SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934.
(Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
[X] 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant toss.240.14a-12
COMMUNITY BANKSHARES, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No Fee Required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
5) Total fee paid
Fee paid previously with preliminary materials
Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------
3) Filing Party:
------------------------------------------------------
4) Date Filed:
--------------------------------------------------------
COMMUNITY BANKSHARES, INC.
791 Broughton Street
Post Office Box 2086
Orangeburg, South Carolina 29115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 17, 2004
TO THE SHAREHOLDERS:
Notice is hereby given that the Annual Meeting of the Shareholders (the
"Annual Meeting") of Community Bankshares, Inc., a South Carolina corporation
(the "Company"), will be held at Orangeburg National Bank, 791 Broughton Street,
Orangeburg, South Carolina at 3:00 p.m., on Monday, May 17, 2004, for the
following purposes:
(1) To elect six directors to each serve three-year terms and one director
to serve a two year term;
(2) To vote on an amendment to the 1997 Stock Option Plan to increase by
300,000 shares the total number of shares of Common Stock reserved for
issuance under the Plan; and
(3) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
Only record holders of Common Stock of the Company at the close of
business on April 1, 2004, are entitled to notice of and to vote at the Annual
Meeting or any adjournment thereof.
You are cordially invited and urged to attend the Annual Meeting in
person. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE
COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE ENCLOSED PROXY IN THE ENCLOSED,
SELF-ADDRESSED, STAMPED ENVELOPE. IF YOU NEED ASSISTANCE IN COMPLETING YOUR
PROXY, PLEASE CALL THE COMPANY AT (803) 535-1060 or (888) 329-1060. IF YOU ARE
THE RECORD OWNER OF YOUR SHARES AND ATTEND THE ANNUAL MEETING AND DESIRE TO
REVOKE YOUR PROXY AND VOTE IN PERSON YOU MAY DO SO. IN ANY EVENT, A PROXY MAY BE
REVOKED BY THE RECORD OWNER OF SHARES AT ANY TIME BEFORE IT IS EXERCISED.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF ALL THE PROPOSALS PRESENTED.
By Order of the Board of Directors
William W. Traynham
President
Orangeburg, South Carolina
April 15, 2004
Community Bankshares, Inc.
791 Broughton Street
Post Office Box 2086
Orangeburg, South Carolina 29115
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held May 17, 2004
-------------------------------------------------
This Proxy Statement is furnished to shareholders of Community Bankshares,
Inc., a South Carolina corporation (herein, unless the context otherwise
requires, together with its subsidiaries, the "Company"), in connection with the
solicitation of proxies by the Company's Board of Directors for use at the
Annual Meeting of Shareholders to be held at Orangeburg National Bank, 791
Broughton Street, Orangeburg, South Carolina at 3:00 p.m. on Monday, May 17,
2004, or any adjournment thereof (the "Annual Meeting"), for the purposes set
forth in the accompanying Notice of Annual Meeting of Shareholders.
Solicitation of proxies may be made in person or by mail, telephone or
other electronic means by directors, officers and regular employees of the
Company. The Company may also ask banking institutions, brokerage firms,
custodians, nominees and fiduciaries to forward solicitation materials to the
beneficial owners of Common Stock of the Company held of record by such persons,
and the Company will reimburse the reasonable forwarding expenses. The cost of
solicitation of proxies will be paid by the Company. This Proxy Statement was
first mailed to shareholders on or about April 15, 2004.
The Company's principal executive offices are located at 791 Broughton
Street, Orangeburg, South Carolina 29115. The Company's telephone number is
(803) 535-1060 or (888) 329-1060.
ANNUAL REPORT
The Annual Report on Form 10-K covering the Company's fiscal year ended
December 31, 2003, including financial statements, constitutes the Company's
Annual Report to Shareholders and is included (without exhibits) with this Proxy
Statement. Such Annual Report does not form any part of the material for
solicitation of proxies.
REVOCATION OF PROXY
Any record shareholder who returns the accompanying proxy may revoke such
proxy at any time prior to its exercise (a) by giving written notice to the
Company of such revocation, (b) by voting in person at the meeting, or (c) by
executing and delivering to the Company a later dated proxy. Attendance at the
Annual Meeting will not in itself constitute revocation of a proxy. Any written
notice or proxy revoking a proxy should be sent to Community Bankshares, Inc.,
791 Broughton Street, Orangeburg, South Carolina 29115, Attention: William W.
Traynham, President. Written notice of revocation or delivery of a later dated
proxy will be effective upon receipt thereof by the Company.
QUORUM AND VOTING
The Company's only voting security is its no par value Common Stock
("Common Stock"), each share of which entitles the holder thereof to one vote on
each matter to come before the Annual Meeting. At the close of business on April
1, 2004, (the "Record Date"), the Company had issued and outstanding 4,336,112
shares of Common Stock, which were held of record by approximately 2,134
persons. Only shareholders of record at the close of business on the Record Date
are entitled to notice of and to vote on matters that come before the Annual
Meeting. Notwithstanding the Record Date specified above, the Company's stock
transfer books will not be closed and shares of the Common Stock may be
transferred subsequent to the Record Date. However, all votes must be cast in
the names of holders of record on the Record Date.
The presence in person or by proxy of the holders of one-third of the
outstanding shares of Common Stock entitled to vote at the Annual Meeting is
necessary to constitute a quorum at the Annual Meeting. If a share is
represented for any purpose at the Annual Meeting by the presence of the
registered owner or a person holding a valid proxy for the registered owner, it
is deemed to be present for the purposes of establishing a quorum. Therefore,
valid proxies which are marked "Abstain" or "Withhold" or as to which no vote is
marked, including proxies submitted by brokers that are the record owners of
shares (so-called "broker non-votes"), will be included in determining the
number of votes present or represented at the Annual Meeting. If a quorum is not
present or represented at the meeting, the shareholders entitled to vote,
present in person or represented by proxy, have the power to adjourn the meeting
from time to time, without notice other than an announcement at the meeting,
until a quorum is present or represented. Directors, officers and regular
employees of the Company may solicit proxies for the reconvened meeting in
person or by mail, telephone or other electronic means. At any such reconvened
meeting at which a quorum is present or represented, any business may be
transacted that might have been transacted at the meeting as originally noticed.
If a quorum is present at the meeting, directors will be elected by a
plurality of the votes cast by shares present and entitled to vote at the
meeting. Votes that are withheld or shares that are not voted in the election of
directors will have no effect on the outcome of election of directors.
Cumulative voting will not be permitted.
If a quorum is present, all other matters which may be considered and
acted upon by the holders of Common Stock at the Annual Meeting, including
amendment of the 1997 Stock Option Plan, will be approved if the votes cast in
favor of the proposal at the Annual Meeting exceed the votes cast against the
proposal.
ACTIONS TO BE TAKEN BY THE PROXIES
If the shareholder appropriately specifies how the proxy is to be voted,
it will be voted in accordance with the shareholder's specifications. If the
shareholder does not specify how the proxy is to be voted, the proxy will be
voted "FOR" the election of the persons named in this Proxy Statement as the
Board of Directors' nominees for election to the Board of Directors and "FOR"
amendment of the 1997 Stock Option Plan. As to any other matter of business
which may be brought before the Annual Meeting, a vote may be cast pursuant to
the accompanying proxy in accordance with the best judgment of the persons
voting the same, but the Board of Directors does not know of any such other
business.
SHAREHOLDER PROPOSALS
Any shareholder of the Company who wishes to present a proposal for action
at the 2005 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company, 791 Broughton Street, Orangeburg, South
Carolina 29115, Attention: William W. Traynham, President. Any shareholder who
wishes for the Company to include any such proposal in its proxy statement and
form of proxy for the 2005 Annual Meeting of Shareholders must deliver the
proposal to the executive offices of the Company to Mr. Traynham's attention no
later than December 17, 2004. If any shareholder proposal is not received by Mr.
Traynham by March 1, 2005, proxies solicited by management of the Company will
be voted on the proposal in the discretion of the designated proxy agents. Only
proper proposals that are timely received will be included in the Company's
proxy statement and proxy.
2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 2003, the number and
percentage of outstanding shares beneficially owned by (i) each director and
director nominee of the Company, (ii) each person named in the Summary
Compensation Table, and (iii) all executive officers and directors of the
Company as a group. No person is known by the Company to own more than 5% of the
outstanding Common Stock.
Number of % of
Shares Common
Position in the Company Beneficially Stock
Name and the Banks* Owned Ownership**
---- -------------- ----- -----------
E. J. Ayers, Jr. Director CBI, ONB, SNB, FNB, BR and CRM, 91,280 (1) 2.10%
Chairman CRM, Chairman and Chief Executive
Officer of CBI
Keith W. Buckhouse Director CBI and FNB, President and Chief - (2) **
Executive Officer of FNB
Alvis J. Bynum Director CBI and SNB 32,685 (3) **
Martha Rose C. Carson Director CBI and ONB 66,629 (4) 1.53%
Anna O. Dantzler Director CBI and ONB 97,500 (5) 2.25%
A. Wade Douroux Director CBI and CRM, President and Chief 64,818 1.50%
Executive Officer of CRM
Thomas B. Edmunds Director CBI and BR 20,000 (6) **
J. M. Guthrie Director CBI and ONB, Chairman of ONB, 170,000 (7) 3.92%
Chairman Executive Committee of CBI
William A. Harwell Director CBI and BR, President and Chief 28,862 (8) **
Executive Officer of BR
Richard L. Havekost Director CBI and FNB 12,450 (9) **
Phil P. Leventis Director CBI and SNB, Chairman of SNB 44,360 (10) 1.02%
J. V. Nicholson, Jr. Director CBI and Chairman of BR 135,000 (11) 3.12%
William H. Nock Director CBI and SNB, Chief Executive Officer 65,409 (12) 1.50%
and President of SNB
Samuel F. Reid, Jr. Director CBI and ONB 53,702 (13) 1.24%
William W. Traynham Director CBI, ONB, SNB, FNB, BR, and CRM, 60,447 (14) 1.39%
President and Chief Financial Officer of CBI
J. Otto Warren, Jr. Director CBI and ONB, Vice Chairman of CBI 176,521 (15) 4.07%
Wm. Reynolds Williams Director CBI and FNB, 12,188 (16) **
Chairman of FNB
Michael A. Wolfe Director CBI and ONB, Chief Executive Officer 56,741 (17) 1.30%
and President of ONB
All executive officers and 1,188,592 (18) 26.57%
directors as a group (18 persons)
*CBI - the Company; ONB - Orangeburg National Bank; SNB - Sumter National Bank;
FNB - Florence National Bank; BR - Bank of Ridgeway; CRM - Community Resource
Mortgage
**Percentages not shown are less than one percent.
3
(1) Includes 1,680 shares owned by Nancy R. Ayers, Mr. Ayers' wife; 2,030
shares owned by an IRA for the benefit of Nancy R. Ayers; 1,680 shares held
by an IRA for the benefit of Mr. Ayers; and 10,250 shares subject to stock
options which are currently exercisable.
(2) Mr. Buckhouse was appointed President of Florence National Bank on March 1,
2004, and was appointed to the Board of Directors of the Company on March
29, 2004. At the time this proxy statement was prepared he did not own any
shares in the Company.
(3) Includes 5,874 shares owned by Marjorie F. Bynum, Mr. Bynum's wife; and
8,150 shares subject to stock options which are currently exercisable.
(4) Includes 10,250 shares subject to stock options which are currently
exercisable.
(5) Includes 10,500 shares held jointly with Charlton Ardis, Mrs. Dantzler's
son; and 10,250 shares subject to stock options which are currently
exercisable.
(6) Includes 10,000 shares held by Lucy Edmunds, Mr. Edmund's wife.
(7) Includes 159,750 shares owned jointly with Lou D. Guthrie, Mr. Guthrie's
wife; and 10,250 shares subject to stock options which are currently
exercisable.
(8) Includes 14,100 shares held jointly with Kathyrn Harwell, Mr. Harwell's
wife; 9,000 shares held by Smith Barney in an IRA for the benefit of Mr.
Harwell; and 4,100 shares held by Smith Barney in an IRA for the benefit of
Mrs. Harwell.
(9) Includes 4,050 shares subject to stock options which are currently
exercisable.
(10) Includes 11,347 owned by LPT Enterprises, a limited partnership; 2,483
shares owned by an IRA for the benefit of Mr. Leventis; 22,380 shares held
by Raymond James in an IRA for the benefit of Mr. Leventis; and 8,150
shares subject to stock options that are currently exercisable.
(11) Includes 67,500 shares owned by Ellen Nicholson, Mr. Nicholson's wife.
(12) Includes 1,415 shares owned by the Nock Family Trust; 493 shares owned by
an IRA for the benefit of Linda H. Nock, Mr. Nock's wife; 41,546 shares
held by Paine Webber for benefit of Mr. Nock; 2,889 shares held by Scott &
Stringfellow for the benefit of Linda Nock; and 18,650 shares subject to
stock options which are currently exercisable.
(13) Includes 14,052 shares held by Mr. Reid as trustee for his children; 16,800
shares owned by Rosa G. Reid, Mr. Reid's wife; and 10,250 shares subject to
stock options which are currently exercisable.
(14) Includes 18,436 shares owned jointly with Margaret S. Traynham, Mr.
Traynham's wife; 2,122 shares owned jointly with children; and 18,650
shares subject to stock options which are currently exercisable.
(15) Includes 53,010 shares owned by Mildred J. Warren, Mr. Warren's wife; and
10,250 shares subject to stock options which are currently exercisable.
(16) Includes 4,738 shares owned jointly with Mary T. Williams, Mr. Williams'
wife; and 4,050 shares subject to stock options which are currently
exercisable.
(17) Includes 2,241 shares owned by Joye McGrady Wolfe as custodian for minor
children; and 18,650 shares subject to stock options which are currently
exercisable.
(18) Includes 141,850 shares subject to stock options which are currently
exercisable.
ELECTION OF DIRECTORS
The Bylaws of the Company provide for a Board of Directors consisting of
not less than nine nor more than twenty-four directors divided into three
classes each serving three-year staggered terms. The number of directors is
currently fixed by the Board at eighteen. Six directors have been nominated for
re-election by the shareholders at the 2004 Annual Meeting to serve for
three-year terms and one director has been nominated to serve for a two year
term. All directors serve until their successors are elected and qualified to
serve. All of the nominees are presently directors of the Company and have
served continuously since first becoming directors.
Should any of the nominees become unable or unwilling to serve upon
election, the proxy agents intend to vote for the election, in his or her stead,
of such other person or persons as the Board of Directors of the Company may
recommend. The Board of Directors has no reason to believe that any of the
proposed directors will be unable or unwilling to serve if elected.
4
MANAGEMENT
Directors
The table below sets forth the age, business experience for the past five
years, and term in office for each of the directors of the Company. Each of the
directors of the Company is also a director of one or more of the Company's
subsidiaries as shown in the table on page 3. There are no family relationships
among any of the directors or executive officers of the Company.
Name, Address (and age) Director Since Business Experience During the Past 5 Years
----------------------- --------------- -------------------------------------------
Nominees for Election to Serve Until 2007
Anna O. Dantzler (64) 1994 Retired since 1989; former customer service representative
Orangeburg, S.C. for Orangeburg National Bank
William A. Harwell (55) 2002 President and Chief Executive Officer of Bank of Ridgeway
Winnsboro, S.C. since 1982; President and Chief Executive Officer of Ridgeway Bancshares
from 1999 to June 2002
Richard L. Havekost (63) 1998 Licensed professional engineer; Principal in Raldex, Inc.
Florence S.C. (investor in motel properties); Principal and Secretary of RDBP, Inc.
(retail beverage store); 1967-1993, employed by Nucor Corp. in various
capacities, including Vice President of Nucor Corp. and General Manager
of the Florence Division
William H. Nock (58) 1996 President and Chief Executive Officer, Sumter National Bank
Sumter, S.C. since June 1996
Samuel F. Reid, Jr. (55) 1994 Attorney, Horger, Barnwell & Reid
Orangeburg, S.C.
William W. Traynham (48) 1992* President and Chief Financial Officer of the Company
Orangeburg, S.C.
Nominee for Election to Serve until 2006
Keith W. Buckhouse (42) 2004 President and Chief Executive Officer of Florence National
Florence, S.C. Bank since March 2004; Pee Dee Area Executive for Carolina First Bank from
April 2003 to February 2004. Florence City Executive for Carolina First Bank
from 1996 to April 2003.
Current Directors Whose Terms Expire in 2006
E. J. Ayers, Jr. (71) 1987* Chairman of the Board of Directors and Chief Executive
Orangeburg, S.C. Officer of the Company since January, 1999; retired President, C.M. Dukes
Oil Co., oil distributor and auto parts supplier
Alvis J. Bynum (66) 1996 Retired President, Cities Supply Co., waterwork supplies
Sumter, S.C. distributor
J. Otto Warren, Jr. (76) 1987* President, Warren and Griffin Lumber Co., Inc. and Home
Orangeburg, S.C. Builder's Supply Co., Inc., builders' supply and lumber
manufacturer
5
J. V. Nicholson, Jr. (59) 2002 Retired dentist; Chairman Bank of Ridgeway since 2001;
Ridgeway, S.C. Chairman Ridgeway Bankshares from 2001 to June 2002
Current Directors Whose Terms Expire in 2005
Thomas B. Edmunds (66) 2002 Retired financial consultant, Merrill Lynch
Columbia, S.C.
Martha Rose C. Carson (68) 1987* President, Marty Rae, Inc., apparel and furniture retailers
Orangeburg, S.C.
A. Wade Douroux (32) 2001 President and Chief Executive Officer, Community Resource
Columbia, S.C. Mortgage, Inc.
J. M. Guthrie (76) 1987* President, Superior Motors, Inc., Vice President, Superior
Orangeburg, S.C. Honda car dealerships; Chairman of the Board of Directors of Orangeburg
National Bank since March 1998
Phil P. Leventis (58) 1996 President and Chief Executive Officer, Dixie Central
Sumter, S.C. Distributing Co., Inc., wholesale beverage distributor; member of the
South Carolina State Senate; Chairman of the Board of Directors of Sumter
National Bank since June 1996
Wm. Reynolds Williams (58) 1998 Attorney, Managing Partner, Willcox, Buyck & Williams,
Florence, S.C. P.A.; Chairman of the Board of Directors of Florence National Bank since
July 1998
Michael A. Wolfe (46) 1992* President of Orangeburg National Bank since 1992,
Orangeburg, S.C. Chief Executive Officer of Orangeburg National Bank since June 1996
--------------------
* Includes service as Director of Orangeburg National Bank prior to formation of
the Company in 1992.
Executive Officers
Information about Mr. Ayers, the Chief Executive Officer of the
Company, and Mr. Traynham, the President and Chief Financial Officer of the
Company, is set forth above under "--Directors." Mr. Ayers and Mr. Traynham are
the only executive officers of the Company.
Attendance at Meetings of the Board of Directors and Shareholder Meetings
The Board of Directors of the Company held 12 meetings during 2003.
Each director, except Mr. Williams, attended at least 75% of the total number of
meetings of the Board of Directors during the period in 2003 for which he served
as director.
The Company encourages, but does not require, its directors to attend
annual meetings of shareholders. Last year, 14 of the Company's directors
attended the annual meeting of shareholders.
6
Committees of the Board of Directors
Audit Committee
The Company has an Audit Committee established in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934. The Audit Committee
is comprised of Alvis J. Bynum (chairman), Thomas B. Edmunds, Anna O. Dantzler,
and Richard L. Havekost, all of whom are non-employee directors. Each member of
the Audit Committee is independent as defined in Section 121 (A) of the American
Stock Exchange's listing standards, as modified or supplemented. The Audit
Committee is responsible for appointment of the independent auditors and
oversees the internal and external audit function. The Audit Committee met seven
times in 2003. The Audit Committee acts pursuant to a written charter adopted by
the Board of Directors, a copy of which is attached to this Proxy Statement as
Appendix A.
Compensation Committee
The Company has a Compensation Committee comprised of Richard L.
Havekost (chairman), Wm. Reynolds Williams, J. M. Guthrie, Samuel F. Reid, Phil
P. Leventis, Thomas B. Edmunds, J. V. Nicholson and Alvis J. Bynum. The
Compensation Committee makes recommendations to the Board of Directors
concerning the compensation for the senior officers of the Company. The
Compensation Committee met six times during 2003.
Nominating Committee
The Board of Directors does not have a separate nominating committee.
Rather, the entire Board of Directors acts as nominating committee. Based on the
Company's size, the small geographic area in which it does business and the
desirability of directors being a part of the communities served by the Company
and familiar with the Company's customers, the Board of Directors does not
believe the Company would derive any significant benefit from a separate
nominating committee. The members of the Board of Directors are not all
independent as defined in American Stock Exchange Company Guide, as modified or
supplemented. The Company does not have a Nominating Committee charter.
In recommending director candidates, the Board takes into consideration
such factors as it deems appropriate based on the Company's current needs. These
factors may include diversity, age, skills such as understanding of banking and
general finance, decision-making ability, inter-personal skills, experience with
businesses and other organizations of comparable size, community activities and
relationships, and the interrelationship between the candidate's experience and
business background, and other Board members' experience and business
background, as well as the candidate's ability to devote the required time and
effort to serve on the Board.
The Board will consider for nomination by the Board director candidates
recommended by shareholders if the shareholders comply with the following
requirements. If a shareholder wishes to recommend a candidate to the Board for
consideration as a Board of Directors' nominee, such shareholder must submit in
writing to the Board the recommended candidate's name, a brief resume setting
forth the recommended candidate's business and educational background and
qualifications for service, and a notarized consent signed by the recommended
candidate stating the recommended candidate's willingness to be nominated and to
serve. This information must be delivered to the Chairman of the Company at the
Company's address and must be received no later than January 15 in any year for
a potential candidate to be considered as a potential Board of Directors'
nominee. The Board may request further information if it determines a potential
candidate may be an appropriate nominee. Director candidates recommended by
shareholders that comply with these requirements will receive the same
consideration that the Board's candidates receive.
Director candidates recommended by shareholders will not be considered
for recommendation by the Board as potential Board of Directors' nominees if the
shareholder recommendations are received later than January 15 in any year.
However, shareholders may nominate director candidates for election at the
annual meeting, but no person who is not already a director may be elected at an
7
annual meeting of shareholders unless that person is nominated in writing at
least 30 days prior to the meeting. Such nominations, other than those made by
or on behalf of the existing management of the Company, must be made in writing
and must be delivered or mailed to the President of the Company, not less than
30 days prior to any meeting of Shareholders called for the election of
Directors. Nominations not made in accordance with this requirement may be
disregarded by the presiding officer of the meeting, and upon his instructions,
the vote tellers shall disregard all votes cast for each such nominee.
Shareholder Communications with the Board of Directors
Any shareholder who wishes to send communications to the Board of
Directors should mail them addressed to the intended recipient by name or
position in care of: Corporate Secretary, Community Bankshares, Inc., 791
Broughton Street, Orangeburg, South Carolina 29115. Upon receipt of any such
communications, the Corporate Secretary will determine the identity of the
intended recipient and whether the communication is an appropriate shareholder
communication. The Corporate Secretary will send all appropriate shareholder
communications to the intended recipient. An "appropriate shareholder
communication" is a communication from a person claiming to be a shareholder in
the communication the subject of which relates solely to the sender's interest
as a shareholder and not to any other personal or business interest.
In the case of communications addressed to the Board of Directors, the
Corporate Secretary will send appropriate shareholder communications to the
Chairman of the Board. In the case of communications addressed to the
independent or outside directors, the Corporate Secretary will send appropriate
shareholder communications to the Chairman of the Audit Committee. In the case
of communications addressed to committees of the board, the Corporate Secretary
will send appropriate shareholder communications to the Chairman of such
committee.
MANAGEMENT COMPENSATION
Executive Officer Compensation
The following table summarizes for the years ended December 31, 2003,
2002 and 2001 the compensation awarded to, earned by or paid to the Chairman and
Chief Executive Officer of the Company, the President of the Company and to the
current chief executive officers of the Company's subsidiaries who earned, were
awarded or paid compensation greater than $100,000 in 2003.
8
Summary Compensation Table
Long-Term
Compensation
------------
Awards
Annual ------
Compensation Securities
------------ Underlying All Other
Year Salary Bonus Options Compensation (1)
---- ------ ----- --- -------- ----------------
E. J. Ayers, Jr. 2003 $ 82,000 $25,554 5,000 $ 5,016
Chairman and Chief Executive Officer of 2002 82,000 28,182 - 5,965
Community Bankshares 2001 82,000 17,258 5,000 2,460
William W. Traynham 2003 $135,000 $42,072 5,000 $ 5,847
President of Community Bankshares 2002 135,000 46,396 - 5,151
2001 135,000 28,414 5,000 4,333
Michael A. Wolfe 2003 $135,000 $42,072 5,000 $ 5,847
President and Chief Executive Officer of 2002 135,000 46,396 - 5,307
Orangeburg National Bank 2001 135,000 28,414 5,000 5,869
William H. Nock 2003 $135,000 $42,072 5,000 $6,603
President and Chief Executive Officer of 2002 135,000 46,396 - 6,063
Sumter National Bank 2001 135,000 28,414 5,000 4,185
William A. Harwell (2) 2003 $135,000 $42,072 5,000 $4,986
President and Chief Executive Officer of 2002 67,500 23,198 - 4,098
Bank of Ridgeway
A. Wade Douroux (3) 2003 $125,000 $98,000 5,000 $3,000
President and Chief Executive Officer 2002 96,000 85,396 - 2,750
Community Resource Mortgage Inc 2001 16,000 11,833 - -
(1) This column sets forth Company contributions made on behalf of the named
executive officers to the 401(k) plan maintained by the Company for all
eligible employees.
(2) Mr. Harwell became a director and executive officer of the Company July 1,
2002.
(3) Mr. Douroux became a director and executive officer of the Company November
1, 2001.
9
Option Grants in Fiscal 2003
Individual Grants(1)
--------------------------------
Potential realizable
value at assumed
Number of % of total annual rates of stock
Securities Options price appreciation for
Underlying Granted to Exercise option term
Options Employees Price Expiration -----------
Name Granted in 2003 (per share) Date 5% 10%
---- ------- ------- ----------- ---- -- ---
E. J. Ayers 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
William A. Harwell 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
William H. Nock 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
William W. Traynham 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
Michael A. Wolfe 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
A. Wade Douroux 5,000 2.6% $18.85 October 27, 2013 $59,273 $150,210
(1) The options were granted at the fair market price on October 27, 2003, the
date of the grant, become exercisable on October 27, 2004, and expire on
October 27, 2013.
Aggregated Option Exercises in 2003 and 2003 Year End Option Values
The following table sets forth information about stock options held at
December 31, 2003 by the executive officers listed in the Summary Compensation
Table. No options were exercised in 2003.
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options 12/31/03 Options 12/31/03(1)
---------------- -------------------
Name Exercisable(2) Unexercisable Exercisable Unexercisable
---- -------------- ------------- ----------- -------------
E. J. Ayers 10,250 5,000 $ 74,955 $2,000
William A. Harwell - 5,000 $ - $2,000
William H. Nock 18,650 5,000 $172,647 $2,000
William W. Traynham 18,650 5,000 $172,647 $2,000
Michael A. Wolfe 18,650 5,000 $172,647 $2,000
A. Wade Douroux - 5,000 $ - $2,000
----------------------
(1) Based on a fair value of $19.25 per share, the closing price of a share of
the Company's common stock on December 31, 2003.
(2) Each of the above persons holds options for 5,000 shares at an exercise
price of $18.85 per share, which will not be exercisable before October 27,
2004. Each of the above persons, with the exception of Messrs. Harwell and
Douroux, also holds options for 5,250 shares at an exercise price of $12.83
per share and 5,000 shares at an exercise price of $11.00 per share.
Messrs. Nock, Traynham and Wolfe also each hold options for 8,400 shares at
an exercise price of $7.62 per share.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee for the year ended December
31, 2003 were Richard L. Havekost, Chair, Alvis J. Bynum, Thomas B. Edmunds, J.
V. Nicholson, J. M. Guthrie, Phil P. Leventis, Samuel F. Reid and Wm. Reynolds
Williams.
The law firm of Horger, Barnwell & Reid, L.L.P., in which Samuel F.
Reid is a partner, provided legal services to the Company in 2003, and is
continuing to provide legal services to the Company in 2004. The law firm of
10
Willcox, Buyck & Williams, P.A. in which Wm. Reynolds Williams is a member,
provided legal services to the Company in 2003, and is continuing to provide
legal services to the Company in 2004.
Board Report on Executive Officer Compensation
The Compensation Committee is required to report to the shareholders
the basis for the Compensation Committee's action in establishing compensation
for Community Bankshares' and its subsidiaries' executive officers.
The Community Bankshares' compensation program is designed to retain
and reward executive officers that are capable of leading Community Bankshares
in achieving its business objectives in an industry characterized by complexity,
competitiveness and change. The compensation of Community Bankshares' and its
subsidiaries' executive officers is reviewed and approved annually by the
Compensation Committee.
Annual compensation for Community Bankshares' Chief Executive Officer
and other senior executive officers consists of three elements.
o A base salary that is determined by individual contribution and
performance, and which is designed to provide a base level of
compensation comparable to that provided key executives of other
financial institutions of similar size and performance.
o A short-term cash incentive program that is directly linked to
individual performance and to Community Bankshares' performance.
One-half of the officer's incentive is determined by the applicable
subsidiary and one-half by Community Bankshares. Incentive payments
for the President and the Chief Executive Officer of Community
Bankshares are determined by the Board of Directors of Community
Bankshares.
o A long-term incentive program that provides from time to time stock
options to executive officers. Stock option grants provide an
incentive that focuses the executive's attention on managing Community
Bankshares from the perspective of a stockholder with an equity stake
in the business. The economic value of any stock option granted is
directly tied to the future performance of Community Bankshares' stock
and will provide value to the recipient only when the price of
Community Bankshares' stock increases over the option grant price.
For Community Bankshares' key executives, base salary is targeted to
approximate average salaries for individuals in similar positions with similar
levels of responsibilities who are employed by other banking organizations of
similar size and financial performance. During 2003, Community Bankshares set
the base salary for Mr. Ayers, the Chief Executive Officer, at $82,000. During
2003 the Committee set the base salary for each of Mr. Wolfe, President of
Orangeburg National Bank, Mr. Nock, President of Sumter National Bank, Mr.
Harwell, President of the Bank of Ridgeway, and Mr. Traynham, President of
Community Bankshares at $135,000.
The Compensation Committee annually reviews national, regional,
statewide, and local peer group salary data (to the extent available) to assist
it in setting appropriate levels of the Chief Executive Officer's and other
executive officers' base salaries. A second factor considered by the
Compensation Committee in setting and adjusting base salary was Community
Bankshares' 2003 financial performance. The Committee annually sets a base level
of consolidated income before taxes, which was $5.6 million for 2003. Income
earned above that level is multiplied by a factor of 4.5% to determine the
amount available for incentive payments to senior officers. This performance
indicator is updated annually based on current economic conditions and
expectations.
For Community Bankshares' key executives, the Compensation Committee
considered cash incentive bonuses based on 2003 results payable in 2004 that
ranged to over 30% of base salary. The plan is designed so that over time
incentive payments may be as much as 40% of base pay. For purposes of
determining the cash incentive bonus payable during 2004 for 2003, Community
Bankshares considered actual operating results and individual performances of
the involved officers. The Committee completed its recommendations and the
Boards of Directors approved them in February 2004.
11
During 2004, Messrs. Traynham, Wolfe, Nock and Harwell were each paid a
bonus of $42,072 for 2003 performance. During 2004, Mr. Ayers was paid a bonus
of $25,554 for 2003 performance.
In October 2003 the Board of Community Bankshares approved the grant of
5,000 stock options each to Messrs. Ayers, Traynham, Wolfe, Nock, and Harwell.
Mr. Douroux, President of Community Resource Mortgage, Inc., is a
senior officer of the company, but his compensation is considered outside the
parameters of the senior officer compensation plan. His base salary for 2003 was
$125,000. His bonus for 2003, paid in 2004, was $98,000 and was based on
mortgage loan production volume during the year. Mr. Douroux also received a
grant in October of 2003 of 5,000 stock options.
This report is provided as a summary of current Board practice with
regard to annual compensation review and authorization of executive officer
compensation and with respect to specific action taken for the Chief Executive
Officer.
Richard L. Havekost, Chairman Phil P. Leventis
Alvis J. Bynum J. V. Nicholson, Jr.
Thomas B. Edmunds Samuel F. Reid, Jr.
J. M. Guthrie Wm. Reynolds Williams
Shareholder Return Performance Graph
The Company is required to provide its shareholders with a line graph
comparing the Company's cumulative total shareholder return with a performance
indicator of the overall stock market and either a published industry index or a
Company-determined peer comparison. Shareholder return (measured through
increases in stock price and payment of dividends) is often a benchmark used in
assessing corporate performance and the reasonableness of compensation paid
executive officers.
The performance graph below compares the Company's cumulative total
return over the most recent five year period with the Russell 2000 Index
(reflecting overall stock market performance for small cap stocks) and the SNL
Southeast Bank Index (reflecting changes in banking industry stocks in the
southeastern U. S.), and a peer group index consisting of all the publicly
traded banks and thrifts in South Carolina. Returns are shown on a total return
basis, assuming the reinvestment of dividends and a beginning stock index price
of $100 per share. Values presented for the Company are based on transactions as
reported through the American Stock Exchange.
12
Community Bankshares, Inc.
Period Ending
Index 12/31/98 12/31/99 12/31/00 12/31/01 12/31/02 12/31/03
-------- -------- -------- -------- -------- --------
Community Bankshares, Inc. $100.00 $93.82 $84.94 $102.85 $131.19 $158.77
Russell 2000 100.00 121.26 117.59 120.52 95.83 141.11
SNL Southeast Bank Index 100.00 78.69 79.01 98.44 108.74 136.55
Publicly Traded Banks and Thrifts in SC 100.00 78.30 62.15 80.64 100.59 137.21
Change of Control Agreements and Employment Agreements
In 1999, the Company entered into Change of Control Agreements with
Messrs. Ayers, Traynham, Wolfe and Nock. The principal purpose of the agreements
is to protect these executives against a change in control of the Company. The
agreements provide that, if within five years after the date of the agreements,
any change of control of the Company is effected, then the executive will be
entitled to certain benefits. A change of control of the Company will be deemed
to have been effected for purposes of the Agreement if: (i) voting control of
the Company is acquired, directly or indirectly, by any person or group acting
in concert, (ii) the Company is merged with or into any other entity and the
Company is not the surviving entity of the merger, (iii) voting control of any
subsidiary of the Company by which the executive is principally employed is
acquired, directly or indirectly, by any person or group acting in concert, or
(iv) any subsidiary of the Company by which the executive is principally
employed is merged with or into another entity that is not also a subsidiary of
the Company and such subsidiary is not the surviving entity of the merger. If
the executive terminates his employment with the Company or his employment is
terminated by the Company at any time within six months following the effective
date of a change in control, the executive will be entitled to a lump sum
13
payment equal to twice his annual salary in effect at the date of termination.
The Agreement requires certain adjustments in the event that the lump sum
payment exceeds the amount prescribed by Section 280G of the Internal Revenue
Code. The term of the Agreement extends automatically for an additional year on
each annual anniversary thereof, unless the Company gives 30 days prior notice
to the executive that the term will not be extended. Keith W. Buckhouse became
President of Florence National Bank on March 1, 2004, and was appointed to the
Board of Directors of Community Bankshares on March 29, 2004. Mr. Buckhouse will
be provided with a change in control agreement comparable to those in effect for
the other senior officers.
CBI entered into employment agreements with A. Wade Douroux, President
and Chief Executive Officer of Community Resource Mortgage, Inc., in October
2001, and with William A. Harwell, President and Chief Executive Officer of the
Bank of Ridgeway, in July 2002. Mr. Douroux's contract is for an initial term of
three years, and Mr. Harwell's contract is for an initial term of five years.
Each contract is for an initial term and at the end of the term automatically
renews for an additional year unless notice is given according to the terms of
the contract. The contracts specify compensation and other benefits appropriate
to the nature of Messrs. Douroux's and Harwell's employment. The contracts also
provide the employees with protection in the event of a change in control of the
Company under terms and conditions comparable to those outlined above for the
Change of Control Agreements.
The foregoing descriptions of the Change of Control Agreements and
Employment Agreements are merely summaries of such agreements and are qualified
in their entirety by reference to the agreements, which are included in the
Company's filings with the Securities and Exchange Commission.
Director Compensation
Community Bankshares Inc. paid directors who are not employees of the
Company or its subsidiaries fees of $200 per month until March 2003, and
increased the fees to $400 per month for the remainder of 2003. Orangeburg
National Bank paid fees of $500 per month to its non-employee directors until
April 2003, and increased the fees to $800 per month for the remainder of 2003.
Sumter National Bank paid fees of $600 per month to its non-employee directors
during 2003. Florence National Bank paid fees of $300 per month to its
non-employee directors until April 2003, and increased the fees to $500 per
month for the remainder of 2003. The Bank of Ridgeway paid fees of $450 per
month to its non-employee directors during 2003. Community Resource Mortgage
Inc. did not pay any director fees during 2003. The foregoing director fees
totaled $282,650 for Community Bankshares Inc. and its subsidiaries in 2003.
Stock Plan
For information on the stock option plan, see the section "Amendment to
the 1997 Stock Option Plan."
AMENDMENT TO THE 1997 STOCK OPTION PLAN
At the 2004 Annual Meeting, shareholders will be asked to vote on
amendments to the 1997 Stock Option Plan for the purpose of increasing by
300,000 shares to a total of 785,600 shares the number of shares reserved for
issuance under the Plan. All of the additional shares will be reserved for
issuance pursuant to the exercise of incentive stock options.
Options may be granted pursuant to the plan to persons who are
employees of the Company or any subsidiary (including officers and directors who
are employees) at the time of grant. At December 31, 2001, the Company and its
subsidiaries had 126 employees. Non-employee directors are also permitted to
participate in the Plan. Such non-employee directors are only eligible to be
granted non-qualified stock options.
All incentive stock options must have an exercise price not less than
the fair market value of the Common Stock at the date grant, as determined by
the Board of Directors. Non-qualified options will have such exercise prices as
may be determined by the Board of Directors at the time of grant, and such
exercise prices may be less than fair market value. The Board of Directors may
set other terms for the exercise of the options but may not grant to any one
holder more than $100,000 of incentive stock options (based on the fair market
value of the optioned shares on the date of the grant of the option) which first
become exercisable in any calendar year. The Board of Directors also selects the
employees to receive grants under the plan and determines the number of shares
covered by options granted under the plan. No options may be exercised after ten
years from the date of grant, options may not be transferred except by will or
the laws of descent and distribution, and options may be exercised only while
14
the optionee is an employee of the Company, within three months after the date
of termination of employment, or within twelve months of death or disability.
The number of shares reserved for issuance under the Plan, the number of shares
covered by outstanding options, the exercise price and the exercise date of
options will be adjusted in the event of changes in the number of outstanding
shares of common stock effected without receipt of consideration by the Company.
The Board of Directors may amend, suspend or terminate the Plan, but may not
increase (except as discussed above) the maximum number of shares reserved for
issuance under the Plan, or materially modify the eligibility requirements under
the Plan without shareholder approval or ratification. The plan will terminate
on March 16, 2007, and no options will be granted thereunder after that date.
Under federal tax law and regulations, the granting of a stock option
does not produce income to the optionee or a tax deduction for the Company
unless the option itself has a determinable market value and is not an incentive
stock option. Upon exercise of a non-qualified stock option, the excess of the
fair market value of the shares over the option exercise price is taxable to the
optionee as ordinary income and deductible as an expense by the Company. The
cost basis of the shares acquired is the fair market value at the time of
exercise. Upon exercise of an incentive stock option, the excess of the fair
market value of the stock acquired over the option price will be an item of tax
preference to the optionee, which may be subject to an alternative minimum tax
for the year of exercise. If no disposition of the stock is made within two
years from the date of grant of the incentive stock option nor within one year
after the transfer of the stock to the optionee, the optionee does not realize
income as a result of exercising the incentive stock option; the tax basis of
the stock received is the option price; any gain or loss realized on the
ultimate sale of the stock is long-term capital gain or loss, and the Company is
not entitled to any tax deduction by reason of the exercise. If the optionee
disposes of the stock within the two-year or one-year periods referred to above,
the excess of the fair market value of the stock at the time of exercise (or the
proceeds of disposition, if less) over the option price will at that time be
taxable to the optionee as ordinary income and deductible by the Company. For
determining capital gain or loss on such a disposition, the tax basis of the
stock will be the fair market value at the time of exercise.
As of March 31, 2004, there were outstanding incentive options to
purchase 418,367 shares (including 195,750 shares subject to approval by
shareholders of the amendment to the 1997 Plan at the 2004 Annual Meeting) and
nonqualified options to purchase 162,050 shares. The market value of the Common
Stock on March 31, 2004 was $18.25 per share.
The Board of directors recommends a vote "FOR" approval of the
amendment to the 1997 Stock Option Plan.
15
Equity Compensation Plan Information
The following table sets forth aggregated information as of December
31, 2003, about the 1997 Stock Option Plan, which is the Company's only equity
compensation plan.
Plan category Number of securities Weighted-average Number of securities
to be issued upon Exercise price of Remaining available
exercise of Outstanding options, for future issuance
outstanding options, Warranties and rights under equity
warrants and rights compensation plans
(excluding securities
reflected in column(a))
(a) (b) (c)
---------------------- ---------------------- ---------------------- -------------------------
Equity compensation
plans approved by
security holders 357,591 $11.24 205,183
Equity compensation
plans not approved
by security holders None N/A N/A
------- ------ -------
Total 357,591 $11.24 205,183
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The banks have loan and deposit relationships with some of the
directors of the Company and some of the directors of the subsidiaries of the
Company and with companies with which the directors are associated as well as
members of the immediate families of the directors ("Affiliated Persons"). (The
term "members of the immediate families" for purposes of this paragraph includes
each person's spouse, parents, children, siblings, mothers and fathers-in-law,
sons and daughters-in-law, and brothers and sisters-in-law.) The total loans
outstanding to these parties at December 31, 2003, were $7,416,000. Loans to
Affiliated Persons were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not, at the time they were made involve more than the normal risk of
collectibility or present other unfavorable features.
The law firm of Horger, Barnwell & Reid, L.L.P. in which Samuel F.
Reid, a director of the Company, is a partner, provided legal services to the
Company in 2003, and is continuing to provide legal services to the Company in
2004. The law firm of Willcox, Buyck & Williams, P.A. in which Wm. Reynolds
Williams, a director of the Company, is a member also provided legal services to
the Company in 2003, and is continuing to provide legal services to the Company
in 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934,
the Company's directors, its executive officers and certain individuals are
required to report periodically their ownership of the Company's Common Stock
and any changes in ownership to the Securities and Exchange Commission. Based on
a review of Forms 3, 4 and 5 and written representations made to the Company, it
appears that all such reports for these persons were filed in a timely fashion
during 2003, except for late filings of two reports reporting one transaction
each for each of E. J. Ayers, A. Wade Douroux, William A. Harwell, Phil P.
Leventis, William H. Nock, William W. Traynham and Michael A. Wolfe, and late
filing of one report reporting one transaction for J. M. Guthrie. It is the
Company's practice to assist directors with filing of Section 16(a) reports.
16
INDEPENDENT ACCOUNTANTS
The Audit Committee has appointed J. W. Hunt & Company, LLP,
independent certified public accountants, as independent auditors for the
Company and its subsidiaries for the current fiscal year ending December 31,
2004. A representative of J. W. Hunt & Company, LLP is expected to be present at
the 2004 Annual Meeting and will be given the opportunity to make a statement on
behalf of the firm if he or she so desires, and will respond to appropriate
questions from shareholders.
Fees Billed by Independent Auditors
The following table sets forth the aggregate fees billed by J.W. Hunt &
Company, LLP, the Company's independent auditors for audit services rendered in
connection with the consolidated financial statements and reports for the fiscal
years ended December 31, 2003 and December 31, 2002 and for other services
rendered during fiscal years 2003 and 2002, on behalf of the Company and its
subsidiaries, as well as all out-of-pocket costs incurred in connection with
these services, which have been billed to the Company.
Fee Category 2003 % of Total 2002 % of Total
------------ ---- ---------- ---- ----------
Audit Fees $ 92,050 80% $ 88,000 82%
Audit-Related Fees 12,900 11% 10,825 10%
Tax Fees:
Tax compliance/preparation 10,200 9% 8,650 8%
Other tax services - -
-------- --------
Total Tax Fees 10,200 9% 8,650 8%
-------- --------
All Other Fees - -
-------- --------
Total Fees $115,150 100% $107,475 100%
======== ========
Total Fees
Audit Fees: Audit fees include fees billed for professional services
rendered for the audit of the Company's consolidated financial statements and
review of the interim condensed consolidated financial statements included in
quarterly reports and services that are normally provided by the Company's
independent auditor in connection with statutory and regulatory filings or
engagements, and attest services, except those not required by statute or
regulation.
Audit-Related Fees: Audit-related fees include fees billed for
assurance and related services that are reasonably related to the performance of
the audit or review of the Company's consolidated financial statements and are
not reported under "Audit Fees". These services include employee benefit plan
audits, attest services that are not required by statute or regulation,
consultations concerning financial accounting and reporting standards, and
agreed upon procedures required by various government agencies, such as the
Federal Home Loan Bank or the Department of Housing and Urban Development.
Tax Fees: Tax fees include fees for tax compliance/preparation and
other tax services. Tax compliance/preparation include fees billed for
professional services related to federal and state tax compliance.
All Other Fees: All other fees would include fees for services other
than those reported above. No other services were provided by J.W. Hunt &
Company, LLP.
In making its decision to appoint J.W. Hunt & Company, LLP as the
Company's independent auditors for the fiscal year ending December 31, 2004, the
Audit Committee considered whether services other than audit and audit-related
services provided by that firm are compatible with maintaining the independence
of J.W. Hunt & Company, LLP.
17
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
The Audit Committee pre-approves all audit and permitted non-audit
services (including the fees and terms thereof) provided by the independent
auditors, subject to possible limited exceptions for non-audit services
described in Section 10A of the Securities Exchange Act of 1934, which are
approved by the Audit Committee prior to completion of the audit. The Committee
may delegate to one or more designated members of the Committee the authority to
pre-approve audit and permissible non-audit services, provided such pre-approval
decision is presented to the full Committee at its next scheduled meeting.
General pre-approval of certain audit, audit-related and tax services
is granted by the Committee at the first quarter Audit Committee meeting. The
Committee subsequently reviews fees paid. Specific pre-approval is required for
all other services, of which there were none during the year. During 2003, all
audit and permitted non-audit services were pre-approved by the Committee.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors has reviewed and
discussed with management the Company's audited financial statements for the
year ended December 31, 2003. The Audit Committee has discussed with the
Company's independent auditors, J. W. Hunt & Company, LLP, the matters required
to be discussed by Statement on Auditing Standards 61, as modified or
supplemented. The Audit Committee has also received the written disclosures and
the letter from J. W. Hunt & Company, LLP, required by Independence Standards
Board Standard No. 1, as modified or supplemented, and has discussed with J. W.
Hunt & Company, LLP, their independence. Based on the review and discussions
referred to above, the Audit Committee recommended to the Board of Directors
that the audited financial statements be included in the Company's Annual Report
on Form 10-K for the year ended December 31, 2003 for filing with the Securities
and Exchange Commission.
Alvis J. Bynum, Chair Richard L. Havekost
Anna O. Dantzler Thomas B. Edmunds
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
A copy of the Company's Annual Report on Form 10-K for the year ended
December 31, 2003, including financial statements (but not including exhibits),
is being provided free of charge with this Proxy Statement to each shareholder
of record. Copies of exhibits to the Form 10-K will be provided upon written
request to William W. Traynham, President, Community Bankshares, Inc., Post
Office Box 2086, Orangeburg, South Carolina 29116, at a charge of 20(cent) per
page. Copies of the Form 10-K and exhibits may also be downloaded from the
Securities and Exchange Commission website at http://www.sec.gov. Copies of the
10-K will soon be available on the company's website at
www.communitybanksharesinc.com.
OTHER BUSINESS
The Board of Directors of the Company does not know of any other
business to be presented at the Annual Meeting. If any other matters are
properly brought before the Annual Meeting, however, it is the intention of the
persons named in the accompanying proxy to vote such proxy in accordance with
their best judgment.
18
Appendix A
COMMUNITY BANKSHARES INC.
AUDIT COMMITTEE CHARTER
Purposes of the Committee
The primary functions of the Audit Committee (the "Committee") are as
follow:
o Overseeing that management has maintained the reliability and
integrity of the accounting policies and financial reporting and
disclosure practices of the Company (the Company refers to
Community Bankshares and its banking subsidiaries);
o Overseeing that management has established and maintained
processes to assure that an adequate system of internal control
is functioning within the Company;
o Overseeing that management has established and maintained
processes to assure compliance by the Company with all applicable
laws, regulations and Company policy.
Committee Membership and Qualifications
The Committee shall consist of a minimum of three members of the Board, each of
whom has been determined by the Board to be "independent" under the rules of the
American Stock Exchange, Inc. (the "AMEX"), and other applicable law or
regulation.
Each member of the Committee must be able to read and understand fundamental
financial statements, including the Company's balance sheet, income statement
and cash flow statement. At least one member of the Audit Committee must be
"financially sophisticated," in that he or she has past employment experience in
finance or accounting, professional certification in accounting, or any other
comparable experience or background such as having served as a chief executive
officer or chief financial officer or other senior officer with financial
oversight responsibilities, and each of whom meets all other legal and
regulatory requirements imposed upon audit committee members. Members shall be
appointed by the Board and shall serve for such term or terms as the Board may
determine.
No director may serve as a member of the Committee if such director serves on
the audit committees of more than two other public companies unless the Board
determines that such simultaneous service would not impair the ability of such
director to effectively serve on the Committee.
No member of the Committee may, directly or indirectly, receive any compensation
from the Company other than (1) director's fees, and (2) fixed amounts of
compensation under a retirement or other deferred compensation plan for prior
service that is not contingent on continued service.
Powers, Duties and Responsibilities of the Committee
The Committee shall have the following duties, responsibilities and powers:
1. Holding at least quarterly meetings and such additional meetings
as may be called by the Chairman of the Audit Committee or at the
request of the independent accountants or the Internal Auditor;
2. Approving an agenda for the ensuing year;
3. At least annually, appointing or replacing the independent
auditor and overseeing the work of the independent auditor, which
shall report directly to the Committee;
1
4. Pre-approving all auditing services and permitted non-audit
services (including the fees and terms thereof) to be performed
by the independent auditor, subject to the de minimus exceptions
for non-audit services described in Section 10A of the Securities
Exchange Act of 1934 which are approved by the Committee prior to
completion of the audit; the Committee may delegate to one or
more designated members of the Committee the authority to
pre-approve audit and permissible non-audit services, provided
such pre-approval decision is presented to the full Committee at
its next scheduled meeting;
5. Overseeing the accounting and financial reporting processes of
the Company and the audits of the Company's financial statements;
6. Reviewing the performance of the independent accountants;
7. Ensuring the Committee's receipt from the outside auditors of a
formal written statement delineating all relationships between
the auditor and the Company, consistent with Independence
Standards Board Standard 1, and actively engaging in a dialogue
with the auditor with respect to any disclosed relationships or
services that may impact the objectivity and independence of the
auditor and taking, or recommending that the full board take,
appropriate action to oversee the independence of the outside
auditor;
8. Reviewing and concurring in the appointment, replacement,
reassignment or dismissal of the internal auditor;
9. Confirming the independence of the internal auditor;
10. Conferring with the independent accountants and the internal
auditors concerning the scope of their examinations of the books
and records of the Company and its subsidiaries; reviewing and
approving the independent accountants' annual engagement letter;
reviewing and approving the Company's internal audit strategy and
plans, annual audit plans and budgets; directing the special
attention of the auditors to specific matters or areas deemed by
the Committee or the auditors to be of special significance; and
authorizing the auditors to perform such supplemental reviews or
audits as the Committee may deem desirable;
11. Reviewing with management, the independent accountants and
internal auditors significant risks and exposures, audit
activities and significant audit findings;
12. Reviewing the range and cost of audit and non-audit services
performed by the independent accountants;
13. Reviewing the Company's audited annual consolidated financial
statements and the independent accountant's opinion rendered with
respect to such consolidated financial statements, including
reviewing the nature and extent of any significant changes in
accounting principles or the application thereof;
14. Reviewing the interim and annual financial reports filed with the
SEC;
15. Reviewing the adequacy of the Company's systems of internal
control, including computerized information systems, controls and
security;
16. Obtaining from the independent accountants and internal auditors
their recommendations regarding internal controls and other
matters relating to the accounting procedures and the books and
records of the Company and its subsidiaries and reviewing the
correction of controls deemed to be deficient;
2
17. Providing an independent, direct communication between the Board
of Directors, internal auditors and independent accountants;
18. Reviewing the adequacy of internal controls and procedures
related to executive travel and entertainment;
19. Reviewing the programs and policies of the Company designed to
ensure compliance with applicable laws and regulations and
monitoring the results of these compliance efforts;
20. Reporting through its Chairman to the Board of Directors
following the meetings of the Audit Committee;
21. Maintaining minutes or other records of meetings and activities
of the Audit Committee;
22. Reviewing the powers of the Committee annually and reporting and
making recommendations to the Board of Directors on these
responsibilities;
23. establishing procedures for: (i) the receipt, retention and
treatment of complaints received by the Company regarding
accounting, internal accounting controls, or auditing matters;
and (ii) the confidential, anonymous submission by employees of
the Company of concerns regarding questionable auditing or
accounting matters;
24. Conducting or authorizing investigations into any matters within
the Audit Committee's scope of responsibilities. The Audit
Committee shall be empowered to retain independent counsel,
accountants, or others to assist it in the conduct of any
investigation; and
25. Considering such other matters in relation to the financial
affairs of the Company and its accounts, and in relation to the
internal and external audit of the Company as the Audit Committee
may, in its discretion, determine to be advisable.
Resources and Authority of the Committee
The Committee shall be directly responsible for the appointment, compensation,
retention and oversight of the work of the independent auditor (including
resolution of disagreements between management and the auditor regarding
financial reporting) for the purpose of preparing or issuing an audit report or
performing other audit, review or attest services for the Company. The
independent audit firm must report directly to the Committee.
The Committee shall have the resources and authority appropriate to discharge
its responsibilities, including: (i) the authority to engage and compensate
independent auditors for the purpose of preparing or issuing an audit report, or
performing other audit, review or attest services, and other procedures; (ii) to
retain and compensate counsel and other experts or consultants; and (iii) to
provide for its members to take advantage of opportunities for further education
regarding the performance of their duties. The Company shall provide the
Committee with appropriate funding, as determined by the Committee for such
purposes.
3
PROXY
COMMUNITY BANKSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - Monday, May 17, 2004
E. J. Ayers and Michael A. Wolfe, or either of them, with full power of
substitution, are hereby appointed as agent(s) of the undersigned to vote as
proxies all of the shares of Common Stock of Community Bankshares, Inc. held of
record by the undersigned on the Record Date at the Annual Meeting of
Shareholders to be held on May 17, 2004, and at any adjournment thereof, as
follows:
1. Election of [ ] FOR all nominees listed [ ] WITHHOLD AUTHORITY
Directors. below to vote for all nominees
listed below
WITHHOLD AUTHORITY only on the following nominees:_________
___________________________________________________________
___________________________________________________________
Instructions: To withhold authority to vote for any
individual(s), write the nominee's(s') name(s) on the line
above.
NOMINEES: Three Year Terms: Anna O. Dantzler, William A. Harwell, Richard L.
Havekost, William H. Nock, Samuel F. Reid, Jr. and
William W. Traynham
Two Year Term: Keith W. Buckhouse
2. Amendment to the 1997 Stock Option Plan to increase by 300,000 shares the
number of shares of common stock reserved for issuance upon exercise of
options under the 1997 Stock Option Plan.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. And, in the discretion of said agents, upon such other business as may
properly come before the meeting, and matters incidental to the conduct of
the meeting. (Management at present knows of no other business to be
brought before the meeting.)
THE PROXIES WILL BE VOTED AS INSTRUCTED. IF NO CHOICE IS INDICATED WITH RESPECT
TO A MATTER WHERE A CHOICE IS PROVIDED, THIS PROXY WILL BE VOTED "FOR" SUCH
MATTER.
Please sign exactly as name appears below. When signing as attorney, executor,
administrator, trustee, or guardian, please give full title. If more than one
trustee, all should sign. All joint owners must sign.
Dated: , 2004 ___________________________________________
-------------
--------------------------------------------