Exhibit 10.1

 
CHARTER FOR THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
OF
PATIENTS & PHYSICIANS, INC.
 
Adopted July 31, 2006

I.
PURPOSE

The primary function of the Audit Committee (the “Committee”) is to represent
the Board of Directors (the “Board”) of Patients & Physicians, Inc. and its
subsidiaries (the “Company”), in fulfilling its oversight responsibilities by:

 
1.
Reviewing the financial reports and other financial related information released
by the Company to the public, or in certain circumstances, governmental bodies.

 
2.
Reviewing the Company's system of internal controls regarding finance,
accounting, business conduct and ethics and legal compliance that management and
the Board have established.

 
3.
Reviewing the Company's accounting and financial reporting processes.

 
4.
Reviewing and appraising with management the performance of the Company's
independent auditors.

 
5.
Providing an open avenue of communication between the independent auditors and
the Board.

II.
COMPOSITION

The Committee shall be comprised of at least three members. Each Committee
member shall be appointed by the majority of the Board, and unless otherwise
agreed upon by a majority of the Board, be independent directors and free from
any relationship that, in the opinion of the Board, would interfere with the
exercise of his or her independent judgment as a member of the Committee. For
purposes hereof, the term “independent” shall be based on the independence
requirements of the Nasdaq Stock Market.

All members of the Committee shall have a working familiarity with basic finance
and accounting practices, and at least one member of the Committee shall have
financial management expertise as determined by the Board. In addition, unless
otherwise agreed upon by a majority of the Board, at least one member of the
Committee shall be designated an “audit committee financial expert,” as
determined by the Board in accordance with the applicable rules of the
Securities and Exchange Commission.
 
 

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The members of the Committee shall be elected or reappointed by the Board
annually for a one year term. A Chairperson shall be appointed by the Board.
 
III.
MEETINGS

The Committee will meet at least three times annually and be available to meet
more frequently as circumstances dictate. Scheduled meetings of the Committee
are (a) to review and approve the scope of the annual audit to be performed by
the Company's independent auditors and (b) to review and discuss the results of
the audit and the Company's 10-K report, prior to its filing. Incidental to any
of these regularly scheduled meetings, the Committee should meet, if necessary,
with management and the independent auditors in separate executive sessions to
discuss any matters that the Committee and each of these groups believe should
be discussed privately.

IV.
RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Committee shall:

Documents/Reports Review

 
1.
Review and reassess the adequacy of this Charter on an annual basis or as
conditions dictate.

 
2.
Review and approve the Company's Business Conduct policies.

 
3.
Discuss with management and the independent auditors, the annual audited
financial statements and other reports and financial and related information
released to the public, or in certain circumstances governmental bodies,
including any certification, report, opinion or review rendered by the
independent auditors.

 
4.
Discuss with management and the independent auditors, as necessary, the
quarterly financial information. The Chairperson of the Committee may represent
the entire Committee for purposes of this review.

 
5.
Review with independent auditors the recommendations included in their
management letter, if any, and their informal observations regarding the
adequacy of overall financial and accounting procedures of the Company. On the
basis of this review, make recommendations to senior management for any changes
that seem appropriate.

 
6.
Prepare the minutes of each meeting, distribute the minutes to all members of
the Committee and provide periodic summary reports to the Board. The permanent
file of the minutes will be maintained by the Secretary of the Company.

 
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Independent Auditors

 
1.
Select, evaluate, and if appropriate, terminate or replace the independent
auditors. On an annual basis, the Committee will review and discuss with the
auditors all significant relationships, including non-audit services proposed or
performed, the auditors have with the Company to determine the auditors'
independence. The independent auditors are accountable to the Committee and to
the Board.

 
2.
The Committee shall approve the audit engagement and fees related thereto and
pre-approve any other services and fees related thereto to be provided by the
independent auditors.

 
3.
Annually consult with the independent auditors out of the presence of management
about internal controls and the fullness and accuracy of the Company's financial
statements.

Financial Reporting Process

 
1.
In consultation with the independent auditors, review the integrity of the
Company's financial reporting process, both internal and external.

 
2.
Review and consider the independent auditors' judgments about the
appropriateness of the Company's accounting principles as applied in its
financial reporting.

 
3.
Review and consider major changes to the Company's accounting principles and
practices as proposed by management or the independent auditors.

Process Improvement

 
1.
Establish regular reporting to the Committee by management and the independent
auditors regarding any principal/critical risks, emerging or developing issues
and significant judgments made or to be made in management's preparation of the
financial statements.

 
2.
Following completion of the annual audit, review separately with management and
the independent auditors any significant difficulties encountered during the
course of the audit, including any restrictions on the scope of work or access
to required information.

 
3.
Review any significant disagreement among management and the independent
auditors in connection with the preparation of the financial statements.

 
4.
Review with the independent auditors and management the extent to which changes
or improvements in financial or accounting practices, as approved by the
Committee, have been implemented.

 
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Ethical and Legal Compliance

 
1.
Establish procedures for reviewing and handling complaints or concerns received
by the Company regarding accounting, internal accounting controls, or auditing
matters, including enabling employees to submit concerns confidentially and
anonymously, and review management’s disclosure of any frauds that involve
management or other employees who have a significant role in internal control.

 
2.
Review the Company's operations and determine whether management has established
and maintains effective programs and processes to ensure compliance with its
Business Conduct policies.

 
3.
Review management's programs and processes for risk management and protection of
the Company's assets and business.

 
4.
Review management's monitoring of the Company's compliance with the above
programs to ensure that management has the proper review system in place to
ensure that the Company's financial statements, reports and other financial
information disseminated to governmental organizations and the public satisfy
legal requirements.

 
5.
Review, with the Company's counsel, legal compliance matters, including
corporate securities trading policies.

 
6.
Review, with the Company's counsel, any legal matter that could have a
significant impact on the Company's financial statements.

 
7.
Perform any other activities consistent with this Charter, the Company's By-laws
and government law, as the Committee or the Board deems necessary or
appropriate.

Outside Advisors

The Committee shall have the authority to retain such outside counsel,
accountants, experts and other advisors as it determines appropriate to assist
it in the performance of its functions and shall receive appropriate funding, as
determined by the Committee, from the Company for payment of compensation to any
such outside counsel, accountants, experts or advisors.
 
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