SCHEDULE 14A
(Rule 14a-101)
Information Required in Proxy Statement
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:
<TABLE>
<CAPTION>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-
11(c) or Rule 14a-12
</TABLE>
COMMUNITY BANKSHARES INCORPORATED
- --------------------------------------------------------------------------------
(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 (set forth the amount on which
the filing fee is calculated and state how it was determined):
...................................................................
(4) Proposed maximum aggregate value of transaction:
...................................................................
(5) Total fee paid:
...................................................................
<PAGE>
[ ] 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:
...................................................................
<PAGE>
[COMPANY LETTERHEAD]
May 8, 1998
Dear Fellow Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
of Community Bankshares Incorporated ("CBI") to be held at the Holiday Inn
Select, 1021 Koger Center Boulevard, Richmond, Virginia on June 11, 1998 at 4:30
p.m.
At the Meeting, you will consider and vote on an amendment to CBI's
Articles of Incorporation to increase the amount of authorized Common Stock from
4,000,000 to 20,000,000 shares. Details of the proposed amendment are set forth
in the accompanying Proxy Statement, which you are urged to read carefully.
Approval of the amendment requires the affirmative vote of a majority of the
shares of Common Stock present in person or represented by proxy at the meeting.
Your Board of Directors unanimously approved the amendment and believes
that the amendment is in the best interest of CBI and its shareholders.
Accordingly, the Board unanimously recommends that you VOTE FOR the amendment.
At the Meeting, you also will vote on the election of three directors
for a term of three years. Your Board of Directors unanimously supports these
individuals and recommends that you VOTE FOR them as directors.
We hope you can attend the Meeting. Whether or not you plan to attend,
please complete, sign and date the enclosed proxy card and return it promptly in
the enclosed envelope. Your vote is important regardless of the number of shares
that you own. We look forward to seeing you at the Meeting.
Sincerely.
Nathan S. Jones, 3rd
President and Chief Executive Officer
Community Bankshares Incorporated
200 North Sycamore Street
Petersburg, Virginia 23804
<PAGE>
COMMUNITY BANKSHARES INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held on June 11, 1998 at 4:30 p.m.
The Annual Meeting of Shareholders of Community Bankshares Incorporated
("CBI") will be held on June 11, 1998 at 4:30 p.m., at the Holiday Inn Select,
1021 Koger Center Boulevard, Richmond, Virginia for the following purposes:
1. To approve an amendment to CBI's Articles of Incorporation to
increase the amount of authorized Common Stock from 4,000,000
to 20,000,000 shares (the text of the amendment is attached to
the accompanying Proxy Statement as Exhibit A).
2. To elect three directors to serve for a three-year term and
until their successors are elected and qualified.
3. To transact such other business as may properly come before
the meeting or any adjournments or postponements thereof.
The Board of Directors has fixed April 30, 1998 as the record date for
the Meeting, and only holders of record of Common Stock at the close of business
on that date are entitled to receive notice of and to vote at the Meeting or any
adjournments or postponements thereof.
By Order of the Board of Directors
Nathan S. Jones, 3rd
President and Chief Executive Officer
May 8, 1998
PLEASE MARK, SIGN, DATE AND RETURN YOUR PROXY PROMPTLY,
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
<PAGE>
COMMUNITY BANKSHARES INCORPORATED
200 North Sycamore Street
Petersburg, Virginia 23803
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
To Be Held June 11, 1998
This Proxy Statement is being furnished to the shareholders of
Community Bankshares Incorporated ("CBI") in connection with the solicitation of
proxies by the Board of Directors of CBI for use at the Annual Meeting of
Shareholders (the "Annual Meeting") to be held at the Holiday Inn Select, 1021
Koger Center Boulevard, Richmond, Virginia on June 11, 1998 at 4:30 p.m. and any
postponement or adjournment thereof.
A shareholder giving a proxy may revoke it at any time before it is
voted by (i) giving notification in person or by writing to CBI, (ii) submitting
to CBI a subsequently dated proxy or (iii) attending the Annual Meeting and
withdrawing the proxy before it is voted. All shares represented by a proxy,
when executed and not so revoked, will be voted, and, if the proxy contains any
specific instructions, it will be voted in accordance with such instructions. If
no contrary instructions are given, each proxy received will be voted FOR the
proposal designated as Proposal I and FOR the slate of director nominees
designated as Proposal II.
The cost of the solicitation of proxies will be borne by CBI. In
addition to solicitation by use of the mails, officers and employees of CBI (who
will not be compensated in addition to their regular salaries) may solicit
proxies from shareholders personally or by telephone. CBI will reimburse banks,
brokerage firms and other custodians, nominees and fiduciaries for reasonable
expenses incurred by them in sending proxy materials to beneficial owners of
Common Stock. This Proxy Statement and the related proxy are being mailed to
shareholders of record as of April 30, 1998 (the "Record Date") on or about May
8, 1998.
CBI has 4,000,000 authorized shares of Common Stock, par value $3.00
per share. On the Record Date, there were 2,782,030 issued and outstanding
shares of Common Stock. Holders of Common Stock will vote as a single class at
the Annual Meeting. Each outstanding share of Common Stock will entitle its
holder to one vote on each matter presented at the Annual Meeting.
A shareholder may abstain or (only with respect to the election of
directors) withhold his vote (collectively, "Abstentions") with respect to each
item submitted for shareholder approval. Abstentions will be counted for
purposes of determining the existence of a quorum. Abstentions will not be
counted as voting in favor of the relevant item.
A broker who holds shares in "street name" has the authority to vote on
certain items when it has not received instructions from the beneficial owner.
Except for certain items for which brokers are prohibited from exercising their
discretion, a broker is entitled to vote on matters put to shareholders without
instructions from the beneficial owner. Where brokers do not have or do not
exercise such discretion, the inability or failure to vote is referred to as a
"broker nonvote." Under the circumstances where the broker is not permitted to,
or does not, exercise its discretion, assuming proper disclosure to CBI of such
inability to vote, broker nonvotes will not be counted for purposes of
determining the existence of a quorum, and also will not be counted as not
voting in favor of the particular matter.
<PAGE>
PROPOSAL I
AMENDMENT TO THE ARTICLES OF INCORPORATION
TO INCREASE THE AMOUNT OF AUTHORIZED COMMON STOCK
General
On January 20, 1998, the Board of Directors voted unanimously to
recommend to its shareholders an amendment to CBI's Articles of Incorporation to
increase the number of authorized shares of Common Stock from 4,000,000 to
20,000,000 shares (the "Amendment"). As of April 30, 1998, CBI had 2,782,030
issued and outstanding shares of Common Stock and had reserved an additional
212,174 shares of Common Stock for issuance under its employee and director
benefit plans. The text of the Amendment is attached to this Proxy Statement as
Exhibit A.
Vote Required to Approve the Amendment
Approval of the Amendment requires the affirmative vote of a majority
of the shares of Common Stock present in person or represented by proxy at the
Annual Meeting.
Purpose of the Amendment
The Board of Directors considers the proposed increase in the number of
authorized shares desirable because it would give the Board the necessary
flexibility to issue shares of Common Stock in connection with stock dividends
and splits, possible future acquisitions, and CBI's employee and director
benefit plans and for other general corporate purposes without the expense and
delay incidental to obtaining shareholder approval of an amendment to the
Articles of Incorporation increasing the number of authorized shares at the time
of such action, except as may be required for a particular issuance by
applicable law or by the rules of the Nasdaq National Market or any stock
exchange or automated interdealer quotation system on which CBI's securities may
then be listed. The shareholders of CBI do not have any preemptive rights with
respect to the issuance of any additional shares of Common Stock, and the shares
of Common Stock authorized pursuant to this proposal would likewise contain no
preemptive rights. CBI has no current plans, understandings or agreements
regarding stock dividends and splits, acquisitions, and CBI's employee and
director benefit plans that would cause CBI to issue any of the additional
shares of Common Stock authorized by this proposal.
Effects of the Amendment
The authorization of additional shares of Common Stock pursuant to this
proposal will have no dilutive effect upon the proportionate voting power of the
present shareholders of CBI. However, to the extent that shares are subsequently
issued to persons other than the present shareholders and/or in proportions
other than the proportion that presently exists, such issuance could have a
substantial dilutive effect on present shareholders.
The Board believes, however, that the Amendment will provide several
long-term benefits to CBI and its shareholders, including the flexibility to
pursue acquisitions in exchange for Common Stock. While CBI has no specific
plans, proposals, understandings or agreements for any such acquisition, the
issuance of additional shares of Common Stock for an acquisition may have a
dilutive effect on earnings per share and book value per share, as well as a
dilutive effect on the voting power of existing shareholders. CBI
2
<PAGE>
would expect that any such dilutive effect on earnings per share and/or book
value per share would be relatively short-term in duration.
The issuance of additional shares of Common Stock by CBI also may
potentially have an anti-takeover effect by making it more difficult to obtain
shareholder approval of various actions, such as a merger. The proposed increase
in the number of authorized shares of Common Stock could enable the Board to
render more difficult an attempt by another person or entity to obtain control
of CBI, though the Board has no present intention of issuing additional shares
for such purposes and has no present knowledge of any such takeover efforts.
THE BOARD OF DIRECTORS BELIEVES THAT ADOPTION OF THE AMENDMENT TO THE
ARTICLES OF INCORPORATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS AND
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE AMENDMENT.
PROPOSAL II
ELECTION OF DIRECTORS
CBI's Board of Directors is divided into three classes. At the Annual
Meeting, three directors are expected to be elected to Class I to hold office
for a term of three years and until their respective successors are duly elected
and qualified. Unless authority to do so is withheld, shares represented by
properly executed proxies in the enclosed form will be voted for the election of
the three persons named below. All nominees have consented to be named and have
indicated their intent to serve if elected. If nominees should become
unavailable, the Board of Directors will designate substitutes for whom the
proxies in the enclosed form are to be voted, or will reduce the size of the
Board to the number of remaining nominees for whom the proxies will be voted. At
this time, the Board knows of no reason why any of the nominees listed below may
not be able to serve as a director if elected. The proxy also confers
discretionary authority upon the persons named therein, or their substitutes,
with respect to any other matter that may properly come before the Annual
Meeting.
In the election of directors, those persons receiving the greatest
number of votes will be elected even if they do not receive a majority.
3
<PAGE>
Class I (to serve until the 2001 Annual Meeting of Shareholders)
<TABLE>
<CAPTION>
Principal Occupation or Employment Director
Name During Last Five Years Since Age
- ---- ---------------------- ----- ---
<S> <C> <C> <C>
Nathan S. Jones, 3rd President and Chief Executive Officer, Community 1984 52
Bankshares Incorporated, Petersburg, Virginia; President
and Chief Executive Officer and Director, The Community
Bank, Petersburg, Virginia
Harold L. Vaughn President Southern Hardware and Building Supply 1984* 68
Corporation, Incorporated, Petersburg, Virginia; Director
of The Community Bank, Petersburg, Virginia
Jack W. Miller, Jr. Chairman and Chief Executive Officer, Roller Bearing 1997 66
Industries, Incorporated; Director of County Bank of
Chesterfield, Midlothian, Virginia
</TABLE>
__________________________
* Mr. Vaughn served as a director of CBI from 1984 to June 30, 1997.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE
NOMINEES SET FORTH ABOVE.
Directors Continuing in Office
There are seven directors whose present term of office will continue
after the Annual Meeting until 1999 or 2000, as indicated below, and until their
respective successors are duly elected and qualified. The remaining directors
have served continuously since the year that they joined the Board.
Class II (to serve until the 1999 Annual Meeting of Shareholders)
<TABLE>
<CAPTION>
Principal Occupation or Employment Director
Name During Last Five Years Since Age
- ---- ---------------------- ----- ---
<S> <C> <C> <C>
Richard C. Huffman President and Chief Executive Officer and Director, 1996 57
Commerce Bank of Virginia, Richmond, Virginia
Vernon E. LaPrade, Jr. President, Model Realty, Inc., Midlothian, Virginia; 1997 65
Director of County Bank of Chesterfield, Midlothian,
Virginia
Elinor B. Marshall Private investor, Petersburg, Virginia; Secretary and 1992 61
Director, The Community Bank, Petersburg, Virginia
</TABLE>
4
<PAGE>
Class III (to serve until the 2000 Annual Meeting of Shareholders)
<TABLE>
<CAPTION>
Principal Occupation or Employment Director
Name During Last Five Years Since Age
- ---- ---------------------- ----- ---
<S> <C> <C> <C>
Sam T. Beale Attorney - Beale, Balfour, Davidson & Etherington, P.C., 1996 59
Richmond, Virginia; Chairman of the Board of Community
Bankshares Inc., Petersburg, Virginia; Director of
Commerce Bank of Virginia, Richmond, Virginia
David E. Hudgins David E. Hudgins and Associates, Inc. - Insurance and 1996 64
Real Estate Appraiser; Director of Commerce Bank of
Virginia, Richmond, Virginia
H.E. Richeson President and Director of County Bank of Chesterfield, 1997 56
Midlothian, Virginia
Alvin L. Sheffield Retired President, L.A. Sheffield Transfers and Storage 1984 66
Incorporated, Petersburg, Virginia; Chairman and
Director, The Community Bank, Petersburg, Virginia
</TABLE>
Board of Directors and Certain Committees
There were five meetings of the Board of Directors of CBI in 1997. Each
director attended greater than 75% of the aggregate number of meetings of the
Board of Directors and meetings of committees of which the director was a member
in 1997.
The Auditing Committee consists of Ms. Marshall and Messrs. Hudgins and
Miller and is responsible for reviewing the scope and results of CBI's annual
audit, reviewing the internal accounting and control systems and reviewing and
recommending the auditors to be appointed by the Board of Directors. The
Auditing Committee did not meet during the year ended December 31, 1997. CBI
does not have a standing nominating or compensation committee.
Director Compensation
Directors of CBI receive no compensation from CBI. However, at present,
all directors of CBI also are directors of either The Community Bank, Commerce
Bank of Virginia or County Bank of Chesterfield, each of which compensates its
directors.
The Community Bank. Each director of The Community Bank receives a
monthly retainer of $500 and fees of $500 for each meeting attended and $25 for
each committee meeting attended. In 1997, directors of The Community Bank
received in the aggregate $119,625 as compensation for their services as
directors. In addition, in July 1993, pursuant to CBI's Incentive Stock Option
and Nonstatutory Stock Option Plan, each director of The Community Bank, except
Mr. Jones, was granted a nonstatutory option to purchase 10,000 shares of Common
Stock. The options were granted at a price of $6.25 per share and are
exercisable at anytime before July 20, 2003, on which date such options expire.
5
<PAGE>
Commerce Bank of Virginia. Each director of Commerce Bank of Virginia
receives a monthly retainer of $150 and fees of $500 for each meeting attended
and $125 for each Audit Committee and Compensation Committee meeting attended.
Directors who also serve as officers of Commerce Bank of Virginia do not receive
any additional compensation above their regular salary for any Board or
committee meetings. In 1997, directors of Commerce Bank of Virginia received in
the aggregate $42,375 as compensation for their services as directors.
Commerce Bank of Virginia also maintains a Deferred Compensation Plan
for the benefit of its directors. Contributions to the plan for the years ended
December 31, 1997, 1996 and 1995 amounted to approximately $13,431, $23,700 and
$38,900, respectively. The Deferred Compensation Plan provides each director
with an annual benefit payment upon attaining 70 years of age. In addition,
benefit payments are available upon early retirement, termination and death as
defined by the plan.
County Bank of Chesterfield. Each director of County Bank of
Chesterfield receives an annual retainer of $4,000 and fees of $100 for each
monthly board meeting attended. In addition, in 1994, each director of County
Bank of Chesterfield was granted an option to purchase 8,000 shares of the
common stock of County Bank of Chesterfield at a price of $8.19 per share. In
1996, two additional directors who were not directors in 1994 each were granted
an option to purchase 2,000 shares of the common stock of County Bank of
Chesterfield at a price of $13.50 per share. In July 1997, in connection with
CBI's acquisition of County Bank of Chesterfield, the options granted in 1994
were converted into options to purchase 8,843 shares of CBI Common Stock at a
price of $7.41 per share and the options granted in 1996 were converted into
options to purchase 2,211 shares of CBI Common Stock at a price of $12.21 per
share, respectively. These options expire on August 9, 2004 and September 10,
2006, respectively.
Security Ownership of Certain Beneficial Owners and Management
The table below presents certain information as of April 30, 1998
regarding beneficial ownership of shares of Common Stock by all directors and
nominees for director, by each of the executive officers named in the "Summary
Compensation Table" herein, by all directors and executive officers as a group,
and all of those persons believed by management to be beneficial owners of more
than five percent ("Five Percent Holders") of the outstanding shares of CBI's
Common Stock. The mailing address of each Five Percent Holder is also included.
For the purposes of this table, beneficial ownership has been determined in
accordance with the provisions of Rule 13d-3 under the Securities and Exchange
Act of 1934, as amended (the "Exchange Act"), under which, in general, a person
is deemed to be a beneficial owner of a security if he has or shares the power
to vote or direct the voting of the security or the power to dispose of direct
disposition of the security, or if he has the right to acquire beneficial
ownership of the security within 60 days.
6
<PAGE>
<TABLE>
<CAPTION>
Amount and Nature of
Name of Beneficial Owner Beneficial Ownership (1) Percent of Class (%) (2)
- ------------------------ ------------------------ ------------------------
Directors and Executive Officers
- --------------------------------
<S> <C> <C>
Sam T. Beale 84,175 3.03
B. Glenn Holden 20,100 *
David E. Hudgins 29,679 1.07
Richard C. Huffman 48,708 1.75
Nathan S. Jones, 3rd 130,673 (3) 4.70
Vernon E. LaPrade, Jr. 42,009 1.51
Elinor B. Marshall 33,828 1.22
Jack W. Miller, Jr. 17,077 *
H.E. Richeson 39,542 1.42
Alvin L. Sheffield 54,450 1.96
Harold L. Vaughn (4) 28,118 1.01
All executive officers and
directors as a group (10 persons) 500,241 17.98
Other
- -----
Community Bankshares Incorporated 173,261 6.23
Employee Stock Ownership Plan
P.O. Box 2166
Petersburg, VA 23804
</TABLE>
________________________
* Indicates that holdings amount to less than one percent of the issued and
outstanding shares of Common Stock.
(1) Includes presently exercisable options to purchase Common Stock granted in
1993 to The Community Bank's directors under CBI's Incentive Stock Option
and Nonstatutory Stock Option Plan and in 1994 and 1996 to County Bank of
Chesterfield's directors.
(2) Based on 2,782,030 shares of Common Stock issued and outstanding as of
April 30, 1998 and assumes the exercise of options to purchase shares of
Common Stock.
(3) Does not include unallocated shares held in trust pursuant to CBI's
Employee Stock Ownership Plan by Mr. Jones as trustee. Shares that have not
been allocated to participants are voted by the trustees. As of December
31, 1997, the last date for which information is available to CBI, 164,184
shares of Common Stock had been allocated to participant accounts.
(4) Nominee to Board of Directors.
Executive Compensation
The following table sets forth the annual compensation paid or accrued
by CBI and its subsidiaries to Nathan S. Jones, 3rd, President and Chief
Executive Officer of CBI and The Community Bank, to Richard C. Huffman,
President and Chief Executive Officer of Commerce Bank of Virginia, and to H.E.
Richeson, President and Chief Executive Officer of County Bank of Chesterfield,
for the three fiscal years ended December 31, 1997.
7
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compen-
Annual Compensation sation
------------------- ------
Number of
Securities All Other
Name and Other Annual Underlying Compensation
Principal Position Year Salary Bonus Compensation Options (4)(5)(6)
------------------ ---- ------ ----- ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Nathan S. Jones, 3rd 1997 $162,000(1) $27,840(2) (3) -0- $ 30,730
President and Chief 1996 $139,807(1) $27,846(2) (3) -0- $142,180
Executive Officer, CBI 1995 $129,513(1) $27,846(2) (3) -0- $ 23,531
and The Community Bank
Richard C. Huffman 1997 $110,000 $32,800 (3) -0- $18,691
President and Chief 1996 $100,000 $32,800 (3) -0- $18,663
Executive Officer, 1995 $ 95,000 $14,000 (3) -0- $17,650
Commerce Bank of
Virginia
H. E. Richeson 1997 $118,000 $15,000 (3) -0- $16,000
President and Chief 1996 $112,702 $ 8,000 (3) 10,000 $16,000
Executive Officer, 1995 $108,549 $ 4,900 (3) -0- -0-
County Bank of
Chesterfield
</TABLE>
_________________________
(1) Includes directors' fees of $12,000, $10,348 and $10,348 in 1997, 1996 and
1995, respectively.
(2) Amounts represent cash incentive payments based on an increase in return on
assets pursuant to CBI's Executive Incentive Plan adopted in July 1993.
(3) The value of perquisites and other personal benefits did not exceed the
lesser of $50,000 or ten percent of total annual salary and bonus.
(4) For Mr. Jones includes: (i) $29,270, $26,000 and $14,000 in contributions
by The Community Bank to its KSOP, and (ii) $1,460, $1,180 and $1,059 paid
by The Community Bank on Mr. Jones' behalf for term life insurance, in each
of 1997, 1996 and 1995, respectively. Also includes $8,472 accrued in
connection with an Executive Supplemental Income Plan in 1995 and $115,000
paid in 1996 in consideration of the termination of such Plan.
(5) For Mr. Huffman includes: (i) $7,200, $6,250 and $5,005 in contributions by
Commerce Bank of Virginia to its ESOP, and (ii) $2,750, $2,500 and $1,818
in contributions by Commerce Bank of Virginia to its employee 401(k) plan.
Also includes $8,741, $10,827 and $9,913 accrued in connection with an
executive supplemental retirement agreement in each of 1997, 1996 and 1995,
respectively.
(6) For Mr. Richeson includes $16,000 in contributions by County Bank of
Chesterfield for a Non-Qualified Deferred Compensation Plan in each of 1997
and 1996.
Supplemental Retirement Agreement
Commerce Bank of Virginia and Mr. Huffman are parties to a supplemental
retirement agreement dated December 23, 1994, which provides benefits in the
event of retirement or death prior to retirement.
8
<PAGE>
Under the agreement, Mr. Huffman will be entitled to an annual benefit of
$22,396 for a period of 10 years if he retires after attaining age 65. All
benefits under the agreement are conditioned upon Mr. Huffman's continuous
employment by Commerce Bank of Virginia.
During 1995, Commerce Bank of Virginia adopted a Deferred Compensation
Plan for the benefit of certain of its officers, including Mr. Huffman.
Contributions of approximately $29,200 and $28,000 were made to the plan during
the years ended December 31, 1996 and 1995, respectively. This Deferred
Compensation Plan provides each covered officer with an annual benefit payment
upon retirement. In addition, benefit payments are available upon death or early
termination as defined by the plan.
Employment Contracts
CBI and Mr. Jones are parties to an employment contract for a term
beginning July 1, 1995 and ending on June 30, 1998, which provides for his
employment as President and Chief Executive Officer. Under the contract, Mr.
Jones is entitled to annual base compensation of $112,500. Any increases in base
compensation are at the discretion of the Board of Directors. The contract will
renew for successive terms of one year each if it is not expressly terminated by
Mr. Jones or CBI. If, during the term of the contract, CBI terminates Mr. Jones'
employment without cause, CBI must continue Mr. Jones' salary and benefits for
six months. The contract provides for increased severance pay if Mr. Jones'
employment terminates within three years after a change of control of CBI. In
that case, Mr. Jones is entitled to a payment equal to 2.99 times his cash
compensation for the twelve months that precede the termination of his
employment and a continuation of fringe benefits. However, the payments to Mr.
Jones under the contract following a change of control will be reduced, if
necessary so that no such payments would constitute an "excess parachute
payment" under Section 280G of the Internal Revenue Code. As of January 1, 1998,
the cash amount payable to Mr. Jones if his employment terminated after a change
of control would be $531,741.
CBI and Mr. Huffman are parties to an employment contract for a term
beginning January 1, 1995, and ending December 31, 1998, with automatic renewals
at the ending date for successive terms of one year, which provides for his
employment as President and Chief Executive Officer of Commerce Bank of
Virginia. Under the contract, Mr. Huffman is entitled to annual base
compensation of $95,000. Any increases in base compensation are at the
discretion of the Board of Directors of Commerce Bank of Virginia. The contract
will continue to renew for successive terms of one year each if it is not
expressly terminated by Mr. Huffman or Commerce Bank of Virginia. If, during the
term of the contract, Commerce Bank of Virginia terminates Mr. Huffman's
employment without cause, it must continue Mr. Huffman's salary and benefits for
six months. The contract provides for increased severance pay if Mr. Huffman's
employment terminates within one year after a change of control of CBI. In that
case, Mr. Huffman is entitled to a payment equal to 2.99 times his cash
compensation for the twelve months that precede the termination of his
employment and a continuation of fringe benefits. As of January 1, 1998, the
cash amount payable to Mr. Huffman if his employment terminated after a change
of control would be $426,972.
CBI and Mr. Richeson are parties to an employment contract for a term
beginning June 1, 1994, and ending June 1, 1998, with automatic renewals at the
ending date for successive terms of one year, which provides for his employment
as President and Chief Executive Officer of County Bank of Chesterfield. Under
the contract, Mr. Richeson is entitled to annual base compensation of $92,500.
Any increases in base compensation are at the discretion of the Board of
Directors of County Bank of Chesterfield. The contract will continue to renew
for successive terms of one year each if it is not expressly terminated by Mr.
Richeson or County Bank of Chesterfield. If, during the term of the contract,
Commerce Bank of Virginia terminates Mr. Richeson's employment without cause, it
must continue Mr. Richeson's
9
<PAGE>
salary and benefits for six months. The contract provides for increased
severance pay if Mr. Richeson resigns for good reason (as defined in his
agreement) or Mr. Richeson's employment terminates within one year after a
change of control of CBI. In that case, Mr. Richeson is entitled to a payment
equal to 2.99 times his cash compensation for the twelve months that precede the
termination of his employment and a continuation of fringe benefits for three
years. Mr. Richeson's employment contract also provides for deferred
compensation of $5,000 per month for a period of five years, beginning at age
65. As of January 1, 1998, the cash amount payable to Mr. Richeson if his
employment terminated after a change of control would be $418,600.
Option Exercises and Holdings
All options held by the named executive officers at December 31, 1997
were exercisable. The following tables set forth information with respect to
exercised and unexercised options held by such officers as of the end of the
fiscal year.
Fiscal Year End Option Values
<TABLE>
<CAPTION>
Number of Shares Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
December 31, 1997 December 31, 1997 (1)
----------------- ---------------------
Name Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Nathan S. Jones, 3rd 20,000 -0- $415,000 -0-
H.E. Richeson 30,000 -0- $564,300 -0-
</TABLE>
________________________
(1) The value of unexercised in-the-money options at fiscal year end was
calculated by determining the difference between the market value per share
of Common Stock at December 31, 1997 ($27.00) and the per share exercise
price of the options.
Interest of Management in Certain Transaction
Certain directors and officers and their associates were customers of
and had transactions with CBI and its subsidiaries during 1997, and up to the
present time. All loans and commitments to loan by CBI and its subsidiaries to
directors and officers were made in the ordinary course of business and 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 involve more than the normal risk of collectibility or present other
unfavorable features. CBI expects to have, in the future, similar banking
transactions with directors and officers. The aggregate balance of loans
outstanding to directors and officers of CBI and its subsidiaries and their
associates was $11.5 million (37% of Shareholders' Equity) on December 31, 1997.
In addition, the real property at the location of Commerce Bank of
Virginia's Hanover County branch is owned by the Atlee Station Co., of which Sam
T. Beale, a director of CBI, is the principal shareholder. This lease has a term
of ten years and expires on December 31, 1998, at which time the lease is
automatically renewed with renegotiated rent terms. The lease provides for rent
in the amount of $3,000
10
<PAGE>
per month beginning January 1, 1994, with an annual increase of three percent
through the end of the term. Commerce Bank of Virginia owns the improvements to
the real property at that location.
Section 16 (a) Beneficial Ownership Reporting Compliance
Under Section 16(a) of the Exchange Act, directors and executive
officers of CBI are required to file reports with the Securities and Exchange
Commission and CBI of their beneficial ownership and changes in ownership of
Common Stock.
Based on a review of the forms that were filed and representations of
the directors and executive officers, CBI believes that all required forms were
timely filed for the year ended December 31, 1997.
RELATIONSHIP WITH INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Mitchell, Wiggins and Company LLP has been CBI's independent certified
public accounts since 1984. CBI's consolidated financial statements for the year
ended December 31, 1997 were examined by Mitchell, Wiggins and Company LLP.
CBI anticipates that Mitchell, Wiggins and Company LLP will be selected
as CBI's auditors for the 1998 fiscal year. Representatives of Mitchell, Wiggins
and Company are expected to be present at the Annual Meeting, will have an
opportunity to make a statement, if they desire to do so, and will be available
to respond to appropriate questions.
SHAREHOLDER NOMINATIONS AND PROPOSALS
The Bylaws of CBI permit any shareholder entitled to vote to submit
nominations for directors and proposals for business at annual meetings. Such
nominations and proposals must be made in writing and must be mailed or
delivered to the Secretary of CBI not less than 60 days nor more than 90 days
prior to the annual meeting of shareholders. A written notice of nomination must
include (a) the nominee's name, age, business address and residence address, (b)
the nominee's principal occupation, and (c) the number of shares of CBI that the
nominee owns. A written notice of nomination must also include the name and
address of the nominating shareholder and the number of shares of CBI that the
nominating shareholder owns. Nominations not made in accordance with the above
procedure may, in the sole discretion of the chairman of the meeting, be
disregarded.
A written notice of proposal for business must include (a) a brief
description of the business desired to be brought at the meeting and the reasons
for conducting such business at the meeting, (b) the name and address of the
proposing shareholder, (c) the number of shares of CBI that the proposing
shareholder owns, and (d) any material interest of the shareholder in the
proposal. Proposals not made in accordance with the above procedure may, in the
sole discretion of the chairman of the meeting, be disregarded.
Shareholders having director nominations or other proposals which they
desire to present at next year's annual meeting should, if they desire that such
proposals be included in the Board of Director's proxy and proxy statement
relating to such meeting, submit such proposals in time to be received by CBI at
its principal executive office in Petersburg, Virginia not later than January 8,
1999, to be so included. All such submissions must comply with the requirements
of Rule 14(a)-8 of the Securities and Exchange Commission under the Exchange
Act, and the Board of Directors directs the close attention of interested
shareholders to that Rule.
11
<PAGE>
ANNUAL REPORT AND FINANCIAL STATEMENTS
A copy of CBI's Annual Report to Shareholders for the year ended
December 31, 1997 accompanies this Proxy Statement. The Annual Report includes
consolidated financial statements as of, and for the three years ended December
31, 1997, 1996 and 1995, together with related notes, and the report of
Mitchell, Wiggins and Company LLP, independent certified public accounts for
such years. Additional copies may be obtained by written request to the
Secretary of CBI at the address indicated below. Such Annual Report is not part
of the proxy solicitation materials.
UPON RECEIPT OF A WRITTEN REQUEST OF ANY PERSON WHO, ON THE RECORD
DATE, WAS RECORD OWNER OF COMMON STOCK OR WHO REPRESENTS IN GOOD FAITH THAT HE
OR SHE WAS ON SUCH DATE THE BENEFICIAL OWNER OF SUCH STOCK ENTITLED TO VOTE AT
THE ANNUAL MEETING OF SHAREHOLDERS, CBI WILL FURNISH TO SUCH PERSON, WITHOUT
CHARGE, A COPY OF ITS ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 AND THE EXHIBITS THERETO REQUIRED TO BE FILED WITH THE
SECURITES AND EXCHANGE COMMISSION UNDER THE EXCHANGE ACT. ANY SUCH REQUEST
SHOULD BE MADE IN WRITING TO ELINOR B. MARSHALL, SECRETARY, COMMUNITY BANKSHARES
INCORPORATED, 200 NORTH SYCAMORE STREET, PETERSBURG, VIRGINIA 23803. THE FORM
10-K IS NOT PART OF THE PROXY SOLICITATION MATERIALS.
OTHER MATTERS
At the date of this Proxy Statement, the Board of Directors knows of no
matter to come before the meeting other than those stated in the notice of the
meeting. As to other matters, if any, that may properly come before the meeting,
it is intended that proxies in the accompanying form will be voted in accordance
with the best judgement of the person or persons named therein.
We hope that you will be able to attend this meeting in person, but if
you cannot be present, please execute the enclosed proxy and return it in the
accompanying envelope (no postage required) as promptly as possible.
By Order of the Board of Directors
Nathan S. Jones, 3rd
President and Chief Executive Officer
Dated in Petersburg, Virginia and
Mailed this 8th day of May, 1998
12
<PAGE>
EXHIBIT A
PROPOSED AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE THE AMOUNT OF AUTHORIZED COMMON STOCK
RESOLVED, that the shareholders of Community Bankshares
Incorporated hereby approve a proposal to amend Article 3 of the
Corporation's Articles of Incorporation so that after amendment it
shall read in its entirety as follows:
"3. Authorized Stock. CBI shall have authority to issue
20,000,000 shares of Common Stock, par value of $3.00 per share."
<PAGE>
Community Bankshares Incorporated
Proxy Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Sam T. Beale, David E. Hudgins and
Alvin L. Sheffield jointly and severally, proxies, with full power to act alone,
and with full power of substitution, to represent the undersigned and to vote,
as designated below and upon any and all other matters that may properly be
brought before such meeting, all shares of Common Stock which the undersigned
would be entitled to vote at the Annual Meeting of Shareholders of Community
Bankshares Incorporated ("CBI") to be held at the Holiday Inn Select, 1021 Koger
Center Boulevard, Richmond, Virginia on June 11, 1998 at 4:30 p.m., local time,
or any adjournments thereof, for the following purposes:
1. To approve an amendment to CBI's Articles of Incorporation to
increase the amount of authorized Common Stock from 4,000,000 to 20,000,000
shares (the text of the amendment is attached to the accompanying Proxy
Statement as Exhibit A).
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. To elect as directors the three persons listed as nominees below.
<TABLE>
<CAPTION>
<S> <C>
[ ] FOR nominees listed below [ ] WITHHOLD AUTHORITY to
(except as written on the line below) vote for all nominees listed below
</TABLE>
Nathan S. Jones, 3rd
Jack W. Miller, Jr.
Harold L. Vaughn
(INSTRUCTION: To withhold authority to vote for any individual
nominee listed above, write that nominee's name on the space
provided below.)
-----------------------------------------------------------------
3. In their discretion, the proxies are authorized to vote upon any
other business that may properly come before the meeting, or any adjournment
thereof.
<PAGE>
THE PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE SHAREHOLDER. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR ITEM
1 AND FOR ALL NOMINEES LISTED IN ITEM 2.
______________________________________
Signature
______________________________________
Signature
Dated:
(If signing as Attorney,Administrator,
Executor, Guardian or Trustee, please
add your title as such.)
PLEASE MARK, SIGN, DATE AND RETURN PROMPTLY
