CHARTER OF THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS

OF
MINRAD INTERNATIONAL, INC.
As Amended September 28, 2005

Purpose

The Audit Committee (the “Committee”) of the Board of Directors (the “Board”) of Minrad International, Inc. (“Minrad”) is organized for the purpose overseeing on behalf of the Board:

· Minrad’s accounting and financial reporting processes and the integrity of its financial statements;

· the audits of the Minrad’s financial statements and the appointment, compensation, qualifications, independence, and performance of Minrad’s independent auditors;

· compliance by Minrad with legal and regulatory requirements; and

· the performance of Minrad’s internal audit function and internal control over financial reporting.

The Committee also has the purpose of preparing the audit committee report as required by the rules of the Securities and Exchange Commission (the “SEC”) to be included in Minrad’s annual meeting proxy statement.

Authority

In discharging its oversight role, the Committee is empowered to investigate any matter relating to the Corporation’s accounting, auditing, internal control or financial reporting practices brought to its attention with full access to Minrad’s books, records, facilities and personnel. The Committee may retain outside counsel, auditors or advisors in achieving its purposes, whose funding will be determined by the Committee and provided by Minrad.

Composition

The Committee will consist of no fewer than three members as determined by the Board, each of whom will be a non-employee director of Minrad. The Board shall in the exercise of its business judgment determine that the Committee’s composition meets the requirements for audit committees of the American Stock Exchange (“AMEX”) that all of the members of the Committee are “independent” as determined under the rules of the AMEX (see attached Appendix A), and that the members of the Committee will be persons:

· who have no relationship to Minrad that may interfere with the exercise of their independence from the management of Minrad; and

· who are able to read and understand fundamental financial statements, including Minrad’s balance sheet, income statement, and cash flow statement.

The Board shall appoint at least one member of the Committee whom it determines has the qualifications of an “audit committee financial expert” under AMEX rules (see Appendix A).

A Chairperson of the Committee will be selected by the full Board from among the Committee members. The Committee members will serve for such term or terms as the full Board will determine. Subject to the availability of Board members who satisfy applicable independence and experience requirements, the Board will seek to limit the length of term of office of Committee members and to replace them in an orderly, staggered rotation. The Board will have the power at any time to change the membership of the Audit Committee and to fill vacancies on it, subject to such new member(s) satisfying applicable independence and experience requirements. Except as expressly provided in this Charter or the by-laws of Minrad, the Audit Committee will fix its own rules of procedure.

Meetings

The Audit Committee will meet as often as it determines, but not less frequently than quarterly. The Audit Committee will meet periodically with management, those responsible for the internal audit function and the independent auditor in separate executive sessions. The Audit Committee may request any officer or employee of Minrad or its outside counsel or independent auditor to attend a meeting of the Committee or to meet with any members of, or consultants to, the Committee.

A majority of the members of the Audit Committee will constitute a quorum for any meeting. Any action of a majority of the members of the Audit Committee present at any meeting at which a quorum is present will be an action of the Audit Committee.

Functions

In carrying out its oversight responsibilities, the Committee will perform the following functions:

· The Committee will appoint, compensate, retain, evaluate and terminate the independent auditor. The Committee will be directly responsible for the oversight of the work of the independent auditor (including resolution of disagreements between management and the independent auditor regarding financial reporting) in preparing or issuing an audit report or performing other audit, review, attest or similar services. The independent auditor will report directly to the Committee.

· The Committee will pre-approve all auditing services and permitted non-audit services (including the fees and terms thereof) to be performed for Minrad by its independent auditor, subject to any de minimus exceptions described in the Exchange Act which are approved by the Committee prior to the completion of the audit. The Committee may form and delegate authority to subcommittees consisting of one or more members when appropriate, including the authority to grant pre-approvals of audit and permitted non-audit services, provided that decisions of such subcommittee to grant pre-approvals will be presented to the full Committee at its next scheduled meeting.

· The Committee will establish procedures for the receipt, retention and treatment of complaints received by Minrad regarding accounting, internal accounting controls or auditing matters, and for the confidential, anonymous submission by Minrad’s employees of concerns regarding questionable accounting or auditing matters.

· The Committee will, to the extent it deems necessary or appropriate, retain independent legal, accounting or other advisors. Minrad will provide for appropriate funding, as determined by the Committee, for payment of compensation to the independent auditor for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for Minrad, compensation to any advisors employed by the Committee, and for payment of ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.

· The Committee will make regular reports to the full Board. The Committee should review with the Board any issues that arise with respect to the quality or integrity of Minrad’s financial statements, Minrad’s compliance with legal or regulatory requirements, the performance and independence of Minrad’s independent auditors, or the performance of the internal audit function. The Committee will review and reassess the adequacy of this Charter annually and recommend any proposed changes to the Board for approval. The Committee will annually review the Committee’s own performance.
The Committee, to the extent it deems necessary or appropriate in meeting its responsibilities, will:

Financial Statement and Disclosure Matters.

1. Discuss with management and the independent auditor the annual audited financial statements, including disclosures made in “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and recommend to the Board whether the audited financial statements should be included in Minrad’s Forms 10-KSB or Forms 10-K.

2. Discuss with management and the independent auditor Minrad’s quarterly financial statements prior to the filing of its Forms 10-QSB or Forms 10-Q, including the results of the independent auditor’s review of the quarterly financial statements.

3. Discuss with management and the independent auditor significant financial reporting issues and judgments made in connection with the preparation of Minrad’s financial statements, including any significant changes in Minrad’s selection or application of accounting principles, any major issues as to the adequacy of Minrad’s internal controls and any special steps adopted in light of material control deficiencies.

4. Review and consider quarterly reports from the independent auditor on:
(a) Minrad’s critical accounting policies and practices.
(b) Alternative treatments of financial information within generally accepted accounting principles related to material items that have been discussed with management, ramifications of the use of such alternative treatments, and the treatment preferred by the independent auditor.
(c) Other material written communications between the independent auditor and management, such as any management letter or schedule of unadjusted differences.

5. Discuss with management Minrad’s earnings press releases, as well as financial information and earnings guidance provided to analysts and rating agencies. The Committee will be consulted and/or informed prior to each earnings release or each instance in which Minrad will provide earnings guidance to analysts and rating agencies.

6. Discuss with management and the independent auditor the effect of regulatory and accounting initiatives as well as off-balance sheet structures, if any, on Minrad’s financial statements.

7. Discuss with management Minrad’s major financial risk exposures and the steps management has taken to monitor and control such exposures, including Minrad’s risk assessment and risk management policies.

8. Discuss with the independent auditor the matters required to be discussed by Statement on Auditing Standards No. 61 relating to the conduct of the audit, including any problems or difficulties encountered in the course of the audit work and management’s response, any restrictions on the scope of activities or access to requested information, and any significant disagreements with management.

9. Review disclosures, if any, made to the Committee by Minrad’s CEO and CFO during their certification process for the Form 10-KSB (or Form 10-K) and Form 10-QSB (or Form 10-Q) about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any fraud involving management or other employees who have a significant role in Minrad’s internal controls.

Oversight of Minrad’s Relationship with the Independent Auditor

10. Review and evaluate the lead partner of the independent auditor team.

11. Obtain and review a written report from the independent auditor at least annually describing (a) the independent auditor’s internal quality-control procedures, (b) any material issues raised by the most recent internal quality-control review, or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities within the preceding five years respecting one or more independent audits carried out by the firm, (c) any steps taken to deal with any such issues, and (d) consistent with Independence Standards Board No. 1, all relationships between the independent auditor and Minrad. Evaluate the qualifications, performance and independence of the independent auditor, including considering whether the auditor’s quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor’s independence, and taking into account the opinions of management and those responsible for the internal audit function. The Committee will actively engage in a dialogue with the auditor with respect to any disclosed relationaships or services that may impact the objectivity and independence of the auditor taking, or recommending that the full Board take, appropriate action to oversee the independence of the outside auditor. The Committee will present its conclusions with respect to the independent auditor to the Board.

12. Monitor the rotation of the lead (or coordinating) audit partner having primary responsibility for the audit and the audit partner responsible for reviewing the audit as required by law.

13. Recommend to the Board policies for Minrad’s hiring of employees or former employees of the independent auditor who participated in any capacity in the audit of Minrad.

14. Meet with the independent auditor prior to the audit to discuss the planning and staffing of the audit.

Oversight of Minrad’s Internal Audit Function(s)

15. Review with management and those responsible for the internal audit function(s) (in separate meetings, as appropriate) the operation of the internal audit function(s) including the quality and adequacy of internal controls that could significantly affect Minrad’s financial statements.

16. Review the significant reports to management prepared by the internal auditing function(s) and management’s responses.

17. Discuss with the independent auditor and management the internal audit function(s)’s responsibilities, budget and staffing and any recommended changes in the planned scope of the internal audit.

Compliance Oversight Responsibilities

18. Review reports and disclosures of insider and affiliated party transactions.

19. Advise the Board with respect to Minrad’s policies and procedures regarding compliance with applicable laws and regulations, including disclosure controls and procedures, and with applicable Minrad codes of conduct, including its Code of Ethics for Senior Financial Officers.

20. Discuss with management and the independent auditor any correspondence with regulators or governmental agencies and any published reports that raise material issues regarding Minrad’s financial statements or accounting policies.

21. Monitor litigation or other legal matters that could have a material impact on Minrad’s financial condition or results of operations.

22. Report regularly to the Board on its meetings and discussions and review with the Board significant issues or concerns that arise at meetings of the Committee, including its evaluation of the independent auditor.

Audit Committee’s Role

While the Committee has the responsibilities and functions set forth in this Charter, it serves in an oversight capacity and, as such, it is not the duty of the Committee to plan or conduct audits or to determine that Minrad’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 auditor.

AUDIT COMMITTEE
APPENDIX (A)

Independent Directors.

AMEX rules require that each member of the Audit Committee must (a) satisfy the independence standards of Rule 10A-3 under the Securities Exchange Act of 1934 (the “Exchange Act”), and (b) be affirmatively determined by the Board of Directors not to have a material relationship with the Minrad that would interfere with the exercise of independent judgment.

(a) The AMEX rules further provide the following non-exclusive list of persons who shall not be considered independent:

(1) a director who is, or during the past three years was, employed by Minrad or by any parent or subsidiary of Minrad, other than prior employment as an interim Chairman or CEO;

(2) a director who accepts or has an immediate family member who accepts any payment from Minrad or any parent or subsidiary of Minrad in excess of $60,000 during the current or any of the past three fiscal years, other than compensation for board service, payments arising solely from investments in the Companies securities, compensation paid to an immediate family member who is a non-executive employee of Minrad or a parent or subsidiary of Minrad, compensation received for former service as an interim Chairman or CEO, benefits under a tax-qualified retirement plan, nondiscretionary compensation, or loans permitted under Section 13(k) of the Exchange Act;

(3) a director who is an immediate family member of an individual who is, or has been in any of the past three years, employed by Minrad or any parent or subsidiary of Minrad as an executive officer;

(4) a director who is, or has an immediate family member who is, a partner in, controlling shareholder or executive officer of, any organization to which Minrad made, or from which Minrad received, payments (other than those arising solely from investments in Minrad’s securities or payment under non-discretionary charitable contribution matching programs) that exceed 5% of the organization’s consolidated gross revenues for that year, or $200,000, whichever is more, in any of the most recent three fiscal years;

(5) a director of Minrad who is, or has an immediate family member who is, employed as an executive officer of another entity where at any time during the most recent three fiscal years any of Minrad’s executive officers serve on that entity’s compensation committee; or

(6) a director who is, or has an immediate family member who is, a current partner of Minrad’s outside auditor, or was a partner or employee of Minrad’s outside auditor who worked on Minrad’s audit at any time during any of the past three years.

(b) Rule 10A-3 under the Exchange Act provides that in order to be considered independent for purposes of the audit committee requirements under that rule, a member of an audit committee may not, other than in his or her capacity as a member of the audit committee, the board of directors, or any other board committee:

(1) accept directly or indirectly any consulting, advisory, or other compensatory fee from the company or any subsidiary of the company, provided that, unless the rules of the AMEX shall provide otherwise, compensatory fees do not include the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation) for prior service with the company (provided that the compensation is not contingent in any way on continued service); or

(2) be an affiliated person of the issuer or any subsidiary thereof.

Notwithstanding the AMEX requirements in (a)(1) through (6) above, one director who is not independent under (a)(1) through (6) but who satisfies the requirements of Rule 10A-3 under the Exchange Act and is not a current officer or employee or immediate family member of such an officer or employee, may be appointed to the Audit Committee, if the Board of Directors, under exceptional and limited circumstances, determines that membership on the committee by the individual is required by the best interests of the company and its shareholders, and the Board discloses, in the next annual proxy statement (or in the next annual report on SEC Form 10-K or equivalent if the Company does not file an annual proxy statement) subsequent to such determination, the nature of the relationship and the reasons for that determination. A director appointed to the Audit Committee pursuant to this exception may not serve for in excess of two consecutive years and may not chair the Audit Committee.

Audit Committee Financial Expert

(1) An understanding of generally accepted accounting principles and financial statements;

(2) The ability to assess the general application of such principles in connection with the accounting for estimates, accruals and reserves;

(3) Experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised by Minrad’s financial statements, or experience actively supervising one or more persons engaged in such activities;

(4) An understanding of internal controls and procedures for financial reporting; and

(5) An understanding of audit committee functions.

An audit committee financial committee expert must have acquired such attributes through any one or more of the following:

(1) Education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions;

(2) Experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions;

(3) Experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or

(4) Other relevant experience.