EXHIBIT 10.1

 

CARDIODYNAMICS INTERNATIONAL CORPORATION

 

CHARTER

 

AUDIT COMMITTEE OF THE BOARD OF DIRECTORS

 

July 17, 2003

 

I. PURPOSE

 

The primary function of the Audit Committee is to assist the Board of Directors
in fulfilling its oversight responsibilities by reviewing: the financial reports
and other financial information provided by the Corporation to any governmental
body or the public; the Corporation’s system of internal controls regarding
finance, accounting, legal compliance and ethics that management and the Board
have established; and the Corporation’s auditing, accounting and financial
reporting processes. Consistent with this function, the Audit Committee
encourages continuous improvement of, and adherence to, the Corporation’s
policies, procedures and practices at all levels. The Audit Committee’s primary
duties and responsibilities are to:

 

Serve as an independent and objective party to monitor the Corporation’s
financial reporting process and internal control system.

 

Review and appraise the audit efforts of the Corporation’s independent
accountants and internal auditing department.

 

Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board of Directors.

 

The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.

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II. COMPOSITION

 

The Audit Committee shall consist of three or more directors as determined by
the Board, each of whom shall 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. All
members of the Committee shall have a working familiarity with basic finance and
accounting practices and, providing a qualified candidate is reasonably
available, at least one member shall meet the requirements for and be designated
as the “Audit Committee Financial Expert” as defined by Section 407 of the SEC
rules.

 

The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board and shall serve until their successors shall
be duly elected and qualified. Unless a chair is elected by the full Board, the
members of the Committee may designate a chair by majority vote of the full
Committee membership.

 

III. MEETINGS

 

The Committee shall meet at least four times annually, or more frequently as
circumstances dictate. The Committee shall meet with management and the
independent accountants in separate executive sessions, as necessary or
appropriate, to discuss any matters that the Committee or any of these groups
believe should be discussed privately. The Committee may ask members of
management or others to attend the meetings and provide pertinent information as
necessary.

 

IV. RESPONSIBILITIES AND DUTIES

 

To fulfill its responsibilities and duties the Audit Committee shall:

 

Documents/Reports Review

 

1. Review and update this Charter periodically, as conditions dictate.

 

2. Review the Corporation’s annual financial statements and any financial
reports or other financial information submitted to the public, including any
certification, report, opinion, or review rendered by the independent
accountants.

 

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3. Maintain minutes or other records of meetings and activities of the
Committee.

 

4. Develop, disclose and maintain a Code of Ethics to deter wrongdoing and
promote honest and ethical conduct, which meets the requirements of Section 406
of the SEC rules, including disclosure of any changes to, or waivers of, the
Code of Ethics.

 

5. Take appropriate measures to assure that no officer, director, or any person
acting under their direction, fraudulently influences, coerces, manipulates, or
misleads the auditor engaged in the audit of its financial statements for the
purpose of rendering the financial statements materially misleading.

 

Independent Public Accountants

 

6. Be directly responsible for the appointment, removal, compensation and
oversight of the work of any independent public accounting firm employed by the
Company for the purpose of preparing or issuing an audit report or related work,
including resolution of disagreements between the Company’s management and such
firm regarding financial reporting, and including, with respect to the
engagement of any such firm, authority to engage such firm for auditing services
and non-audit services, as such terms are used in the Sarbanes-Oxley Act of
2002, with each such firm reporting directly to the Audit Committee.

 

7. In connection with its oversight of the audit process, have the authority to
engage experts and consultants, including counsel, in furtherance of such
responsibilities and the carrying out of its duties hereunder.

 

8. Consider the independence and effectiveness of the independent public
accountants and assure that any non-audit services (as defined by
Sarbanes-Oxley) are allowable and pre-approved by the Audit Committee. On a
regular basis, the Committee shall review and discuss with the accountants all
significant relationships the accountants have with the Corporation to determine
the accountants’ independence.

 

9. Approve the fees and other compensation to be paid to the independent public
accountants and disclose such fees billed by the independent accountant
separately reporting audit, audit-related, tax and all other fees for the two
most recent years. Describe, in qualitative terms, the types of services
provided under each category.

 

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10. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances warrant.

 

11. Periodically consult with the independent accountants out of the presence of
management about internal controls and the fullness and accuracy Corporation’s
financial statements.

 

Financial Reporting Processes

 

12. In consultation with the independent accountants, review the integrity of
the Corporation’s financial reporting and disclosure processes.

 

13. Consider the independent accountants’ judgments about the quality and
appropriateness of the Corporation’s accounting principles as applied in its
financial reporting.

 

14. Consider and approve, if appropriate, major changes to the Corporation’s
accounting principles and practices as suggested by the independent public
accountants or management.

 

Process Improvement

 

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

 

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

 

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

 

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Ethical and Legal Compliance

 

18. Review, with the Corporation’s counsel, legal compliance matters including
corporate securities trading policies.

 

19. Review, with the Corporation’s counsel, any legal matter that could have
significant impact on the Corporation’s financial statements.

 

20. Perform any other activities consistent with this Charter, the Corporation’s
By-laws and governing law, as the Committee or the Board deems necessary or
appropriate.

 

The Committee has the responsibility and powers set for in this Charter,
however, it is not the duty of the Committee to plan or conduct audits or to
determine that the Company’s financial statements are complete and accurate and
are in compliance with generally accepted accounting principles. This is the
responsibility of management and the independent accountants

 

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