| Report of the Audit Committee and Audit Fees||12-13|
| Independent Auditors||13|
| Description of Audit Committee||10|
This excerpt taken from the FMSB DEF 14A filed Mar 17, 2005.
Audit Committee The Audit Committee is responsible for retaining the independent auditor for the Company and reviews the audit results and services of the independent auditors and the Companys internal controls. The Committee meets periodically with the independent auditors. It also monitors compliance with regulatory and audit requirements and changes in accounting policies and procedures. During 2004, the Audit Committee made recommendations to the Board as it deemed appropriate, including the appointment of the independent auditors and changes in accounting policies and procedures. During 2004, the Audit Committee was composed of Directors Doud, Florence, Rowley and Sprague, and it met nine times. The functions of the Audit Committee and its activities during fiscal 2004 are described below under the heading, Report of the Audit Committee and Audit Fees. The Audit Committee Charter was revised effective September 23, 2004, and a copy is attached as Appendix A.
The Board has examined the composition of the Audit Committee in light of the Securities and Exchange Commission (SEC) and NASDAQ rules governing audit committees. Based upon this examination, the Board confirmed that all members of the Audit Committee are independent within the meaning of the current SEC and NASDAQ rules regarding audit committee members. The Board took note
that Richard Sprague, Chairman of the Audit Committee, may not meet the safe harbor test for a determination regarding the SECs definition for an independent audit committee member. Mr. Sprague is an executive officer and a director of Bellevue Square Managers, Inc., which is affiliated with persons, including F. Kemper Freeman, Jr., which beneficially own or control more than 10% of the Companys common shares. The Board determined to its satisfaction that Mr. Sprague is not an affiliate of this Company, and the Company has certified that Mr. Sprague meets the criteria for independence of SEC Rule 10A-3 and the NASDAQ rules. He is expected to continue as Chair of the Audit Committee.
The Board of Directors has determined that Audit Committee member, James J. Doud, Jr., meets the definition of an audit committee financial expert as that term has been defined by the SEC. As noted above, Mr. Doud is an independent member of the Board as that term is defined by the SEC and NASDAQ rules. The identification of a person as an audit committee financial expert does not impose any duties, obligations or liabilities that are greater than those imposed on all members of the Audit Committee and the Board of Directors, and does not affect the duties, obligations or liabilities of any other member of the Audit Committee or the Board of Directors.