2003 Audit Charter: SOL

Purpose

The primary purpose of the Audit Committee is to assist the Board of Directors in fulfilling its responsibility of monitoring:


  • the integrity of SOLA's financial statements;

  • the qualifications, independence and performance of SOLA's independent auditor;

  • the performance of SOLA's operational audit function; and

  • SOLA's compliance with legal and regulatory requirements.


    The Committee shall prepare the report required by the rules of the Securities and Exchange Commission (the "SEC") to be included in SOLA's annual proxy statement.

    Membership

    The Board shall determine membership of the Committee, which shall be comprised of not less than three Board members, each of whom shall meet the independence and experience requirements of the New York Stock Exchange, Section 10A(m)(3) of the Securities Exchange Act of 1934 (the "Exchange Act") and the rules and regulations of the SEC. Unless a Chair is elected by the full Board, a majority of the members of the Committee may designate a Chair.

    Accordingly, all the members will be directors:


    1. Who have no relationship to SOLA that may interfere with the exercise of their independence from management and the company; and

    2. Who are financially literate or who become financially literate within a reasonable period of time after appointment to the Committee. In addition, at least one member of the Committee shall have accounting or related financial management expertise, as the Board interprets such qualification in its business judgment. The Board shall determine whether at least one member of the Committee qualifies as an "audit committee financial expert" as defined by the SEC.


    Committee members shall not simultaneously serve on the audit committees of more than two other public companies.

    Meetings

    The Committee shall meet at least quarterly, or more frequently as it determines. The Committee shall meet periodically with management, the operational auditors and the independent auditor in separate executive sessions. The Committee may request that any SOLA officer or employee or SOLA's outside counsel or independent auditor attend a Committee meeting or meet with any members of, or consultants to, the Committee.

    Authority and Responsibilities

    Generally

    1. The Committee shall have the sole authority to appoint or replace SOLA's independent auditor. The Committee shall be directly responsible for the compensation and oversight of the work of the independent auditor for the purpose of preparing or issuing an audit report or related work, including the resolution of any disagreements between management and the independent auditor regarding financial reporting. The independent auditor shall report directly to the Committee. The Company shall provide appropriate funding, as
    determined by the Committee, for payment of compensation to the independent auditor for the purpose of rendering or issuing an audit report.

    2. The Committee shall maintain a policy pursuant to which the Committee reviews and pre-approves audit and permitted non-audit services (including the fees and terms thereof) to be provided to SOLA by the independent auditor, subject to the de minimis exceptions for non-audit services described in Section 10A(i)(1)(B) of the Exchange Act that are approved by the Committee prior to the completion of the audit. The Chair of the Committee, or any other member or members designated by the Committee, shall be authorized to pre-approve non-audit services, provided that any pre-approval shall be reported to the full Committee at its next scheduled meeting.

    3. The Committee shall have the authority, as it deems necessary or appropriate, to retain independent legal, accounting or other advisors. The Company shall provide appropriate funding, as determined by the Committee, for payment of compensation to any advisors employed by the Committee. The Committee shall have the power to conduct or authorize investigations into any matters within its scope of responsibility, and shall have full access to all books, records, facilities and personnel of SOLA in connection with any such investigation.

    4. The Committee shall make regular reports to the Board and perform an annual self-assessment of the Committee's own performance.

    5. The Committee shall review and assess the adequacy of this Charter at least annually and recommend any changes to the Board.

    6. The Committee shall perform such other functions as assigned by law, SOLA's Certificate of Incorporation or Bylaws, or the Board.

    7. The Committee may delegate any of its responsibilities to subcommittees as it deems appropriate in its sole discretion.

    Financial Statement and Disclosure Matters

    The Committee, to the extent it deems necessary or appropriate, shall:


    1. Review and discuss with management and the independent auditor SOLA's annual audited financial statements (including related footnotes and disclosures under 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 SOLA's Annual Report on Form 10-K.

    2. Review and discuss with management and the independent auditor SOLA's quarterly financial statements (including related footnotes, disclosures under Management's Discussion and Analysis of Financial Condition and Results of Operations and the results of the independent auditor's review of the quarterly financial statements) prior to the filing of the Quarterly Report on Form 10-Q.

    3. Review any disclosures made to the Committee by SOLA's CEO and CFO during the certification process for Forms 10-K and 10-Q about any significant deficiencies in the design or operation of internal controls or material weaknesses therein and any corrective actions taken, and any fraud involving management or other employees who have a significant role in SOLA's internal controls.

    4. Review and discuss with management and the independent auditor:



  • Any significant changes to generally accepted accounting principles ("GAAP") or critical accounting policies or standards.

  • Any major issues regarding accounting principles and financial statement presentations, including any significant changes in SOLA's selection or application of accounting principles, any major issues as to the adequacy of SOLA's internal controls and any special steps adopted in light of material control deficiencies.


  • The effect of regulatory and accounting initiatives and, if applicable, off-balance sheet structures, on SOLA's financial statements.



    5. Discuss with management:



  • The type and presentation of information to be included in earnings press releases, as well as any financial information and earnings guidance provided to analysts and rating agencies. This discussion may be of a general nature (e.g., as to the types of information to be disclosed and the types of presentations to be made), and advance review of each disclosure is not required.

  • SOLA's policies with respect to risk assessment and risk management, as well as SOLA's major financial risk exposures and the steps management has taken to monitor and control those exposures.



    6. Review and discuss quarterly reports from the independent auditor regarding:



  • All critical accounting policies and practices to be used.

  • All alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of those alternative treatments, and the treatment preferred by the independent auditor.

  • Other material written communications between the independent auditor and management, such as a management letter or schedule of unadjusted differences.



    7. 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 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 and management's response.


    SOLA's Relationship with its Independent Auditor

    The Committee, to the extent it deems necessary or appropriate, shall:


    1. At least annually, obtain and review a report by the independent auditor describing:



  • The auditor's internal quality-control procedures;

  • Any material issues raised by the most recent internal quality-control review or peer review of the auditor, 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 auditor;

  • Steps taken to deal with any such issues; and

  • All relationships between the independent auditor and SOLA (consistent with Independence Standards Board Standard No. 1).



    2. At least annually, evaluate and report to the Board regarding the Committee's assessment of the independent auditor's qualifications, performance (including the lead partner) and independence, taking into account the opinions of management and internal auditors. Consideration shall be given as to whether the auditor's quality controls are adequate and the provision of permitted non-audit services is compatible with maintaining the auditor's independence.

    3. Monitor the regular rotation of the audit partners as required by law.

    4. Consider whether, in order to assure continuing auditor independence, there should be regular rotation of the independent audit firm. The Committee shall present its conclusions to the Board.

    5. Set clear policies compliant with applicable laws or regulations for hiring employees or former employees of the independent auditor.

    6. Meet with the independent auditor prior to the audit to discuss the planning, scope and staffing of the audit.


    Operational Audit Function

    The Committee, to the extent it deems necessary or appropriate, shall:


    1. Review and advise on the appointment or replacement of the director of operational audit.

    2. Periodically review with the director of operational audit any significant difficulties, disagreements with management or scope restrictions encountered.

    3. Review any significant reports to management prepared by operational audit and management's responses.

    4. Discuss with the independent auditor and management the performance, responsibilities, work plan, budget and staffing of the operational audit function, as well as any recommended changes in the planned scope of the operational audit. Consideration shall be given to independence, objectivity and authority of the operational audit function.


    Compliance Oversight


    The Committee, to the extent it deems necessary or appropriate, shall:

    1. Obtain assurance from the independent auditor that it is not aware of any illegal acts that would implicate Section 10A(b) of the Exchange Act.

    2. Establish procedures for the receipt, retention and treatment of complaints received by SOLA regarding accounting, internal accounting controls or auditing matters, and the confidential, anonymous submission by SOLA employees of concerns regarding questionable accounting or auditing matters.

    3. Periodically review and advise the Board with respect to SOLA's policies and procedures regarding compliance with applicable laws and regulations and with SOLA's Code of Conduct.

    4. Evaluate any actual or potential conflicts of interest, including related party transactions, under SOLA's Code of Conduct or otherwise with respect to SOLA's executive officers or directors and recommend to the Board any action to be taken.

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

    Limitation of the Role of the Audit Committee

    While the Committee has the authority and responsibilities described in this Charter, it is not the duty of the Committee to plan or conduct audits or to determine that SOLA's financial statements and disclosures are complete, accurate and in accordance with GAAP and applicable rules and regulations. These are the responsibilities of management and the independent auditor.

    This charter was amended June 9, 2003.