IV. COMPLIANCE WITH LAWS, RULES & REGULATIONS
Employees must comply fully with all applicable laws, rules,
regulations and corporate governance standards.
V.
REPORTING VIOLATIONS
Designated Officers must promptly report any violations of the
Code to the Chairman of the Audit Committee.
VI.
DISCIPLINARY MEASURES
Designated Officers who violate any applicable laws, rules or
regulations or the Code will face appropriate disciplinary action, as
determined by the Audit Committee, which may include discharge. Other employees who violate any applicable laws, rules or
regulations or the Code will face appropriate disciplinary action, as
determined by the President or CFO , which may include discharge. The
matter may also be referred to appropriate governmental agencies.
VII.
AMENDMENT, MODIFICATION AND WAIVER
The Code may be amended or modified by the Audit Committee. Any
amendments or modifications will be publicly disclosed in accordance
with the rules of the Securities and Exchange Commission. The Audit
Committee may waive violations of the Code, but any such waiver that
constitutes a material departure from a provision of the Code will be
publicly disclosed in accordance with the rules of the Securities and
Exchange Commission.
ACURA PHARMACEUTICALS, INC.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
Purpose
The primary functions of the
Audit Committee (“Committee”) of the Board of Directors of Acura
Pharmaceuticals, Inc. (“Acura”) is to assist the Board in fulfilling its
oversight responsibilities by reviewing the integrity of the
consolidated financial statements of Acura, reviewing the performance of
Acura’s independent auditors, reviewing the timely compliance by Acura
with all legal and regulatory requirements for audit and related
financial functions of Acura, reviewing Acura’s auditing, accounting and
financial reporting processes and overseeing Acura’s systems of and
compliance with internal financial controls and management’s reporting
of internal controls and risk management.
Members
The Committee of the Board
of Directors shall consist of at least three directors elected annually
by the Board. One member of the Committee shall be designated by the
Board as the Chairman of the Committee. Each member of the Committee
shall be independent of Acura management, shall be 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
and shall be able to read and understand fundamental financial
statements, including the Acura’s balance sheet, income statement, and
cash flow statement. Without limiting the foregoing, commencing upon the
listing or admission for trading or quotation of Acura’s securities on a
national securities exchange or on the automated quotation system of a
national securities association (excluding the OTC Bulletin Board) (a
“National Listing”) (i) each member of the Committee shall satisfy the
standards of independence provided (a) in Rule 10A-3 (or any successor
provision) under the Securities Exchange Act of 1934, as amended, and
(b) under the rules of the exchange or national securities association
on which Acura’s securities are admitted for trading or quotation, and
(ii) one member of the Committee must have past employment experience in
finance or accounting, requisite professional certification in
accounting, or any other comparable experience or background which
results in the individual's financial sophistication, including, without
limitation, being or having been a chief executive officer, chief
financial officer or other senior officer with financial oversight
responsibilities. The determination as to whether any particular member
of the Committee satisfies the requirement of subsection (ii) above
shall be made by the Board.
Once appointed, Committee
members shall cease to be a member of the Committee only upon:
(i) Resignation
from the Board;
(ii)
Death;
(iii)
Disability, as
determined by the independent physician retained by the Board;
(iv)
Not being
re-appointed pursuant to the annual Board appointment process.
Responsibilities
The Committee shall have the
following responsibilities:
· Selection,
approval, oversight and retention of the independent accountants to be
selected by Acura as its independent auditors (the “Independent
Auditors”), subject to ratification by Acura’s shareholders. Such
appointment shall include the review and approval of the proposed fees
of the Independent Auditors and require that the Independent Auditors
report directly to the Committee.
· Pre-approval
of all audit and permissible non-audit services provided by the
Independent Auditors. Pre-approval shall be specific to a particular
service or category of services, and may be made on a case-by-case
basis. In assessing the pre-approval of services by the Independent
Auditors, the Committee shall consider whether such services are
consistent with the independence of the Independent Auditors, whether
the service could enhance Acura’s ability to manage or control risk or
improve audit quality, or such other factors as the Committee shall
determine.
· Receipt
and review of a formal written statement from the Independent Auditors
delineating all relationships between the Independent Auditors and
Acura, consistent with Independence Standards Board, Standard No. 1, and
actively engaging in a dialogue with the Independent Auditors with
respect to any disclosed relationships or services that may impact the
objectivity and independence of the Independent Auditors and the taking
of appropriate action (or recommending that the full Board take
appropriate action) to oversee the independence of the Independent
Auditors.
· Meet
with the Independent Auditors and Acura’s financial management to review
the scope of the proposed audit for the current year and the audit
procedures to be utilized, and review the completed audit including any
comments or recommendations of the Independent Auditors.
· Review
and resolve any disagreements between management and the Independent
Auditors regarding financial reporting and the review of any problems
experienced by the Independent Auditors in conducting the audit,
including any restrictions on the scope of the Independent Auditors’
activities or any access to requested information.
· Evaluate
with Acura's financial management and the Independent Auditors, together
and separately, the adequacy and effectiveness of Acura's internal
administrative, business process and accounting controls, and elicit any
recommendations to correct any material weaknesses in such controls.
· Obtain
periodic reports from Acura’s internal audit regarding internal audit
findings, including Acura’s internal controls and Acura’s progress in
remedying any material control deficiencies.
· With
general counsel, appropriate financial management, and the Independent
Auditors, review programs being maintained by management with respect to
compliance with laws and regulations relating to financial matters.
· Review
Acura's financial management functions including the proposed audit plan
for the coming year and the coordination of such plan with the
Independent Auditors and ascertain, through discussion with the
Independent Auditors whether the scope and procedures of the plan are
adequate to meet the objectives set forth in this Charter.
· Satisfy
the review of Acura’s unaudited quarterly and audited annual financial
statements as provided in Schedule 1 hereto.
· Review
with the Independent Auditors those major accounting policy changes that
could impact Acura.
· Establish
procedures for (i) the receipt, retention, investigation and treatment
of complaints received by Acura regarding accounting, internal
accounting controls or auditing matters, and (ii) the confidential,
anonymous submission by employees of Acura of concerns regarding
questionable accounting or auditing matters.
· Selection
and engagement of independent counsel and other advisers, as the
Committee determines necessary to carry out its duties.
· Determine
the appropriate funding for payment of (i) compensation to any
registered public accounting firm engaged for the purpose of preparing
or issuing an audit report or performing other audit, review or attest
services for Acura, (ii) compensation to any advisers employed by the
Committee, and (iii) ordinary administrative expenses of the Committee
that are necessary or appropriate in carrying out its duties.
· Commencing
upon a National Listing, review and approve all of Acura’s related party
transactions.
· Review
and reassess the adequacy of this Charter on an annual basis.
Meetings
The Committee will
hold meetings on at least a quarterly basis, with such additional
meetings as the Chairman of the Committee may deem necessary. In
addition to the Committee members, these meetings normally will be
attended by representatives of the Independent Auditors and by Acura’s
Chief Financial Officer. Acura’s principal financial officers as well as
the President and CEO may attend, except for portions of the meetings
where their presence would be inappropriate, as determined by the
Chairman. Minutes will be kept of all meetings.
In the event that the Chair
of the Committee does not attend a meeting of the Committee, the members
of the Committee shall elect a temporary Chair for such meeting by
majority vote of the members in attendance at the meeting. Greater than
50% of the Committee membership is required for a meeting quorum.
Resolution of the Committee shall require approval by a simple majority
of members voting on such resolution.
Remuneration
Members of the Committee and
the Chairman of the Committee shall receive remuneration for their
service on the Committee as the Board may from time to time determine.
No member of the Committee may earn fees from Acura for any of its
subsidiaries other than for fees for acting as a member of the Board or
of any Board committee (which may include cash and/or shares or options
or other in-kind consideration). For greater certainty no member of the
Committee shall accept, directly or indirectly, any consulting, advisory
or other compensatory fees from Acura.
Limitations
While the Committee has the
responsibilities and powers set forth in this Charter, it is not the
duty of the Committee to plan or conduct audits or to determine that
Acura’s financial statements and disclosures are complete and accurate
and are in accordance with generally accepted accounting principles and
applicable rules and regulations. These are the responsibilities of
management and the Independent Auditors.
SCHEDULE 1
Financial Reporting
Review of
Unaudited Quarterly Financial Results
·
Prior to
public release and filing with securities regulatory agencies, review
and discuss with management and the Independent Auditors the:
o
earnings press
release
o
consolidated
financial statements and notes thereto
o
management's
discussion and analysis
o
results of the
Independent Auditors' review
·
Review of
Acura’s unaudited quarterly financial results, including:
o
any
significant judgments (e.g. estimates and reserves) made in the
preparation of financial statements and the view of each as to the
appropriateness of such judgments
o
any
significant disagreements among management and the Independent Auditors
in connection with the preparation of financial statements
o
the extent to
which changes or improvements in financial or accounting practices, as
approved by the Committee, have been implemented
o
significant
financial reporting issues and judgments made in connection with the
preparation of Acura's financial statements, including any significant
changes in Acura's selection or application of accounting principles,
any major issues as to the adequacy of Acura's internal controls and any
special steps adopted in light of material control deficiencies
o
critical
accounting policies and practices
o
alternative
treatments of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments, and the
treatment preferred by the Independent Auditors
o
any written
communications between the Independent Auditors and management (e.g.
management letters, schedule of unadjusted differences)
o
the effect of
regulatory and accounting initiatives on the Corporation's financial
statements
o
management
certifications of reports filed by Acura
o
integrity of
the Acura's financial reporting processes
·
Recommend to
the Board whether the unaudited financial results should be approved by
the Board
Review
of Audited Annual Financial Results
·
Prior to
public release and filing with securities regulatory agencies, review
and discuss with management and the Independent Auditors the:
o
earnings press
release
o
financial
statements and notes thereto for consolidated and separate entities
o
management's
discussion and analysis
o
results of the
Independent Auditors' audit
·
Review of
Acura's audited financial results, including:
o
all matters
described above with respect to unaudited quarterly financial results
o
results of the
Independent Auditors’ audit
o
matters
required to be discussed by applicable auditing standards relating to
the conduct of the audit, including any difficulties encountered in the
course of the audit work, any restrictions on the scope of activities or
access to requested information, and any significant disagreements with
management
o
a verbal
and/or written report, as appropriate, from the Independent Auditors
describing (i) all critical accounting policies and practices to be
used, (ii) all alternative treatments of financial information within
generally accepted accounting principles that have been discussed with
management, ramifications of the use of such alternative disclosures and
treatments, and the treatment preferred by the Independent Auditors, and
(iii) other material communications between the Independent Auditors and
management, such as the annual management letter or schedule of
unadjusted differences
·
Recommend to
the Board whether the audited financial results should be approved by
the Board
