**Exhibit10.08**

 

 

**AUDITCOMMITTEE POLICY FOR**

**PRE-APPROVALOF AUDITOR SERVICES**

 

 

**ARTICLE I — PURPOSE**

 

The Audit Committee ofCalifornia Coastal Communities, Inc. (the “Company”) is required to pre-approvethe audit and non-audit services performed by the Company’s independent auditorin order to determine that the provision of such services does not adverselyaffect the auditor’s independence. Other than services to be provided by theindependent auditor which have been generally pre-approved, specific pre-approvalby the Audit Committee will be required. If a proposed service exceedspre-approved cost levels, such services must receive specific pre-approval bythe Audit Committee.

 

The exhibits to this Policydescribe the “Audit”, “Audit-Related”, “Tax” and “Other” services that havebeen pre-approved by the Audit Committee. Unless the Audit Committeespecifically provides for a different period, pre-approvals are for a twelve(12) month period from the date of pre-approval. The Audit Committee may, atany time, amend the list of pre-approved services.

 

 

**ARTICLE II — AUDIT SERVICES**

 

The annual Audit Services, termsof engagement and fees will be subject to the specific pre-approval of theAudit Committee. The Audit Committee will approve, as may be required, anychanges in such terms, conditions and fees resulting from changes in the scopeof the audit or other reasons.

 

The Audit Committee may grantpre-approval for other Audit Services, that only the Company’s auditor canreasonably provide. The Audit Services listed in Exhibit A have beenpre-approved, and any other Audit Services must be separately pre-approved bythe Audit Committee.

 

 

**ARTICLE III — AUDIT-RELATEDSERVICES**

 

Audit-Related Services are thoseservices that are reasonably related to the performance of the audit or reviewof the Company’s financial statements and that are traditionally performed bythe auditor. The Audit Committee has pre-approved the Audit-Related Serviceslisted in Exhibit B and believes that the provision of suchAudit-Related Services does not impair the independence of the independentauditor. Any other Audit-Related Services not listed in Exhibit B mustbe separately pre-approved by the Audit Committee.

 

 

**ARTICLE IV — TAX SERVICES**

 

The Audit Committee believesthat, without impairing the auditor’s independence, the auditor can provide TaxServices to the Company such as tax planning, tax compliance and tax 

 

 

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advice. However, the auditor is not permitted tobe retained in connection with a transaction initially recommended by theauditor, where the tax treatment of such transaction may not be supported inthe Internal Revenue Code and the regulations thereunder, or where the purposeof which may be tax avoidance. The Tax Services listed in Exhibit C havebeen pre-approved, and all Tax Services involving large and complextransactions not listed in Exhibit C must be separately pre-approved bythe Audit Committee.

 

 

**ARTICLE V — OTHER SERVICES**

 

The Audit Committee may grantpre-approval to other permissible non-audit services that it believes areroutine and recurring services, and which services the Audit Committee believeswould not impair the independence of the auditor. The Audit Committee haspre-approved the Other Services listed in Exhibit D. Any additionalpermissible Other Services not listed in Exhibit D must be separatelypre-approved by the Audit Committee.

 

Schedule1 to this Policy sets forth a list of the SEC’s currently prohibitednon-audit services.

 

 

**ARTICLE VI — PRE-APPROVAL FEELEVELS**

 

The Audit Committee will periodicallyestablish Pre-approval fee levels for all services to be provided by theauditor. Specific pre-approval by the Audit Committee will be required for anyproposed services exceeding these fee levels.

 

 

**ARTICLE VII — SUPPORTINGDOCUMENTATION**

 

The auditor will provide theAudit Committee with detailed back-up documentation regarding the specificservices to be provided with respect to each proposed pre-approved service.

 

**ARTICLE VIII — DELEGATION**

 

The Audit Committee shall **not** delegate to management of the Company, any of itsresponsibilities to pre-approve services performed by the independent auditor.However, pre-approval authority may be delegated to one or more of the AuditCommittee members; provided that such member(s) to whom such authority isdelegated shall report each pre-approval decision to the Audit Committee at itsnext scheduled meeting.

 

 

**ARTICLE IX — PROCEDURES FORSEPARATE APPROVALS**

 

The auditor and the Company’sChief Financial Officer shall submit to the Audit Committee all requests orapplications to provide services by the auditor, where such services requireseparate approval by the Audit Committee. Such requests or applications mustinclude a joint statement as to whether, in their view, the request orapplication is consistent with the SEC’s rules on auditor independence.

 

 

 

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**Exhibit  A**

 

**Pre-ApprovedAudit Services for Year Ending December 31, 2005**

 

Dated:   March9, 2005

 
| **Service:**                                                                                                                                                                                                                                                                                               | ** ** | **Range of Fees:** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|
|                                                                                                                                                                                                                                                                                                       |       |               |
| Statutory audits or financial audits for subsidiaries or affiliates of  the Company.                                                                                                                                                                                                                       |       | —             |
|                                                                                                                                                                                                                                                                                                       |       |               |
| Services associated with SEC registration statements, periodic reports  and other documents filed with the SEC or other documents  issued in connection with securities offerings  (e.g., comfort letters,  consents),  and assistance in responding to SEC comment letters.                |       | $5,000  - $10,000  |
|                                                                                                                                                                                                                                                                                                       |       |               |
| Consultations by the Company’s management as to the accounting or  disclosure treatment of transactions or events and/or the actual or  potential impact of final or proposed rules,  standards or interpretations  by  the SEC, FASB, or other regulatory or standard setting bodies. |       | $10,000  - $20,000 |
|                                                                                                                                                                                                                                                                                                       |       |               |

 

 

A-1

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**Exhibit B**

 

**Pre-ApprovedAudit-Related Services for Year Ending December 31, 2005**

 

Dated:    March 9, 2005

 
| **Service:**                                                                                                                                                                                                                                                                                                | ** ** | **Range of Fees:**  |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|---------------------|
|                                                                                                                                                                                                                                                                                                        |       |                |
| Due diligence services pertaining to potential business acquisitions/ dispositions.                                                                                                                                                                                                                    |       | —              |
|                                                                                                                                                                                                                                                                                                        |       |                |
| Financial statement audits of employee benefit plans.                                                                                                                                                                                                                                                       |       | —              |
|                                                                                                                                                                                                                                                                                                        |       |                |
| Agreed-upon or expanded audit procedures related to accounting and/or billing  records required to respond to or comply with financial, accounting  or regulatory reporting matters.                                                                                                              |       | —              |
|                                                                                                                                                                                                                                                                                                        |       |                |
| Internal control reviews and assistance with internal control reporting requirements.                                                                                                                                                                                                                  |       | $90,000  - $115,000 |
|                                                                                                                                                                                                                                                                                                        |       |                |
| Consultations by the Company’s management as to the  accounting or disclosure  treatment of transactions or events and/or the actual or potential  impact of final or proposed rules, standards or  interpretations by the  SEC, FASB,  or other regulatory or standard-setting bodies. |       | $10,000 - $25,000   |
|                                                                                                                                                                                                                                                                                                        |       |                |
| Attest services not required by statute or regulation.                                                                                                                                                                                                                                                      |       | —              |

 

 

**B-1**

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**Exhibit C**

 

**Pre-ApprovedTax Services for Year Ending December 31, 2005**

 

Dated: March 9, 2005

 
| **Service:**                                                                                                                                                              | ** ** | **Range of Fees:** |
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------|
|                                                                                                                                                                      |       |               |
| U.S. federal, state and local tax planning and advice.                                                                                                                    |       | $20,000  - $40,000 |
|                                                                                                                                                                      |       |               |
| U.S. federal, state and local tax compliance.                                                                                                                             |       | $15,000  - $35,000 |
|                                                                                                                                                                      |       |               |
| Review of federal, state and local income, franchise, and other  tax returns.                                                                                        |       | $10,000  - $20,000 |
|                                                                                                                                                                      |       |               |
| Licensing or purchase of income tax preparation software from the auditor,  provided the functionality is limited to preparation  of tax provisions or returns. |       | $5,000  - $10,000  |
|                                                                                                                                                                      |       |               |

 

 

C-1

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**Exhibit D**

 
| **Pre-Approved All Other Services for Year Ending December 31, 2005** |
|-----------------------------------------------------------------------|
|                                                                  |   |   |
| Dated:  March 9, 2005                                                 |   |   |
|                                                                  |   |   |
| **Service:**                                                          | ** ** | **Range of Fees:** |
|                                                                  |   |   |
| To be determined                                                      |   |   |
|                                                                  |   |   |

 

 

D-1

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**Schedule 1**

 

**ProhibitedNon-Audit Services***

 

Bookkeeping or other services related to theaccounting records or financial statements of the audit client.

 

Financial information systems design andimplementation.

 

Appraisal or valuation services, fairnessopinions or contribution-in-kind reports.

 

Actuarial services.

 

Internal audit outsourcing services.

 

Management functions.

 

Human resources.

 

Broker-dealer, investment adviser or investmentbanking services.

 

Legal services.

 

Expert services unrelated to the audit.

 

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*****Provision of these non-auditservices is permitted if it is reasonable to conclude that the results of theseservices will not be subject to audit procedures.

 

Materiality is not an appropriate basis uponwhich to overcome the rebuttable presumption that prohibited services will besubject to audit procedures because determining materiality is itself a matterof audit judgment.

 

 

 

S-1

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