Exhibit 3.7
DOV PHARMACEUTICAL, INC.
AUDIT COMMITTEE CHARTER
I. General Statement of Purpose
The purpose of the audit committee is to
Assist board of directors in its oversight of integrity of company's financial statements and qualifications, independence and performance of auditors
Prepare report required by SEC rules to be included in company's annual proxy statement
II. Composition
The audit committee shall consist of at least three members of the board, each of whom must be independent according to both NASD rules and the Sarbanes-Oxley Act of 2002 (the "S-O Act") and moreover not own or control 20% or more of the company's voting securities, or such lesser amount as may be established by the SEC in rules under the S-O Act.
As an exception to the above independence criteria, a director who is not an employee or family member and meets all the above qualifications except those of the NASD can be an audit committee member. For this to occur, the board, under exceptional and limited circumstances, must determine that the director's membership is required in the best interests of the company and its stockholders. The company must then disclose, in the next following annual proxy statement, its reasons for that determination. A member appointed and whose appointment continues under this exception may not serve on the audit committee for more than two years and may not chair the committee.
Each member of the audit committee must be able to understand financial statements. Moreover, at least one member of the audit committee must be a "financial expert" under SEC rules. Those rules require among other things that, in addition to understanding financial statements, the financial expert have an understanding of generally accepted accounting principles and their application as well as experience with internal controls for financial reporting.
Members of the audit committee shall be appointed annually by the board and may be replaced or removed by the board with or without cause. Resignation or removal of a director, for whatever reason, shall mean automatic resignation or removal from the audit committee. Any vacancy on the audit committee may be filled only by the board. The board shall designate one member of the audit committee to be the chair.
III. Compensation
A member may not, other than in his or her capacity as a member of the audit committee, the board or any other board committee, receive any compensation from the company. A member may receive additional director fees to compensate for the significant time and effort required to serve on the audit committee.
IV. Meetings
The audit committee shall meet not less frequently than quarterly to review each quarterly earnings release and quarterly report, and at least on one further occasion to review audit progress and the annual report. Apart from these required meetings, the committee may have additional meetings as often as it determines. A majority of the members of the audit committee shall constitute a quorum for purposes of holding a meeting and the committee may act by a vote of a majority of the members present at the meeting. In lieu of a meeting, where warranted in special circumstances the audit committee may act by unanimous written consent.
V. Responsibilities and Authority
Matters Relating to Selection, Performance and Independence of Auditors
Sole authority to appoint (subject to stockholder ratification), terminate and determine funding for auditors
Instruct auditors to report directly to audit committee
Exercise oversight of auditors' work including resolution of disagreements between management and auditors
Pre-approval of all auditing services and terms and non-audit services not prohibited by SEC or Public Company Accounting Oversight Board
Pre-approval of non-audit services may be delegated to one or more members of audit committee
Review and approve scope and staffing of auditors' overall audit plan
Require auditors to provide audit committee with written disclosures and letter required by Independence Standards Board Standard No. 1, and to submit to audit committee on a periodic basis a formal written statement delineating all relationships between auditors and company
Discuss with auditors any disclosed relationships or services that may impact objectivity and independence, and take appropriate action to satisfy audit committee of auditors' independence
Determine whether services for audit financial information systems design and implementation and other services to company reported in annual proxy are compatible with maintaining auditors' independence
Audited Financial Statements
Review overall audit plan with auditors and management responsible for preparing company's financial statements
Review and discuss with management and auditors
Company's annual audited financial statements including (a) all critical accounting policies and practices used or to be used by company and (b) any significant financial reporting issues that have arisen in connection with preparation of audited financial statements, prior to filing company's annual report on Form 10-K
Any analysis prepared by management or auditors setting forth significant financial reporting issues and judgments made in connection with preparation of financial statements including analyses of effect of alternative GAAP methods on financial statements
Ramifications of use of such alternative disclosures and treatments on financial statements and treatment preferred by auditors, and consider other material written communications between auditors and management including any management letter or schedule of unadjusted differences
Adequacy of company's internal controls and procedures for financial reporting and risk management policies
Major changes in and other issues regarding accounting and auditing principles and procedures including any significant changes in company's selection or application of accounting principles
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Effect on financial statements of regulatory and accounting initiatives as well as off-balance sheet transactions and structures
Review and discuss outside presence of management any audit problems or difficulties and management's response thereto to include any difficulties encountered by auditors in the course of their work, including any restrictions on scope of their activities or access to information, responsibilities, budget and staffing of company's internal audit function if any or financial reporting function and any significant accounting issues raised with management
Review and discuss matters brought to attention of audit committee by auditors pursuant to Statement on Auditing Standards No. 61 ("SAS 61") including any
Restriction on scope of auditors' activities or access to requested information
Accounting adjustments proposed by auditors but not made by management
Communication between auditors and its national office regarding auditing or accounting issues presented by management
Management or internal control letter issued, or proposed to be issued, by auditors and
Significant disagreement between company and auditors
Review and discuss with auditors their report pursuant to Securities Exchange Act on their non-audit services if any
Discuss with CEO, CFO and general counsel significant deficiencies and material weaknesses brought to audit committee's attention in design or operation of internal controls and procedures for financial reporting that could adversely affect company's ability to record, process, summarize and report financial information or reveal any fraud involving management or other employees who have a significant role in company's internal controls and procedures for financial reporting
Based on its review and discussions with management including review of matters required to be discussed by SAS 61, recommend to board whether company's audited financial statements should be included in 10-K
Prepare audit committee report required by Item 306 of Regulation S-K to be included in company's annual proxy statement
Unaudited Quarterly Financial Statements
Discuss with management such issues as may be brought to its attention pursuant to SAS No. 71
Procedures for Addressing Complaints and Concerns
Establish procedures for receipt, retention and treatment of complaints received by company regarding accounting, internal accounting controls or auditing matters and confidential, anonymous submission to audit committee by employees of concerns regarding questionable accounting or auditing matters or disclosure controls
Regular Reports to Board
Regularly report to and review with board any issues that arise with respect to quality or integrity of company's financial statements, compliance with legal or regulatory requirements, performance and
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independence of auditors, performance of internal audit function if any and any other matters that audit committee considers appropriate or is requested by board to review
Review of Charter
Review annually adequacy of charter and recommend amendments if any to board
Engagement of Advisors
Engage and determine compensation for independent counsel and such other advisors necessary or appropriate to carry out its responsibilities and powers
Legal and Regulatory Compliance
Discuss with management legal and regulatory requirements applicable to company and its subsidiaries and company's compliance, and make recommendations to board regarding compliance
Discuss with CEO, CFO and general counsel legal matters (including pending or threatened litigation) that may have a material effect on company's financial statements or its legal and regulatory compliance policies and procedures
General
Form and delegate authority to subcommittees consisting of one or more of its members to carry out its responsibilities and exercise its powers
Require that any officer or employee of company, company's outside legal counsel, auditors or any other professional retained by company attend a meeting of audit committee or meet with any member of or advisor to committee
Notwithstanding the responsibilities and powers of the audit committee set forth in this charter, it is not intended to carry responsibility for planning or conducting audits of the company's financial statements or determining whether the company's financial statements are complete, accurate and prepared in accordance with GAAP. Such responsibilities are the duty of management and, to the extent of their audit responsibilities, the auditors. In addition, it is not the duty of the audit committee to conduct investigations or to assure compliance with laws and regulations. The audit committee shall be entitled to rely upon advice and information it receives in its discussions and communications with management, auditors and such experts, advisors and professionals it may consult.
(Adopted by the board of directors on March 21, 2003)
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