drafts  drawn or
drawn and  accepted  under  Letters  of Credit  are paid in full,  and until the
Obligations are paid and performed in full,  Borrower  agrees that,  unless Bank
otherwise agrees in Bank's absolute and sole discretion:

    7.1 Corporate,  Limited Liability Company, and Partnership Restrictions.  If
Borrower, or any Subsidiary, is a corporation, a limited liability company, or a
partnership,  Borrower shall not and,  except for sales of stock in the Carlsbad
Subsidiary, shall not permit any Subsidiary to, issue any capital stock or other
securities of or any limited liability company interest or partnership  interest
in Borrower,  or any Subsidiary,  or grant any option (except in connection with
employee stock option plans), right-of-first-refusal, warrant, or other right to
purchase  any capital  stock or other  securities  of or any  limited  liability
company interest or partnership interest in Borrower or any Subsidiary. Borrower
shall not be dissolved or liquidated  and shall not permit any  Subsidiary to be
dissolved or liquidated. Borrower shall not, and shall not permit any Subsidiary
to,  amend,  modify,  restate,  supplement,  or  terminate  its  certificate  of
incorporation or bylaws, its limited liability company operating  agreement,  or
its partnership agreement, as the case may be. Borrower shall not, and shall not
permit any Subsidiary to,  reorganize  itself or consolidate  with or merge into
any  other  corporation  or  permit  any other  corporation  to be  merged  into
Borrower.  Any  provision of this  Section 7.1 to the contrary  notwithstanding,
this  Section 7.1 shall not  restrict or limit the issuance of Common Stock that
is  authorized  but unissued as of the date hereof or held in treasury as of the
date  hereof if and to the  extent  such  issuance  is made in  satisfaction  of
Borrower's  obligation to permit  conversion of the Convertible  Notes to Common
Stock pursuant to the terms of such notes.  Provisions of this  Agreement  other
than this Section 7.1 that appear to  contemplate or refer to sales or issuances
of capital stock or other securities,  but do not expressly authorize such sales
or  issuances,  shall not be deemed to be  consent  of Bank to any such sales or
issuances.

    7.2 Change in or Reacquisition of Ownership Interests in Borrower.  Borrower
will  not  suffer  to  occur  or  exist,   whether   occurring   voluntarily  or
involuntarily,  after  the date of this  Agreement  any  change  in the legal or
beneficial ownership of any capital stock of any Subsidiary (except for sales of
stock in the Carlsbad Subsidiary),  without the prior written consent of Bank in
its absolute and sole discretion.

    7.3 Name, Fiscal Year,  Accounting Method,  and Lines of Business.  Borrower
shall not change its name, fiscal year, or method of accounting.  Borrower shall
not directly or  indirectly,  engage in any  business  other than the line(s) of
business in which Borrower is engaged on the date of this Agreement, discontinue
any existing  line(s) of business,  or  substantially  alter its method of doing
business.

    7.4 Acquisition of All or Substantially All Assets.  Borrower shall not, and
shall not permit any Subsidiary to, acquire by purchase, lease, or otherwise all
or substantially all the assets of any other Person.



<PAGE>



    7.5 Limitation on Debt.

         7.5.1 General  Prohibition.  Borrower will not, and will not permit any
of its Subsidiaries to, directly or indirectly,  Incur any Debt except Permitted
Debt.  No  Permitted  Debt  shall  contain  any terms or  conditions  that would
conflict  with or be  violated  by any of  Bank's  rights  hereunder,  including
without limitations, Bank's rights pursuant to Section 8 hereof.

         7.5.2  Additional Debt Allowed.  Notwithstanding  Section 7.5.1 hereof,
and subject to the immediately succeeding paragraph, Borrower may Incur Debt if,
at the time such Debt is so Incurred  and after  giving  effect  thereto and the
application  of the  proceeds  therefrom,  each of the  following  is true:  (i)
Borrower has a Coverage  Ratio of not less than 2.2 to 1.0;  (ii) Borrower is in
compliance  with  Section 6.12 hereof and (iii) no Event of Default or Unmatured
Event of Default has occurred.

         Borrower  shall not  Incur any Debt  (other  than the  Obligations  and
Permitted  Debt) that is pari passu with the Public Notes or the  Obligations or
requires  any  principal  payment,  redemption  payment or sinking  fund payment
thereon,  in whole  or in  part,  to be made  prior  to or at the  final  stated
maturity of the Public Notes or the Obligations;  provided that entering into an
agreement that requires  Borrower to make an offer to purchase  outstanding Debt
upon the  occurrence  of  certain  specified  events  shall  not be deemed to be
restricted by this paragraph.

         For purposes of this Section 7.5, any waiver, extension or continuation
of any or all mandatory prepayments or installment payments or the maturity date
of any of the Debt  Incurred  pursuant  to this  Section  7.5 shall not be or be
deemed to be the Incurrence of Debt by Borrower.

    7.6 Limitations on Liens and  Encumbrances.  Borrower will not, and will not
permit any of its Subsidiaries to, directly or indirectly, create, incur, assume
or permit to exist any Lien or Encumbrance upon or with respect to any assets of
Borrower or any such Subsidiary,  whether now owned or hereafter acquired, or on
any income or profits therefrom;  provided that the foregoing shall not prohibit
Permitted Exceptions.

    7.7 Limitations on Sales,  Transfers,  etc.  Borrower will not,  directly or
indirectly,  and will not  permit  any of its  Subsidiaries  to,  sell,  assign,
transfer or otherwise  dispose of any Capital  Stock of any  Subsidiary or sell,
assign,  transfer  or  otherwise  dispose  of  any  assets  of  Borrower  or any
Subsidiary  except  for (i)  sales  or  issuance  of stock  expressly  permitted
pursuant to Section 7.1 hereof,  (ii) sales of assets in the ordinary  course of
business  of any  Subsidiary,  and (iii)  sales to  Borrower  or a  wholly-owned
Subsidiary  of  Borrower  (except  as such sales may be  prohibited  by the next
sentence).  Borrower  will not,  directly  or  indirectly,  permit the  Carlsbad
subsidiary to sell, assign, transfer or otherwise dispose of all or a portion of
the  Carlsbad  Property to Borrower or any of its  Subsidiaries  (other than the
Carlsbad Subsidiary).

    7.8 Limitation on Operating Losses. Borrower shall not cause or permit
(i)  Borrower's  Consolidated  Net  Income  to be less  than zero in each of two
consecutive fiscal quarters, and (ii) Borrower's Consolidated Net Income to be a
loss of greater  than  $2,500,000  in any  fiscal  quarter.  For the  purpose of
determining  Consolidated Net Income in this Section 7.8,  Borrower shall not be
required to include losses to the extent  resulting from  adjustments to the net
realizable value of assets required pursuant to GAAP.

    7.9  Limitation  on  Restricted  Payments.  Borrower  will not, and will not
permit any of its Subsidiaries  to, directly or indirectly,  make any Restricted
Payment, if, after giving effect thereto:

         (a) an Event of Default  or an  Unmatured  Event of Default  shall have
    occurred and be continuing, or

         (b) the aggregate  amount of all Restricted  Payments (giving effect to
    Restricted  Payments  that are Credit  Extensions/Contributions  only to the
    extent then  outstanding)  made by Borrower and its Subsidiaries (the amount
    expended or  distributed  for such  purposes,  if other than in cash,  to be
    determined  in good faith by the board of directors  of  Borrower)  from and
    after the date hereof shall exceed the sum of:

              (i)  the  aggregate  of 50%  of the  Consolidated  Net  Income  of
         Borrower  accrued  for the  period  (taken  as one  accounting  period)
         commencing  with February 1, 1993 to and including the first full month
         ended  immediately  prior to the date of such  calculation  (or, in the
         event  Consolidated  Net Income is a  deficit,  then minus 100% of such
         deficit),

              (ii) the aggregate net cash proceeds  received by Borrower for the
         period (taken as one  accounting  period)  commencing  with February 1,
         1993 to and including the first full month ended  immediately  prior to
         the date of such calculation from the issuance or sale (other than to a
         Subsidiary  of  Borrower) of its Capital  Stock (other than  Redeemable
         Stock),  including the principal  amount of any  Subordinated  Notes or
         other  convertible  securities  issued for cash that are  converted  to
         Capital Stock from and after the date of this  Agreement,  and options,
         warrants  and  rights  to  purchase  its  Capital   Stock  (other  than
         Redeemable Stock),

              (iii)  amounts  received by  Borrower  or any of its  Subsidiaries
         representing  a return of  capital  or Credit  Extensions/Contributions
         made to the Great Singing Hills joint venture  outstanding  on the date
         of the Indenture and

              (iv) $8,780,953.

The foregoing clauses (a) and (b) will not prevent (i) Permitted Payments,  (ii)
the payment of any dividend  within 60 days after the date of its declaration if
such dividend could have been made on the date of its  declaration in compliance
with the foregoing provisions,  and (iii) the repurchase or redemption of shares
of Capital  Stock from any  officer,  director  or  employee  of Borrower or its
Subsidiaries  whose  employment  has been  terminated  or who has died or become
disabled in an aggregate amount not to exceed $500,000 per annum;  provided that
amounts paid pursuant to clause (iii) shall reduce amounts  available for future
Restricted Payments.

8. SECURITY.

    8.1 Bank's Right to Demand  Security.  Upon the  occurrence  of any Event of
Default, Bank shall have all of the rights and remedies provided pursuant to the
Note,  the other  Loan  Documents  and  applicable  law.  Without  limiting  the
foregoing, upon the occurrence of an Event of Default resulting from a violation
of the covenants set forth in Sections 6.12.1. 6.12.2, 6.12.3, 6.13. 6.14 or 7.8
hereof  or  the  Events  of  Default  set  forth  in  paragraphs  9 or 13 in the
definition  of such  term in the  Note,  Bank  may,  in its  sole  and  absolute
discretion,  and in  addition  to its  other  rights  and  remedies,  demand  (a
"Security Demand") and accept Collateral as security for the Obligations,  which
security shall be on such terms and conditions as Bank may elect in its sole and
absolute  discretion,  and Borrower  shall provide such security and comply with
such requirements,  subject only to the limitation on such security set forth in
the  definition  of "Permitted  Liens" in the  Indenture.  Without  limiting the
foregoing, the terms and conditions upon which Bank will require and accept such
Collateral may include the following:

         8.1.1 Type of  Collateral.  Any such  Collateral  shall consist of real
property and improvements  owned by Borrower or a Subsidiary of Borrower and not
subject to Liens and Encumbrances  (except as approved by Bank). Within five (5)
Business Days after the giving of a Security Demand, Borrower shall provide Bank
with a listing of all such real  property and  improvements  and Bank shall have
the right to select  the  Collateral  from such list in the  following  order of
preference (i) homes under  construction  located in the  metropolitan  Phoenix,
Arizona  area,  (ii)  improved  single  family lots located in the  metropolitan
Phoenix,  Arizona area, (iii) lots under development located in the metropolitan
Phoenix,  Arizona area,  (iv) vacant land located in the  metropolitan  Phoenix,
Arizona area,  (v) real estate  located  elsewhere in Arizona,  (vi) real estate
located in Colorado, and (vii) real estate located in California.  Except as set
forth in Section  8.1,  Bank shall be  entitled  to select the  quantity of such
property to be provided as Collateral.

         8.1.2  Appraisals.  Bank shall  receive and approve such  appraisals or
other evidence of the value of such property as Bank may require in its sole and
absolute discretion.

         8.1.3 Environmental  Questionnaire.  An environmental questionnaire and
disclosure  statement  completed  and signed by  Borrower  and CHI and/or  CHICC
covering the current and former condition and uses of such property and adjacent
property,  and,  if  required  by  Bank,  followed  by such  environmental  site
assessments  and  investigations  that Bank my  require,  all of which  shall be
acceptable to Bank in its sole and absolute discretion.

         8.1.4 Security Documents.  Borrower and such Subsidiaries shall execute
such  deeds of trust,  security  agreements  and other  security  documents  and
instruments as Bank may require in its sole and absolute discretion.

         8.1.5 Other Documents.  Borrower and such  Subsidiaries  shall executed
and deliver such other documents and  instruments,  and perform such other acts,
as Bank may require in its sole and absolute discretion.

         8.1.6 Title Insurance. Bank shall receive such title insurance policies
and endorsements thereto with respect to such deeds of trust as Bank may require
in its sole and  absolute  discretion,  which  title  insurance  policies  shall
contain only those exceptions and limitations as shall be acceptable to Bank.

         8.1.7 No  Defaults.  No other  Event of Default or  Unmatured  Event of
Default shall have occurred and be continuing.

         8.1.8 Attorney  Opinions.  Bank shall receive such opinions of in-house
counsel for  Borrower as Bank may request in its sole and  absolute  discretion,
including, without limitation,  opinions that the execution and delivery of such
deeds of trust and other security documents does not conflict with,  violate, or
cause a default  under,  the terms and  conditions of any  agreement,  document,
instrument,  or indenture to which  Borrower or any  Subsidiary is a party or by
which it is bound or affected,  and that the  transfer of such  security to Bank
does not  constitute  a  voidable  preference  or  fraudulent  conveyance  under
applicable state or federal law.

         8.1.9 Cost and  Expenses.  Borrower  shall pay all of Bank's  costs and
expenses  in  connection  with  the  foregoing  including,  without  limitation,
appraisal fees,  appraisal  review fees,  recording fees,  title insurance fees,
escrow fees, and attorneys' fees.

    8.2 Effect of  Security.  Borrower's  compliance  with Section 8.1 shall not
waive any Event of Default or Unmatured  Event of Default or otherwise be deemed
to modify or release  any of  Borrower's  obligations  hereunder,  except to the
extent such waiver,  release or modification is expressly set forth in a written
agreement  signed by Bank and in form and  content  satisfactory  to Bank in its
sole and absolute discretion.

9. BANK'S  OBLIGATIONS  TO BORROWER  ONLY.  The  obligations  of Bank under this
Agreement  are for the benefit of Borrower  only. No other Person shall have any
rights hereunder or be a third-party beneficiary hereof.

10.  PROVISIONS IN THE NOTE GOVERN THIS AGREEMENT.  This Agreement is subject to
certain  terms and  provisions  in the Note,  to which  reference  is made for a
statement of such terms and provisions.

11.  COUNTERPART  EXECUTION.  This  Agreement  may be  executed  in one or  more
counterparts,  each of  which  shall  be  deemed  an  original  and all of which
together  shall  constitute one and the same  document.  Signature  pages may be
detached from the  counterparts  and attached to a single copy of this Agreement
to physically form one document.

12. ARBITRATION.

         (a)  Binding  Arbitration.  Bank and  Borrower  hereby  agree  that all
    controversies  and  claims  arising  directly  or  indirectly  out  of  this
    Agreement and the Loan Documents,  shall at the written request of any party
    be arbitrated  pursuant to the applicable rules of the American  Arbitration
    Association.  The arbitration shall occur in the State of Arizona.  Judgment
    upon any award  rendered  by the  arbitrator(s)  may be entered in any court
    having  jurisdiction.  The  Federal  Arbitration  Act  shall  apply  to  the
    construction and interpretation of this arbitration agreement.

         (b)  Arbitration  Panel.  A single  arbitrator  shall have the power to
    render a maximum award of one hundred thousand dollars. When any party files
    a claim in excess of this amount, the arbitration  decision shall be made by
    the majority vote of three  arbitrators.  No arbitrator shall have the power
    to restrain any act of any party.

         (c) Provisional  Remedies:  Self Help And Foreclosure.  No provision of
    subparagraph  (a) shall limit the right of any party to  exercise  self help
    remedies, to foreclose against any real or personal property collateral,  or
    to obtain any provisional or ancillary  remedies  (including but not limited
    to  injunctive  relief or the  appointment  off a receiver)  from a court of
    competent  jurisdiction.  At Bank's option, it may enforce its right under a
    mortgage  by  judicial  foreclosure,  and  under a deed of trust  either  by
    exercise of power of sale or by judicial  foreclosure.  The  institution and
    maintenance of any remedy  permitted  above shall not constitute a waiver of
    the rights to submit any controversy or claim to arbitration. The statute of
    limitations,  estoppel,  waiver,  laches,  and similar doctrines which would
    otherwise be applicable in an action  brought by a party shall be applicable
    in any arbitration proceeding.

13.  AMENDED AND RESTATED.  This  Agreement  amends and restates in its entirety
that Loan  Agreement  between  Borrower and Bank dated  February  25,  1993,  as
thereafter  amended,  providing  for a loan by Bank to Borrower in the amount of
$10,000,000.00.  All  outstanding  advances under said loan  agreement  shall be
deemed outstanding Advances under this Agreement and the Note.

DATED as of the date first above stated.

                                     BANK ONE, ARIZONA, NA, a national 
                                     banking association formerly known
                                     as THE VALLEY NATIONAL BANK OF    
                                     ARIZONA                           
                                     


                                     By: /s/ Rhonda R. Williams
                                         --------------------------------------
                                     Name:   Rhonda R. Williams
                                          -------------------------------------
                                     Title:  Assistant Vice President
                                           ------------------------------------

                                     
                                     CONTINENTAL HOMES HOLDING CORP., a 
                                     Delaware corporation               
                                     

                                     By: /s/ Kenda B. Gonzales
                                         --------------------------------------
                                     Name:   Kenda B. Gonzales
                                           ------------------------------------
                                     Title:  Senior Vice President
                                            -----------------------------------