**Exhibit10.10(a)**

 

**MODIFICATIONOFEMPLOYMENT AGREEMENT**

 

THIS MODIFICATION OFEMPLOYMENT AGREEMENT (the “Extension”) is entered into as of November 12, 2003by and between Hearthside Homes, Inc., a California corporation (“Employer”),which is an indirect wholly-owned subsidiary of California Coastal Communities,Inc., a Delaware corporation (“Parent”), and ED MOUNTFORD (“Executive”).

 

WITNESSETH:

 

WHEREAS, Executive andEmployer have entered into an Employment Agreement dated as of May 1,1998, an Extension and Modification of Employment Agreement datedDecember 7, 1999, a Second Extension and Modification of EmploymentAgreement dated April 30, 2001 and a Third Extension and Modification ofEmployment Agreement dated March 18, 2003 (collectively, the “EmploymentAgreement”) through which Executive has provided various executive capacitiesto Employer and Employer has obtained various executive services by Executive;

 

NOW, THEREFORE, inconsideration of the foregoing recitals and the mutual promises and covenantsherein contained, the parties agree as follows:

 

# SECTION 1.           CONTINUINGEFFECTIVENESS OF EMPLOYMENT AGREEMENT. Except to the extent of any modification made pursuant to the terms ofthis Extension, the Employment Agreement shall continue to remain in full forceand effect following the date hereof.

#  

# SECTION 2.           BONUS.  From the date hereof and until the expirationof the term set forth in the Third Extension (April 30, 2005), Employer agreesto provide Executive with the opportunity to earn incentive bonuses based uponthe formula set forth on Schedules A, B and C attached hereto.  Included in Schedule Cisa spreadsheet which details the mechanics for determining the amount, if any,of a bonus payment that may be earned by Executive in connection with the NorthOrmond Beach, LLC development project in Oxnard, California (the “OxnardProject”), which bonus (the “Oxnard Project Bonus”) shall only be payable tothe extent that certain profit levels on the Oxnard Project are realized incash (“Profits”) as calculated on Schedule C.  In order to receive the allocable amount ofthe Oxnard Project Bonus set forth on Schedule C, Executive must remainin the employ of Employer at the time the requisite Profits have been realizedunless:

 

(i)                                     Executivehas been terminated “without cause”;

 

(ii)                                  TheAgreement is not further extended after the expiration of the Term as set forthherein;

 

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(iii)                               Executive has terminatedhis employment for “Good Reason”, as such terms are defined in the Agreement;

 

(iv)                              Theability to calculate Profits has been delayed by virtue of Employer havingentered into a subsequent agreement to develop and sell residential units atthe Oxnard Project, provided that Executive was not terminated “for cause” ordid not voluntarily terminate his employment with Employer prior to the date ofany such subsequent agreement; or

 

(v)                                 Parentor an affiliate has caused the sale or merger of the business and operations ofEmployer to a third party and the employ of Executive has not been continued bythe successor to Employer under substantially the same terms and conditions setforth in the Agreement and as extended and modified herein.

 

In the event of theoccurrence of any of the events set forth in clauses (i) through (iv) above,Executive shall be paid his allocable share of the Oxnard Project Bonus at suchtime, if any, following the termination of his employment that Employer hasrealized the requisite level of Profits. In the case of clause (v) above, the portion of the sales price ofEmployer that has been allocated to the Oxnard Project shall be used todetermine whether the requisite level of Profits has been realized andExecutive shall be paid accordingly out of the proceeds received by Parent orany of its affiliates in connection with any such sale or merger of Employer.

 

# INWITNESS WHEREOF, the parties have executed this Extension as of the date firstabove written.

 
|   | “EMPLOYER”                 |
|--------|--------------------------------------|
|   |                                 |
|   | HEARTHSIDE HOMES, INC.               |
|   |                                 |
|   | By                                   | /s/  Raymond J. Pacini |   |
|   |                                 | Raymond J. Pacini |
|   |                                 | Chief Executive Officer |
|   |                                 |
|   | “EXECUTIVE”                |
|   |                                 |
|   |   /s/  Edward G. Mountford |   |
|   | Ed Mountford                         |

 

2

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11/12/2003

Schedule C

 

($ in thousands)

 
| ** ** | ** **                                           | ** ** | ** ** | **Equity**       | ** ** | ** ** | ** ** | **Original Pro Forma** | ** ** | ** ** | ** ** | ** **       | ** **                | ** **              | ** ** | ** ** |
|------------|------------------------------------------------------|------------|------------|------------------|------------|------------|------------|------------------------|------------|------------|------------|------------------|---------------------------|-------------------------|------------|------------|
| ** ** | ** **                                           | ** ** | ** ** | **Required**     | ** ** | ** ** | ** ** | **Net**                | ** ** | ** ** | ** ** | **Hearthside**   | ** **                | ** **              | ** ** | ** ** |
| ** ** | ** **                                           | ** ** | ** ** | **per Original** | ** ** | ** ** | ** ** | **Cash**               | ** ** | ** ** | ** ** | **Profit Spilt** | ** **                | ** **              | ** ** | ** ** |
| **Oxnard** | ** **                                           | ** ** | ** ** | **Pro Forma**    | ** ** | ** ** | ** ** | **Flow**               | ** ** | **IRR**    | ** ** | **Company**      | ** **                | **Employees**           | ** ** | ** ** | ** ** | ** ** |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    |       |       |   |   |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             | first $5,500 (base case): |                    |       |       |   |
| 1.         | base case (entitle by March 2005):                   |       | IHP        |             | $          | 4,000      |       | 80%                    |       | $          | 9,500      |             | 91.4                      | %                       | ** ** | ** ** | ** ** | ** ** | ** ** | ** ** | ***** |
|       | - no inflation in land / home prices                 |       | Co.        |             | 1,000      |       | 20%        |                   | 5,500      |       | 123.0      | %                | 85%                       |                    | 15%        | =          |   | $ | 825 |   |
|       | - total lot sale revenue:                            |       |       |             | $          | 5,000      |       |                   |       | $          | 15,000     |             |                      |                    |       |       |   |   |   |   |   |
|       |                                                 | $          | 63,000     |             |       |       |       |                   |       |       |       | company          |                      | $                       | 4,675      |       |   |   | Mike /Ed | 40% |   | $ | 330 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       | 85.0       | %                |                      |                    | John       | 20%        |   | $ | 165 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    |       |       |   |   |   |
| 2a.        | total profit if 7% annual inflation for next 2 yrs.  |       |       |             |       |       | IHP        |                   | $          | 14,000     |       |             |                      | co. profits > $5,500 |       |       |   |   |
|       | (on land sales revenue of $62.9 million)             |       |       |             |       |       | Co.        |                   | 10,000     |       |       |             |                      |                    |       |       |   |   |   |
|       | (7% inflation = $9,000)                              |       |       |             |       |       |       |                   | $          | 24,000     |       |             |                      | 80%                     |       | 20%        | = |   | $ | 1,725 |   |
|       | - total lot sale revenue:                            |       |       |             |       |       |       |                   | company    |       | $          | 8,275            |                      |                    |       |       |   |   |   |   |
|       |                                                 | $          | 72,000     |             |       |       |       |                   |       |       |       |             |                      | 82.8                    | %          |       |   | Mike /Ed | 40% |   | $ | 690 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    | John       | 20%        |   | $ | 345 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    |       |       |   |   |   |
| 2b.        | total profit if 10% annual inflation for next 2 yrs. |       |       |             |       |       | IHP        |                   | $          | 16,000     |       |             |                      | co. profits > $5,500 |       |       |   |   |
|       | (on land sales revenue of $62.9 million)             |       |       |             |       |       | Co.        |                   | 12,000     |       |       |             |                      |                    |       |       |   |   |   |
|       | (10% inflation = $13,000)                            |       |       |             |       |       |       |                   | $          | 28,000     |       |             |                      | 80%                     |       | 20%        | = |   | $ | 2,125 |   |
|       | - total lot sale revenue:                            |       |       |             |       |       |       |                   | company    |       | $          | 9,875            |                      |                    |       |       |   |   |   |   |
|       |                                                 | $          | 76,000     |             |       |       |       |                   |       |       |       |             |                      | 82.3                    | %          |       |   | Mike /Ed | 40% |   | $ | 850 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    | John       | 20%        |   | $ | 425 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    |       |       |   |   |   |
| 2c.        | total profit if 13% annual inflation for next 2 yrs. |       |       |             |       |       | IHP        |                   | $          | 18,583     |       |             |                      | co. profits > $5,500 |       |       |   |   |
|       | (on land sales revenue of $62.9 million)             |       |       |             |       |       | Co.        |                   | 14,583     |       |       |             |                      |                    |       |       |   |   |   |
|       | (13% inflation = $18,160)                            |       |       |             |       |       |       |                   | $          | 33,165     |       |             |                      | 80%                     |       | 20%        | = |   | $ | 2,642 |   |
|       | - total lot sale revenue:                            |       |       |             |       |       |       |                   | company    |       | $          | 11,941           |                      |                    |       |       |   |   |   |   |
|       |                                                 | $          | 81,160     |             |       |       |       |                   |       |       |       |             |                      | 81.9                    | %          |       |   | Mike /Ed | 40% |   | $ | 1,057 |   |
|       |                                                 |       |       |             |       |       |       |                   |       |       |       |             |                      |                    | John       | 20%        |   | $ | 528 |   |
|            |                                                      |            |            |                  |            |            |            |                        |            |            |            |                  |                           |                         |            |            |  |  |  |  |  |  |  |  |  |  |  |

 

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*  before adjustment for preferred return @ 15%on Company’s investment

 

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