AMENDED AND RESTATED
 
                            CERTIFICATE OF INCORPORATION
                                         OF
                        CALIFORNIA COASTAL COMMUNITIES, INC.
 
     California Coastal Communities, Inc., a corporation organized and existing
under the laws of the State of Delaware (the "Corporation"), hereby certifies as
follows:
 
     1.   The name of the Corporation is California Coastal Communities, Inc.
The date of the filing of its original certificate of incorporation with the
Secretary of State of the State of Delaware was September 20, 1988.  The name
under which the Corporation filed its original certificate of incorporation was
Henley Newco Inc.
 
     2.   This Amended and Restated Certificate of Incorporation (the
"Certificate") amends, restates and integrates the provisions of the amended and
restated certificate of incorporation of the Corporation, as heretofore amended.
This Certificate was duly adopted by the Board of Directors of the Corporation
in accordance with the provisions of Sections 242 and 245 of the Delaware
General Corporation Law, as amended from time to time (the "DGCL"), and was duly
adopted by the stockholders of the Corporation in accordance with the applicable
provisions of Sections 228, 242 and 245 of the DGCL.
 
     3.   The text of the amended and restated certificate of incorporation of
the Corporation, as amended to date, is hereby amended and restated in its
entirety to provide as herein set forth in full.
 
          FIRST:  The name of the Corporation is California Coastal
     Communities, Inc.
 
          SECOND:  The address of the registered office of the Corporation
     in the State of Delaware is 1013 Centre Road, in the City of
     Wilmington, County of Newcastle.  The name of the Corporation's
     registered agent at that address is Corporation Service Company.
 
          THIRD:   The purpose of the Corporation is to engage in any
     lawful act or activity for which a corporation may be organized under
     the DGCL.
 
          FOURTH:  The Corporation shall have the authority to issue a
     total of 36 million shares of stock, to be divided into two classes.
     The Corporation shall have authority to issue18 million shares of
     Common Stock, par value $0.05 per share (the "Common Stock"), and 18
     million shares of Excess Stock, par value $0.05 per share (the "Excess
     Stock").
 
          FIFTH:
 
 
                                          1
 
<PAGE>
 
          (A)   COMMON STOCK.  The designations and the powers, preferences
     and rights, and qualifications, limitations or restrictions thereof,
     of each share of Common Stock shall be as follows:
 
               1.     Identical Rights.  All shares of Common Stock shall
     be identical and shall entitle the holders thereof to the same rights
     and privileges.
 
               2.     Voting Rights.  On all matters submitted to the
     Corporation's stockholders, the holders of Common Stock shall be
     entitled to one vote per share.
 
               3.     Dividend Rights.  When and as dividends or other
     distributions are declared, whether in cash, in property or in
     securities of the Corporation, the holders of shares of Common Stock
     shall be entitled to share equally, share for share, in such dividends
     or distributions.
 
               4.     Stock Splits.  If the Corporation shall in any manner
     subdivide, split or combine the outstanding shares of Common Stock,
     each share of outstanding Common Stock shall be proportionately
     subdivided, split or combined.
 
          (B)  RESTRICTIONS ON OWNERSHIP AND TRANSFER OF COMMON STOCK.
 
               1.   DEFINITIONS.  For purposes of this section (B) of
     Article FIFTH and for purposes of Article SIXTH, the following terms
     shall have the meanings set forth below:
 
                    (a)    The term "1934 Act" shall mean the Securities
     Exchange Act of 1934, as amended.
 
                    (b)    The terms "Affiliate" and "Associate" shall have
     the meanings ascribed to them in Rule 12b-2 of the General Rules and
     Regulations under the 1934 Act.
 
                    (c)    The terms "acquire", "acquisition" or
     "acquiring" with respect to the acquisition of any security of the
     Corporation shall refer to the acquisition of such security by any
     means whatsoever, including without limitation, an acquisition of such
     security by operation of law, by will or by intestacy.
 
                    (d)    The term "Code" means the Internal Revenue Code
     of 1986, as amended.
 
                    (e)    The term "Common Stock" means all Common Stock
     of the Corporation and any other securities issued by the Corporation
     (other than Excess Stock or Rights) which are treated as stock for
     purposes of Section 382 of the Code.
 
 
                                          2
<PAGE>
 
                    (f)    The term "Excess Shares" shall have the meaning
     ascribed to it in paragraph (A)(1) of Article SIXTH.
 
                    (g)    The term "5% Limitation" shall mean the
     limitations on ownership of Common Stock or Rights as imposed by
     paragraph (B)(2) of this Article FIFTH.
 
                    (h)    The term "5% Shareholder" shall have the meaning
     ascribed to it in paragraph (B)(2) of this Article FIFTH.
 
                    (i)    The term "Net Operating Loss Carryovers" means
     the net operating loss carryovers to which the Corporation is entitled
     from time to time under the Code.
 
                    (j)    The terms "own", "owned", "ownership" or
     "owning" refer to the ownership of securities within the meaning of
     Section 382 of the Code after taking into account the attribution
     rules of Section 382(1)(3) of the Code and the regulations promulgated
     thereunder (except insofar as such attribution would be inconsistent
     with provisions of this Article FIFTH or of Article SIXTH relating to
     the Rights).
 
                    (k)    The term "Permitted Transferee" shall have the
     meaning ascribed to it in paragraph (H) of Article SIXTH.
 
                    (l)    The term "Person" shall mean any individual,
     firm, corporation, partnership, joint venture or other entity and
     shall include any group comprised of such Person and any other Person
     with whom such Person or any Affiliate or Associate of such Person has
     any agreement, arrangement or understanding, directly or indirectly,
     for the purpose of acquiring, holding, voting or disposing of Common
     Stock or Rights, and any other Person who is such a member of such
     group, but does not include any underwriter which participates in an
     underwritten public offering of the Corporation's Common Stock or
     Rights, provided that such underwriter shall not own such Common Stock
     or Rights on the last day of any fiscal year.
 
                    (m)    The term "Purported Owner" shall have the
     meaning ascribed to it in Section (A)(1) of Article SIXTH.
 
                    (n)    The term "Purported Owner's Transferor" shall
     have the meaning ascribed to it in Section (D) of Article SIXTH.
 
                    (o)    The term "Restriction Termination Date" shall
     have the meaning ascribed to it in Section (B)(2) of this Article
     FIFTH.
 
 
                                          3
<PAGE>
 
                    (p)    The term "Rights" shall mean any securities
     issued by the Corporation, or any securities issuable by the
     Corporation in respect of issued securities, which are convertible
     into, or which include the right to acquire, shares of Common Stock,
     whether or not the right to make such conversion or acquisition is
     subject to any contingencies, including, without limitation, warrants,
     options and convertible debt instruments.
 
                    (q)    The term "Share Trustee" shall mean the trustee
     of the Excess Stock nominated and appointed by the Board of Directors
     from time to time.
 
                    (r)    The term "Testing Date" shall mean the date(s)
     on which the Corporation is required by Section 382 of the Code to
     make a determination of whether an ownership change has occurred.
 
                    (s)    The term "Testing Period" shall mean the
     three-year period ending on any Testing Date.
 
                    (t)    The term "Transfer Agent" shall mean the
     transfer agent with respect to the Common Stock nominated and
     appointed by the Board of Directors from time to time.
 
                    (u)    The term "Trust" shall have the meaning ascribed
     to it in Section (A)(1)(b) of Article SIXTH.
 
               2.  At no time on or before the earlier of (i) the date on
     which the Corporation has used all its existing Net Operating Loss
     Carryovers and (ii) December 31, 2012 (the earlier to occur of such
     dates being the "Restriction Termination Date"), shall (1) any Person
     owning Common Stock or Rights which, in the aggregate, and assuming
     conversion of such Rights into the maximum number of shares of Common
     Stock issuable in respect of such Rights regardless of contingencies,
     equal less than 5% of the fair market value of the sum total of the
     outstanding Common Stock plus the shares of Common Stock deemed to be
     outstanding by reason of the assumed conversion of such Rights owned
     by such Person, acquire (whether voluntarily or involuntarily) any
     shares of Common Stock or Rights which, together with the shares of
     Common Stock or Rights owned by such Person, if any, would increase
     such percentage ownership interest of such Person to 5% or more of the
     fair market value of the sum total of the then outstanding Common
     Stock plus the shares of Common Stock deemed to be outstanding by
     reason of the assumed conversion of such Rights owned by such Person,
     or (2) any Person who owns, or has owned at any time during the
     Testing Period, Common Stock or Rights which, in the aggregate, and
     assuming conversion of such Rights into the maximum number of shares
     of Common Stock issuable in respect of such Rights regardless of
     contingencies, equal or exceed 5% of the fair market value of the sum
     total of the then outstanding Common Stock
 
 
                                          4
<PAGE>
 
     plus the shares of Common Stock deemed to be outstanding by reason of the
     assumed conversion of such Rights then owned by such Person, increase the
     ownership interest held by such Person in Common Stock or Rights (any such
     Person who is or becomes the owner of such percentage being a "5%
     Shareholder"); unless:
 
                    (a)    The increase in ownership is due to the receipt
     or exercise by any Person of Rights which were received by such Person
     pursuant to the issuance of Rights by the Corporation; provided,
     however, that the Corporation shall have the right to prevent the
     exercise of Rights by any Person who would become a 5% Shareholder or
     by any 5% Shareholder whose ownership interest would increase, as the
     result of such exercise; or
 
                    (b)    Such acquisition in each instance does not
     jeopardize the Corporation's ability to preserve and use its Net
     Operating Loss Carryovers as determined in a finding made in writing
     by the Board of Directors or a duly authorized committee thereof and
     filed with the Secretary of the Corporation; or
 
                    (c)    Such acquisition is pursuant to any transaction,
     including, but not limited to, a merger or consolidation, in which
     holders of all outstanding shares of Common Stock receive, or are
     offered the opportunity to receive, cash or other consideration for
     all such shares, and upon the consummation of which the acquiror will
     own at least a majority of the outstanding shares of Common Stock.
 
     Notwithstanding the foregoing, (i) the Corporation pursuant to
     regulations and procedures promulgated pursuant to paragraph (Q) of
     Article SIXTH may identify additional 5% Shareholders as may be
     required by Section 382 of the Code and (ii) the Corporation may make
     appropriate adjustments to the calculations required by Section 382 of
     the Code.  The Corporation and the Board of Directors shall be fully
     protected in relying in good faith upon the information, opinions,
     reports or statements of the chief executive officer or the chief
     financial officer of the Corporation or of the Corporation's legal
     counsel, independent auditors, Transfer Agent, investment bankers, and
     other employees and agents in making the determination and finding
     contemplated by this paragraph (B)(2) of Article FIFTH.
 
               3.   To the extent permitted by regulations promulgated
     under Section 382 of the Code, in determining whether any Person has
     become a Purported Owner of Excess Shares:
 
                    (a)    The Corporation may rely on the existence or
     absence, as of the Testing Date, of filings on Schedules 13D and 13G
     as required by Rule 13d-1 of the 1934 Act to identify any person who
     is a 5% Shareholder, and the existence or absence of any amendments to
     Schedule 13D and 13G
 
 
                                          5
 
<PAGE>
 
     showing any material  increase or decrease in the percentage of Common
     Stock or Rights owned by such Person, as required by Rule 13d-2 of the 1934
     Act.
 
     The Board of Directors shall be fully protected in relying in good
     faith on the items set forth in subparagraph (a) of this paragraph
     (3), together with such other items or sources of information as may
     be required from time to time by the Code, to determine whether any
     Person has become a Purported Owner of Excess Shares.
 
          SIXTH: EXCESS STOCK.
 
          (A)  CONVERSION INTO EXCESS STOCK.
 
               1.  The transfer of any shares of Common Stock or Rights in
     violation of Section (B) of Article FIFTH is prohibited and shall be
     null and void.  If, notwithstanding such prohibition, a Person shall,
     voluntarily or involuntarily, purportedly become or attempt to become
     the purported owner (the "Purported Owner") of shares of Common Stock
     or Rights, or both, in excess of the 5% Limitation (the number of
     shares of Common Stock or Rights, including shares of Common Stock
     issued in respect of Rights, so exceeding the 5% Limitation being
     herein the "Excess Shares"), then:
 
                    (a)    the Purported Owner shall not obtain any rights
     in and to the Excess Shares, and the purported transfer of the Excess
     Shares to the Purported Owner shall not be recognized by the Transfer
     Agent;
 
                    (b)    the Excess Shares shall be automatically
     converted into an equal number of shares of Excess Stock and
     transferred to a trust (the "Trust") of which the Share Trustee shall
     be the trustee in accordance with Section (D) of this Article SIXTH;
 
                    (c)    the Purported Owner shall submit such number of
     Excess Shares to the Corporation for registration of the automatically
     converted shares of Excess Stock in the name of the Share Trustee.
 
     Such conversion into Excess Stock and transfer to a Trust shall be
     effective as of the close of trading on the trading day prior to the
     date of the purported transfer which led to the 5% Limitation.
 
               2.   Upon the occurrence of such a conversion of shares of
     Common Stock into an equal number of shares of Excess Stock, such
     shares of Common Stock shall be automatically retired and canceled,
     without any action required by the Board of Directors of the
     Corporation, and shall thereupon be restored to the status of
     authorized but unissued shares of the particular class or
 
 
                                          6
<PAGE>
 
     series of stock from which such Excess Stock was converted and may be
     reissued by the Corporation as that particular class or series of stock.
 
          (B)  REMEDIES FOR BREACH.  If the Corporation, or its designees,
     shall at any time determine in good faith that a purported transfer
     has taken place in violation of Section (B) of Article FIFTH or that a
     Person intends to acquire or has attempted to acquire ownership of any
     shares of Common Stock in violation of Section (B) of this Article
     FIFTH, the Corporation shall take such action, or direct the Transfer
     Agent to take such action, as it deems advisable to refuse to give
     effect to or to prevent such transfer or acquisition, including, but
     not limited to, refusing to give effect to such transfer on the stock
     transfer books of the Corporation or instituting proceedings to enjoin
     such transfer or acquisition.
 
          (C)  NOTICE OF RESTRICTED TRANSFER.  Any Person who acquires or
     attempts to acquire shares of Common Stock in excess of the 5%
     Limitation, or any Person who owns shares of Common Stock that were
     converted into shares of Excess Stock and transferred to a Trust
     pursuant to Sections (A) and (D) of this Article SIXTH, shall
     immediately give written notice to the Corporation of such event and
     shall provide to the Corporation such other information as the
     Corporation may request in order to determine the effect, if any, of
     such purported transfer on the preservation and usage of the Net
     Operating Loss Carryovers.
 
          (D)  OWNERSHIP IN TRUST. Upon any purported transfer that results
     in Excess Stock pursuant to Section (A) of this Article SIXTH, such
     Excess Stock shall be automatically transferred to the Trust to be
     held for the exclusive benefit of the transferor of the Excess Shares
     to the Purported Owner (the "Purported Owner's Transferor").  Any
     conversion of Excess Shares into shares of Excess Stock and transfer to
     the Trust shall be effective as of the close of trading on the trading
     day prior to the date of the purported transfer.  Shares of Excess
     Stock so held in trust shall remain issued and outstanding shares of
     stock of the Corporation.
 
          (E)  DIVIDEND RIGHTS.  Each share of Excess Stock shall be
     entitled to the same dividends and distributions (as to both timing
     and amount) as may be declared by the Board of Directors upon shares
     of the class or series of Common Stock from which such Excess Stock
     was converted.  The Share Trustee, as record holder of the shares of
     Excess Stock, shall be entitled to receive all dividends and
     distributions and shall hold all such dividends or distributions in
     trust for the benefit of the Purported Owner's Transferor.  The
     Purported Owner with respect to such shares of Excess Stock shall
     repay to the Trust the amount of any dividends or distributions
     received by it (i) that are attributable to any shares of Common Stock
     that have been converted into shares of Excess Stock and (ii) the
     record date of which was on or after the date that such shares were
     converted into shares of Excess Stock.  The Corporation shall take all
     measures that it determines reasonably necessary to recover the amount
     of any such dividend or distribution paid to a Purported Owner,
     including, if necessary, withholding any portion of
 
 
                                          7
 
<PAGE>
 
     future dividends or distributions payable on shares of Common Stock owned
     by the Person who, but for the provisions of Article FIFTH and this Article
     SIXTH, would own the shares of Common Stock that were converted into shares
     of Excess Stock; and, as soon as reasonably practicable following the
     Corporation's receipt or withholding thereof, shall pay over to the Trust
     for the benefit of the Purported Owner's Transferor the dividends so
     received or withheld, as the case may be.
 
          (F)  RIGHTS UPON LIQUIDATION.  In the event of any voluntary or
     involuntary liquidation of, or winding up of, or any distribution of
     the assets of, the Corporation, each holder of shares of Excess Stock
     shall be entitled to receive, ratably with each other holder of shares
     of Common Stock of the same class or series from which the Common
     Stock was converted, that portion of the assets of the Corporation
     that is available for distribution to the holders of such class or
     series of Common Stock.  The Trust shall distribute to the Purported
     Owner the amounts received upon such liquidation, dissolution, or
     winding up, or distribution; provided, however, that the Purported
     Owner shall not be entitled to receive amounts in excess of, in the
     case of a purported transfer in which the Purported Owner gave value
     for shares of Common Stock and which transfer resulted in the
     conversion of the shares into shares of Excess Stock, the price per
     share, if any, such Purported Owner paid for the shares of Common
     Stock.  Any remaining amount in such Trust shall be distributed to the
     Purported Owner's Transferor.
 
          (G)  VOTING RIGHTS.  Each share of Excess Stock shall entitle the
     holder to the number of votes the holder would have, if such share of
     Excess Stock was a share of Common Stock of the same class or series
     from which such Excess Stock was converted, on all matters submitted
     to a vote at any meeting of stockholders.  The holders of shares of
     Excess Stock converted from the same class or series of Common Stock
     shall vote together with the holders of such Common Stock as a single
     class on all such matters.  The Share Trustee, as record holder of the
     Excess Stock, shall be entitled to vote all shares of Excess Stock.
     Any vote by a Purported Owner as a purported holder of shares of
     Common Stock prior to the discovery by the Corporation that the shares
     of Common Stock have been converted into shares of Excess Stock shall,
     subject to applicable law, be rescinded and shall be void AB INITIO
     with respect to such shares of Excess Stock, and the Purported Owner
     shall be deemed to have given, as of the close of trading on the
     trading day prior to the date of the purported transfer that results
     in the conversion of the shares of Common Stock into shares of Excess
     Stock and the transfer of such shares to the Trust pursuant to
     Sections (A) and (D) of this Article SIXTH, an irrevocable proxy to
     the Share Trustee to vote the shares of Excess Stock in the manner in
     which the Share Trustee, in its sole and absolute discretion, desires.
 
          (H)  DESIGNATION OF PERMITTED TRANSFEREE.
 
 
                                          8
 
<PAGE>
 
               1.   The Share Trustee shall have the exclusive and absolute
     right to designate one or more persons whose acquisition of any and
     all of the Excess Stock will not violate the 5% Limitation (the
     "Permitted Transferees") if the Corporation fails to exercise its
     option with respect to such shares pursuant to Section (J) hereof
     within the time period set forth therein.  As soon as practicable
     after the transfer of Excess Stock to the Trust, but in an orderly
     fashion so as not to materially adversely affect the market price of
     the shares of Common Stock, the Share Trustee shall designate any one
     or more Persons as Permitted Transferees; provided, however, that (i)
     the Permitted Transferee so designated purchases for valuable
     consideration (whether in a public or private sale) the shares of
     Excess Stock, and (ii) the Permitted Transferee so designated may
     acquire such shares of Excess Stock without violating any of the
     restrictions set forth in Section (B) of Article FIFTH or Section (A)
     of this Article SIXTH and without such acquisition resulting in the
     conversion of the shares of Common Stock so acquired into shares of
     Excess Stock and the transfer of such shares to a Trust pursuant to
     Sections (A) and (D) of this Article SIXTH.
 
               2.   Upon the designation by the Share Trustee of a
     Permitted Transferee in accordance with the provisions of this Section
     (H), the Share Trustee shall cause to be transferred to the Permitted
     Transferee that number of shares of Excess Stock acquired by the
     Permitted Transferee.  Upon such transfer of the shares of Excess
     Stock to the Permitted Transferee, such shares of Excess Stock shall
     be automatically converted into an equal number of shares of Common
     Stock of the same class and series from which such Excess Stock was
     converted.  Upon the occurrence of such a conversion of shares of
     Excess Stock into an equal number of shares of Common Stock, such
     shares of Excess Stock shall be automatically retired and canceled,
     without any action required by the Board of Directors of the
     Corporation, and shall thereupon be restored to the status of
     authorized but unissued shares of Excess Stock and may be reissued by
     the Corporation as Excess Stock.
 
               3.   The Share Trustee shall (i) cause to be recorded on the
     stock transfer books of the Corporation that the Permitted Transferee
     is the holder of record of such number of shares of Common Stock, and
     (ii) distribute to the Purported Owners' Transferor any and all
     amounts held with respect to the shares of Excess Stock after making
     payment to the Purported Owner pursuant to Section (I) of this Article
     SIXTH.
 
               4.   If the transfer of shares of Excess Stock to a
     purported Permitted Transferee shall violate any of the transfer
     restrictions set forth in Section (B) of Article FIFTH or of this
     Article SIXTH, such transfer shall be void AB INITIO as to that number
     of shares of Excess Stock that cause the violation of any such
     restriction when such shares are converted into shares of Common Stock
     (as described in clause (2) above) and the purported Permitted
     Transferee shall be
 
                                          9
<PAGE>
 
     deemed to be a Purported Owner and shall acquire no rights in such shares
     of Excess Stock or Common Stock. Such shares of Common Stock shall be
     automatically re-converted into Excess Stock and transferred to the Trust
     from which they were originally transferred. Such conversion and transfer
     to the Trust shall be effective as of the close of trading on the trading
     day prior to the date of the transfer to the purported Permitted Transferee
     and the provisions of this Article SIXTH shall apply to such shares,
     including, without limitation, the provisions of Sections (H) through (J)
     with respect to any future Transfer of such shares by the Trust.
 
          (I)  COMPENSATION TO RECORD HOLDER OF SHARES OF COMMON STOCK THAT
     ARE CONVERTED INTO SHARES OF EXCESS STOCK.  Any Purported Owner shall
     be entitled (following discovery of the shares of Excess Stock and
     subsequent designation of the Permitted Transferee in accordance with
     Section (H) of this Article SIXTH or following the acceptance of the
     offer to purchase such shares in accordance with Section (J) of this
     Article SIXTH) to receive from the Share Trustee following the sale or
     other disposition of such shares of Excess Stock the lesser of (i) (a)
     in the case of a purported transfer in which the Purported Owner gave
     value for shares of Common Stock and which transfer resulted in the
     conversion of such shares into shares of Excess Stock, the price per
     share, if any, such Purported Owner paid for the shares of Common
     Stock and (b) in the case of a transfer in which the Purported Owner
     did not give value for such shares (E.G., if the shares were received
     through a gift or devise) and which transfer resulted in the
     conversion of such shares into shares of Excess Stock, the price per
     share equal to the market price on the date of such transfer or (ii)
     the price per share received by the Share Trustee from the sale or
     other disposition of such shares of Excess Stock in accordance with
     this Section (I) or Section (J) of this Article SIXTH.  Any amounts
     received by the Share Trustee in respect of such shares of Excess
     Stock and in excess of such amounts to be paid the Purported Owner
     pursuant to this Section (I) shall be distributed to the Purported
     Owner's Transferor in accordance with the provisions of Section (H) of
     this Article SIXTH.  Each Purported Owner's Transferor and Purported
     Owner shall waive any and all claims that it may have against the
     Share Trustee and the Trust arising out of the disposition of shares
     of Excess Stock, except for claims arising out of the gross negligence
     or willful misconduct of, or any failure to make payments in
     accordance with this Article SIXTH by, such Share Trustee or the
     Corporation.
 
          (J)  PURCHASE RIGHT IN EXCESS STOCK.  Shares of Excess Stock
     shall be deemed to have been offered for sale to the Corporation or
     its designee, at a price per share equal to the lesser of (i) the
     price per share in the transaction that created such shares of Excess
     Stock or (ii) the market price on the date the Corporation, or its
     designee, accepts such offer.  The Corporation shall have the right to
     accept such offer for a period of 60 days following the later of (a)
     the date of the purported transfer which results in such shares of
     Excess Stock or (b) the date on which the Corporation determines in
     good faith that a transfer resulting in shares
 
 
                                          10
<PAGE>
 
     of Excess Stock previously has occurred, if the Corporation does not
     receive a notice of such transfer pursuant to Section (C) of this Article
     SIXTH.
 
          (K)  PREEMPTIVE RIGHTS.  No holder of shares of Common Stock,
     Excess Stock or any other class or series of capital stock shall as
     such holder have any preemptive or preferential right to purchase or
     subscribe to (i) any shares of any class or series of capital stock of
     the Corporation, whether now or hereafter authorized, (ii) any
     warrants, rights or options to purchase any such capital stock, or
     (iii) any obligations convertible into any such capital stock or into
     warrants, rights or options to purchase any such capital stock.
 
          (L)  REMEDIES NOT LIMITED.  Nothing contained in this Article
     SIXTH shall limit the authority of the Corporation to take such other
     action as it deems necessary or advisable to protect the Corporation
     and the interests of its stockholders in connection with the
     preservation and usage of the Net Operating Loss Carryovers.
 
          (M)  AMBIGUITY.  In the case of an ambiguity in the application
     of any of the provisions of Article FIFTH or this Article SIXTH,
     including any definition contained in Article FIFTH, the Board of
     Directors shall have the power to determine the application of the
     provisions of Article FIFTH and Article SIXTH with respect to any
     situation based on the facts known to it.
 
          (N)  LEGEND.  Each certificate for shares of Common Stock shall
     bear the following legend:
 
               "The shares of California Coastal Communities, Inc.
          represented by this certificate are subject to restrictions
          in the  Amended and Restated Certificate of Incorporation of
          the corporation which, subject to certain exceptions,
          prohibit any Person owning Common Stock or Rights which, in
          the aggregate, and assuming conversion of such Rights into
          the maximum number of shares of Common Stock issuable in
          respect of such Rights regardless of contingencies, equal
          less than 5% of the fair market value of the sum total of
          the outstanding Common Stock plus the shares of Common Stock
          deemed to be outstanding by reason of the assumed conversion
          of such Rights owned by such Person, from acquiring (whether
          voluntarily or involuntarily) any shares of Common Stock or
          Rights which, together with the shares of Common Stock or
          Rights owned by such Person, if any, would increase such
          percentage ownership interest of such Person to 5% or more
          of the fair market value of the sum total of the then
          outstanding Common Stock plus the shares of Common Stock
          deemed to be outstanding by reason of the assumed conversion
          of such Rights owned by such Person, and prohibit any Person
          who
 
 
                                          11
<PAGE>
 
          owns, or has owned at any time during the Testing Period, Common Stock
          or Rights which, in the aggregate, and assuming conversion of such
          Rights into the maximum number of shares of Common Stock issuable in
          respect of such Rights regardless of contingencies, equal or exceed 5%
          of the fair market value of the sum total of the then outstanding
          Common Stock plus the shares of Common Stock deemed to be outstanding
          by reason of the assumed conversion of such Rights then owned by such
          Person from increasing the ownership interest held by such Person in
          Common Stock or Rights, and the holder of this certificate by his
          acceptance hereof consents to be bound by such restrictions.
 
               California Coastal Communities, Inc. will furnish without charge
          to each stockholder who so requests a copy of the relevant provisions
          of the Amended and Restated Certificate of Incorporation of the
          corporation, and a copy of the provisions setting forth the
          designations, preferences, privileges and rights of each class of
          stock or series thereof that the corporation is authorized to issue
          and the qualifications, limitations and restrictions of such
          preferences and/or rights.  Any such request may be addressed to the
          Secretary of the corporation."
 
          (O)  SEVERABILITY.  Each provision of Article FIFTH and Article
     SIXTH hereof shall be severable, and an adverse determination as to
     any such provision shall in no way affect the validity of any other
     provision.  If any provision of this Article FIFTH or of Article SIXTH
     or any application of any such provision is determined to be invalid
     by any federal or state court having jurisdiction over the issues, the
     validity of the remaining provisions shall not be affected and other
     application of such provision shall be affected only to the extent
     necessary to comply with the determination of such court.
 
          (P)  It is the purpose of Article FIFTH and Article SIXTH to help
     the Corporation attempt to preserve and use its Net Operating Loss
     Carryovers and to that end the Board of Directors is authorized to
     take such action, to the extent permitted by law and not inconsistent
     with Article FIFTH or Article SIXTH, as it may deem necessary or
     advisable to protect the Corporation or to carry out such purpose.
     However, nothing in Article FIFTH or Article SIXTH shall restrict the
     Corporation's ability to issue stock, within the meaning of Section
     382 of the Code, if, in the Board of Directors' sole discretion, the
     Corporation believes that such issuance would be in the best interest
     of the Corporation, notwithstanding the fact that such issuance may
     result in the limitation or disallowance of its Net Operating Loss
     Carryovers.
 
          (Q)  The Board of Directors may, to the extent permitted by law,
     from time to time establish, modify, amend or rescind, by contract,
     by-law or
 
 
                                          12
 
<PAGE>
 
     otherwise, plans, regulations and procedures not inconsistent with the
     express provisions of Article FIFTH and this Article SIXTH for determining
     whether any acquisition of Common Stock or Rights would jeopardize the
     Corporation's ability to preserve and use its Net Operating Loss
     Carryovers, and for the orderly application, administration and
     implementation of the provisions of Article FIFTH and this Article SIXTH.
     Such procedures and regulations shall be kept on file with the Secretary of
     the Corporation and with its Transfer Agent and shall be made available for
     inspection by the public and, upon request, shall be mailed to any holder
     of Common Stock or Rights of the Corporation.
 
          SEVENTH:  The duration of the Corporation is to be perpetual.
 
          EIGHTH:      (a)  The number of directors of the Corporation
     shall be determined from time to time in the manner described in the
     Bylaws.  Each director shall serve for a term ending at the next
     annual meeting following the meeting at which such director was
     elected, or on such later date as such director's successor shall have
     been elected and qualified.
 
                       (b)  Newly created directorships resulting from any
     increase in the number of directors and any vacancies on the Board of
     Directors resulting from death, resignation, disqualification, removal
     or other cause shall be filled by the affirmative vote of a majority
     of the remaining directors then in office, even if less than a quorum
     of the Board of Directors, or by a sole remaining director.  Any
     director elected in accordance with the preceding sentence shall hold
     office until the next annual meeting of stockholders and until such
     director's successor shall have been duly elected and qualified.  No
     decrease in the number of directors constituting the Board of
     Directors shall shorten the term of any incumbent director.
 
                       (c)  Any director may be removed from office, with
     or without cause, by the affirmative vote of the holders of a majority
     of the voting power of the then outstanding shares of capital stock of
     the Corporation entitled to vote generally in the election of
     directors (the "Voting Stock"), voting together as a single class.
 
          NINTH:     Special meetings of stockholders may be called either
     (i) by the Board of Directors or by the Chief Executive Officer
     pursuant to a resolution approved by a majority of the then authorized
     number of directors of the Corporation (as determined in accordance
     with the By-Laws) or (ii) by the holders of capital stock of the
     Corporation representing at least ten percent (10%) of the outstanding
     shares of capital stock of the Corporation entitled to vote in the
     election of directors.
 
 
                                          13
 
<PAGE>
 
          TENTH:    Unless and except to the extent that the By-Laws of the
     Corporation shall so require, the election of directors of the
     Corporation need not be by written ballot.
 
          ELEVENTH:    No contract or other transaction of the Corporation
     shall be void, voidable, fraudulent or otherwise invalidated, impaired
     or affected, in any respect, by reason of the fact that any one or
     more of the officers, directors or stockholders of the Corporation
     shall individually be party or parties thereto or otherwise interested
     therein, or shall be officers, directors or stockholders of any other
     corporation or corporations which shall be party or parties thereto or
     otherwise interested therein; PROVIDED that such contract or other
     transactions be duly authorized or ratified by the Board of Directors,
     with the assenting vote of a majority of the disinterested directors
     then present, or, if only one such director is present, with his
     assenting vote.
 
          TWELFTH:    The Board of Directors may from time to time make,
     amend, supplement or repeal any By-Laws; PROVIDED, FURTHER, that no
     amendment or supplement to the By-Laws adopted by the Board of
     Directors shall vary or conflict with any amendment or supplement
     adopted by the stockholders.
 
          THIRTEENTH:    The Corporation reserves the right to amend,
     alter, change or repeal any provision contained in this Amended and
     Restated Certificate of Incorporation, in the manner now or hereafter
     prescribed by statute, and all rights conferred upon stockholders
     herein are granted subject to this reservation.
 
          FOURTEENTH:     (a) A director of the Corporation shall not be
     personally liable to the Corporation or its stockholders for monetary
     damages for breach of fiduciary duty as a director, provided that the
     foregoing shall not limit or eliminate liability (i) for any breach of
     the director's duty of loyalty to the Corporation or its stockholders,
     (ii) for acts or omissions not in good faith or which involve
     intentional misconduct or a knowing violation of law, (iii) under
     Section 174 of the Delaware General Corporation Law, or (iv) for any
     transaction from which the director derived an improper personal
     benefit.
 
 
               (b)(1)  RIGHT TO INDEMNIFICATION.  Each person who was or is
     made a party or is threatened to be made a party to or is involved in
     any action, suit or proceeding, whether civil, criminal,
     administrative or investigative (hereinafter a "proceeding"), by
     reason of the fact that he or she, or the person of whom he or she is
     the legal representative, is or was a director or officer of the
     Corporation or is or was serving at the request of the Corporation as
     a director, officer, employee or agent of another corporation or of a
     partnership, joint venture, trust or other enterprise, including
     service with respect to employee benefit plans, whether the basis of
     such proceeding is alleged action or inaction in an official capacity
     as a
 
 
                                          14
<PAGE>
 
     director, officer, employee or agent or in any other capacity while serving
     as a director, officer, employee or agent, shall be indemnified and held
     harmless by the Corporation to the fullest extent authorized by the
     Delaware General Corporation Law, as the same exists or may hereafter be
     amended (but, in the case of any such amendment, only to the extent that
     such amendment permits the Corporation to provide broader indemnification
     rights than said law permitted the Corporation to provide prior to such
     amendment), against all expense, liability and loss (including attorney's
     fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or
     to be paid in settlement) reasonably incurred or suffered by such person in
     connection therewith and such indemnification shall continue as to a person
     who has ceased to be a director, officer, employee or agent and shall inure
     to the benefit of his or her heirs, executors and administrators; PROVIDED,
     HOWEVER, that except as provided in this paragraph (b), the Corporation
     shall indemnify any such person seeking indemnification in connection with
     a proceeding (or part thereof) initiated by such person only if such
     proceeding (or part thereof) was authorized by the Board of Directors of
     the Corporation.  The right to indemnification conferred in this paragraph
     (b) shall be a contract right and shall include the right to be paid by the
     Corporation the expenses incurred in defending any such proceeding in
     advance of its final disposition; PROVIDED, HOWEVER, that, if the Delaware
     General Corporation Law requires, the payment of such expenses incurred by
     a director or officer in his or her capacity as a director or officer of
     the Corporation (and not in any other capacity in which service was or is
     rendered by such person while a director or officer, including, without
     limitation, service to an employee benefit plan) in advance of the final
     disposition of a proceeding, shall be made only upon delivery to the
     Corporation of an undertaking, by or on behalf of such director or officer,
     to repay all amounts so advanced if it shall ultimately be determined that
     such director or officer is not entitled to be indemnified under this
     Section or otherwise.  The Corporation may, by action of its Board of
     Directors, provide indemnification to employees and agents of the
     Corporation with the same scope and effect as the foregoing indemnification
     of directors and officers.
 
               (2)  RIGHT OF CLAIMANT TO BRING SUIT.  If a claim under
     subparagraph (b)(1) is not paid in full by the Corporation within 30
     days after a written claim has been received by the Corporation, the
     claimant may at any time thereafter bring suit against the Corporation
     to recover the unpaid amount of the claim and, if successful in whole
     or in part, the claimant shall be entitled to be paid also the expense
     of prosecuting such claim.  It shall be a defense to any such action
     (other than an action brought to enforce a claim for expenses incurred
     in defending any proceeding in advance of its final disposition where
     the required undertaking, if any is required, has been tendered to the
     Corporation) that the claimant has not met the standards of conduct
     which make it permissible under the Delaware General Corporation Law
     for the Corporation to indemnify the claimant for the amount claimed,
     but the burden of proving such defense shall be on the Corporation.
     Neither the failure of the Corporation (including its Board of
     Directors, independent legal counsel, or its stockholders) to have
     made a
 
 
                                          15
 
<PAGE>
 
     determination prior to the commencement of such action that indemnification
     of the claimant is proper in the circumstances because he or she has met
     the applicable standard of conduct set forth in the Delaware General
     Corporation Law, nor an actual determination by the Corporation (including
     its Board of Directors, independent legal counsel, or its stockholders)
     that the claimant has not met such applicable standard of conduct, shall be
     a defense to the action or create a presumption that the claimant has not
     met the applicable standard of conduct.
 
               (3)  NON-EXCLUSIVITY OF RIGHTS.  The right to
     indemnification and the payment of expenses  incurred in defending a
     proceeding in advance of its final disposition conferred in this
     paragraph (b) shall not be exclusive of any other right which any
     person may have or hereafter acquire under any statute, provision of
     the Amended and Restated Certificate of Incorporation, By-Laws,
     agreement, vote of stockholders or disinterested directors or
     otherwise.
 
               (4)  INSURANCE.  The Corporation may maintain insurance, at
     its expense, to protect itself and any director, officer, employee or
     agent of the Corporation or another corporation, partnership, joint
     venture, trust or other enterprises against any such expenses,
     liability or loss, whether or not the Corporation would have the power
     to indemnify such person against such expense, liability or loss under
     the Delaware General Corporation Law.
 
          FIFTEENTH:     The Corporation expressly elects not to be
     governed by Section 203 of the Delaware General Corporation Law.
 
 
                                          16
 
<PAGE>
 
     IN WITNESS WHEREOF, the undersigned Corporation has caused this amended and
restated certificate of incorporation to be executed by its duly authorized
officer this 14th day of October, 1999.
 
 
                                   CALIFORNIA COASTAL COMMUNITES, INC.
 
 
                                   By: /s/ RAYMOND J. PACINI
                                       ------------------------------------
                                       Raymond J. Pacini
                                       Chief Executive Officer