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
14a-6(e)(2)
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss. 240.14a-11(c) or ss. 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)(4) 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:
<PAGE>
COMMUNITY BANKSHARES, INC.
791 Broughton Street
P. O. Box 2086
Orangeburg, South Carolina 29115
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held April 29, 1997
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 the main office of Sumter National Bank, 683
Bultman Drive, Sumter, South Carolina at 3:00 p.m., Sumter, South Carolina time,
on Tuesday, April 29, 1997, for the following purposes:
(1) To elect seven directors of the Company, four of whom will serve
three-year terms, one of whom will serve a two-year term, and two of whom
will serve one-year terms;
(2) To vote on the 1997 Employee Stock Option Plan;
(3) To ratify the appointment of J. W. Hunt & Company, LLP as independent
auditors for the Company for the fiscal year ending December 31, 1997; and
(4) 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 March 21, 1997, 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, YOU ARE
REQUESTED TO 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. 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 1, 1997
<PAGE>
Community Bankshares, Inc.
791 Broughton Street
P. O. Box 2086
Orangeburg, South Carolina 29115
PROXY STATEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS
to be Held April 29, 1997
-------------------------------------------------
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 the main office of Sumter National
Bank, 683 Bultman Drive, Sumter, South Carolina at 3:00 p.m., Sumter, South
Carolina time on April 29, 1997, 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
telegraph by directors, officers and regular employees of the Company. The
Company may also request 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 1, 1997.
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.
ANNUAL REPORT
The Annual Report to Shareholders covering the Company's fiscal year ended
December 31, 1996, including financial statements, is enclosed herewith. Such
Annual Report to Shareholders does not form any part of the material for the
solicitation of proxies.
REVOCATION OF PROXY
Any record shareholder returning 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 March
21, 1997 (the "Record Date"), the Company had issued and outstanding 1,313,238
shares of Common Stock, which were held of record by approximately 1,174
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
<PAGE>
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 telegraph. 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
adoption of the 1997 Employee Stock Option Plan, and ratification of appointment
of J. W. Hunt & Company, LLP as accountants for the fiscal year ending December
31, 1997, will be approved if the votes cast in favor of the proposal at the
Annual Meeting exceed the votes cast opposing the proposal.
ACTIONS TO BE TAKEN BY THE PROXIES
Each proxy, unless the shareholder otherwise specifies therein, 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, "FOR"
adoption of the 1997 Employee Stock Option Plan, and "FOR" the ratification of
the appointment of J. W. Hunt & Company, LLP as accountants for the fiscal year
ending December 31, 1997. In each case where the shareholder has appropriately
specified how the proxy is to be voted, it will be voted in accordance with his
specifications. 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.
STOCKHOLDER PROPOSALS
Any shareholder of the Company desiring to present a proposal for action
at the 1998 Annual Meeting of Shareholders must deliver the proposal to the
executive offices of the Company no later than December 3, 1997. Only proper
proposals that are timely received will be included in the Company's Proxy
Statement and Proxy.
2
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 1, 1997, the number and
percentage of outstanding shares beneficially owned by (i) each person known by
the Company to own more than 5% of the outstanding Common Stock, (ii) each
director and director nominee of the Company, (iii) each person named in the
Summary Compensation Table, and (iv) all executive officers and directors of the
Company as a group.
<TABLE>
<CAPTION>
Number of % of
Shares Common
Name and Address Position in the Company Beneficially Stock
of 5% Shareholders and the Banks* Owned Ownership
- ------------------ -------------- ------------ ---------
<S> <C> <C> <C>
E. J. Ayers, Jr. Director CBI and ONB 38,400(1) 2.9%
Alvis J. Bynum Director CBI and SNB 14,500(2) 1.1%
Martha Rose C. Carson Director CBI and ONB 27,700 2.1%
Anna O. Dantzler Director CBI and ONB 42,500 3.2%
J. M. Guthrie Director CBI and ONB, 62,200(3) 4.7%
Chairman of Executive
Committee of CBI
Phil P. Leventis Director CBI and SNB, 17,100(4) 1.3%
Chairman of SNB
William H. Nock Director CBI and SNB, Chief 19,680(5) 1.5%
Executive Officer and President
of SNB
Samuel F. Reid, Jr. Director CBI and ONB 20,692(6) 1.6%
Hugo S. Sims, Jr. Director CBI and ONB, 90,000(7) 6.8%
791 Broughton Street Chairman, Chief Executive
Orangeburg, S.C. 29115 Officer of CBI
William W. Traynham Director CBI and ONB, 20,100(8) 1.5%
President of CBI
J. Otto Warren, Jr. Director CBI and ONB, Vice 70,156(9) 5.3%
502 Sellers Ave., SE Chairman of CBI
Orangeburg, S.C. 29115
Michael A. Wolfe Director CBI and ONB, Chief 20,350(10) 1.5%
Executive Officer and
President of ONB
Russell S. Wolfe, II Director CBI and ONB, 29,900(11) 2.2%
Chairman of ONB
All executive officers and 473,278 35.5%
directors as a group (13 persons)
</TABLE>
- ------------------------------------
*CBI - the Company; ONB - Orangeburg National Bank; SNB - Sumter National Bank
(1) Includes 200 shares owned by Nancy R. Ayers, Mr. Ayers' wife; 1,300 shares
owned by an IRA for the benefit of Nancy R. Ayers; and 1,300 shares held by
Mr. Ayers in an IRA.
(2) Includes 2,500 shares owned by Marjorie F. Bynum, Mr. Bynums' wife; and
4,500 shares held by Mr. Bynum as trustee for his grandnephews.
(3) Includes 1,000 shares owned by Lou D. Guthrie, Mr. Guthrie's wife.
(4) Includes 1,060 shares held by Ellen L. Leventis, Mr. Leventis' wife; 10,000
shares owned by the Dixie Beverage Co. of Sumter Profit Sharing Plan; and
5,000 shares owned by LPT Enterprises, a limited partnership.
3
<PAGE>
(5) Includes 600 shares owned by the Nock Family Trust; 130 shares owned by an
IRA for the benefit of Linda H. Nock, Mr. Nock's wife; 17,500 shares held
by Alex Brown & Sons, for benefit of Mr. Nock; and 1,250 shares held by
Alex Brown & Son.
(6) Includes 6,692 shares held by Mr. Reid as trustee for his minor children;
and 8,000 shares owned by Rosa G. Reid, Mr. Reid's wife.
(7) Includes 25,000 shares owned by Virginia B. Sims, Mr. Sims' wife.
(8) Includes 9,100 shares owned jointly with Margaret S. Traynham, Mr.
Traynham's wife; 900 shares owned jointly with minor children; and 10,000
shares subject to currently exercisable nonqualified stock options.
(9) Includes 20,460 shares owned by Mildred J. Warren, Mr. Warren's wife.
(10) Includes 850 shares owned by Joye McGrady Wolfe as custodian for minor
children; and 10,000 shares subject to currently exercisable nonqualified
stock options.
(11) Includes 2,500 shares owned by Mary F. Wolfe, Mr. Wolfe's wife.
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 thirteen. After the opening of Sumter National
Bank in 1996, the Board of Directors of the Company expanded the number of
directors from ten to thirteen and elected three members of the Sumter National
Bank Board of Directors, Alvis J. Bynum, Phil P. Leventis and William H. Nock to
the Company's Board of Directors. Each of Messrs. Bynum, Leventis and Nock is a
nominee for election to the Company's Board of Directors at the Annual Meeting.
In order to keep the classes of the Board as nearly equal in number as possible,
one of each of these nominees will be placed in each class. Accordingly, Mr.
Bynum has been nominated to serve until the Annual Meeting in 2000, Mr. Leventis
has been nominated to serve until the Annual Meeting in 1999, and Mr. Nock has
been nominated to serve until the Annual Meeting in 1998. Three of the directors
of the Company whose three-year terms expire at the Annual Meeting, E. J. Ayers,
Jr., Hugo S. Sims, Jr. and J. Otto Warren, Jr. have also been nominated for
re-election to serve for three-year terms. The remaining director of the Company
whose three-year term expires at the Annual Meeting, William W. Traynham, has
agreed to be nominated for re-election to serve for only a one-year term in
order to make the size of the class of 1998 as nearly equal to the classes of
1999 and 2000 as possible. 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 above become unable or unwilling to accept nomination or
election, it is intended that the persons acting under the proxy will vote for
the election, in his 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.
MANAGEMENT
The table below sets forth the age, business experience for the past five
years, and term in office for each of the directors and executive officers of
the Company. Each of the directors of the Company, except Messrs. Bynum,
Leventis and Nock, is also a director of Orangeburg National Bank. Messrs.
Bynum, Leventis and Nock are also directors of Sumter National Bank.
4
<PAGE>
<TABLE>
<CAPTION>
Director Business experience
Name, Address (and age) Since during the past 5 years
- ----------------------- -------- -----------------------
Nominees for Election to Serve Until 2000
<S> <C> <C>
E. J. Ayers, Jr. (64) 1987* President, C. M. Dukes Oil Co., oil distributor
Orangeburg, S.C. and auto parts supplier; farmer
Alvis J. Bynum (59) 1996 President, Cities Supply Co., Inc., waterwork supplies
Sumter, S.C. distributor
Hugo S. Sims, Jr. (75) 1987* Chairman of the Board of Directors and Chief
Orangeburg, S.C. Executive Officer of the Company
J. Otto Warren, Jr. (69) 1987* President, Warren and Griffin Lumber Co., Inc.
Orangeburg, S.C. and Home Builder's Supply Co., Inc., builder's
supply and lumber manufacturer
<CAPTION>
Nominees for Election to Serve Until 1998
<S> <C> <C>
William H. Nock (51) 1996 President and Chief Executive Officer, Sumter
Sumter, S.C. National Bank since June 1996; Senior Vice President,
Finance, Carolina First Bank, April, 1995 -July, 1995;
President and Chief Executive Officer, Aiken County
National Bank, 1992 - April, 1995
William W. Traynham (41) 1992* President of the Company
Orangeburg, S.C.
<CAPTION>
Current Directors Whose Terms Expire in 1998
<S> <C> <C>
Anna O. Dantzler (57) 1994* Retired since 1989; former customer service
Orangeburg, S.C. representative for Orangeburg National Bank
Samuel F. Reid, Jr. (48) 1994* Attorney, Horger, Barnwell & Reid
Orangeburg, S.C.
<CAPTION>
Nominee for Election to Serve Until 1999
<S> <C> <C>
Phil P. Leventis (51) 1996 President and Chief Executive Officer, Dixie
Sumter, S.C. Beverage Company, wholesale beer distributor; member of
the South Carolina State Senate; Chairman of the Board of
Directors of Sumter National Bank since June 1996.
<CAPTION>
Current Directors Whose Terms Expire in 1999
<S> <C> <C>
Martha Rose C. Carson (61) 1987* President, Marty Rae, Inc., apparel and
Orangeburg, S.C. furniture retailers
J. M. Guthrie (69) 1987* President, Superior Motors, Inc., car dealership
Orangeburg, S.C.
Michael A. Wolfe (39) 1992* President of Orangeburg National Bank; Chief
Orangeburg, S.C. Executive Officer since June 1996
Russell S. Wolfe, II (78) 1987* Secretary, Lenaire F. Wolfe Co., heating and air
Orangeburg, S.C. conditioning; Chairman of the Board of Directors of
Orangeburg National Bank since June 1996
</TABLE>
- --------------------
* Includes service as Director of Orangeburg National Bank prior to formation of
the Company.
5
<PAGE>
There are no family relationships among any of the directors and executive
officers of the Company.
Meetings of the Board of Directors and Committees
The Board of Directors of the Company held 16 meetings during 1996. Each
director attended at least 75% of the total number of meetings of the Board of
Directors held during the period for which he served as director with the
exception of Mr. Warren, who attended 11 of the 16 meetings. The Board of
Directors established committees in December 1996, but the committees did not
meet in December.
The Company has an Audit Committee consisting of J. Otto Warren, Jr.,
Martha Rose C. Carson, E. J. Ayers, Jr. (chairman), Alvis J. Bynum, and Samuel
F. Reid, Jr. The Audit Committee oversees the internal and external audit
function. It is composed entirely of non-employee directors.
The Company has an Executive Committee consisting of Hugo S. Sims, Jr.,
William W. Traynham, J. M. Guthrie (chairman), E. J. Ayers, Jr., Russell S.
Wolfe, II, and Phil P. Leventis. The Executive Committee oversees all matters
necessary between board meetings.
The Company has a Personnel Committee consisting of Hugo S. Sims, Jr.,
William W. Traynham, J. M. Guthrie, Samuel F. Reid, Jr. (chairman), and Anna O.
Dantzler. The Personnel Committee oversees personnel and compensation related
matters.
Nomination of Directors
The Company's Articles of Incorporation provide that no person shall be
eligible to be elected a director at a meeting of shareholders unless that
person has been nominated by a shareholder entitled to vote at the meeting by
giving written notice of such nomination to the Secretary of the Company at
least 30 days prior to the date of the meeting.
The Board of Directors acts as a nominating committee and will consider
recommendations by shareholders of persons to be included as management nominees
for directors if the following procedures are met. Recommendations shall be in
writing and be delivered or mailed to the president of the company not less than
30 days or more than 50 days prior to any meeting of shareholders called for the
election of directors. Such recommendations shall contain the following
information to the extent known by the shareholder making the recommendation:
(1) the name and address of each proposed nominee; (2) the principal occupation
of each proposed nominee; (3) the total number of shares that will be voted for
each proposed nominee; (4) the name and residence address of the share holder
making the recommendation; and (5) the number of shares owned by the shareholder
making the recommendation.
MANAGEMENT COMPENSATION
Executive Officer Compensation
The following table summarizes for the years ended December 31, 1996, 1995
and 1994 the executive compensation paid to the Chairman and Chief Executive
Officer of the Company and to executive officers of the Company or its
subsidiaries that received compensation greater than $100,000 in 1996.
6
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual
Compensation
Year Salary
---- ------
<S> <C> <C>
Hugo S. Sims, Jr. 1996 $40,939
Chairman and Chief Executive Officer of the Company(1) 1995 $33,939
1994 $30,000
William W. Traynham 1996 $104,014
President of the Company 1995 $93,388
1994 $82,698
Michael A. Wolfe 1996 $104,583
President of Orangeburg National Bank 1995 $93,856
1994 $83,059
</TABLE>
- ------------------
(1) Mr. Sims was appointed Chief Executive Officer in March 1992. He functions
in this capacity on a part time basis.
The Company does not have employment contracts with any of its executive
officers. The Company does not presently pay bonuses to its executive officers
and offers no perquisites to its executive officers that are not available to
all employees.
The following table sets forth information about stock options held at
December 31, 1996 by the executive officers listed in the Summary Compensation
Table.
<TABLE>
Aggregated Option Exercises in 1996 and 1996 Year End Option Values
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Shares Acquired Value Options 12/31/96 Options 12/31/96
Name on Exercise Realized Exercisable Unexercisable Exercisable* Unexercisable
- ---- --------------- -------- ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
William W. Traynham - - 10,000 0 $ 44,000 0
Michael A. Wolfe - - 10,000 0 44,000 0
</TABLE>
*The fair value of the stock has been estimated at $12.25 per share, which was
the closing price of the stock on December 31, 1996. The exercise price of the
options is $7.80 per share and they expire in 2000.
Director Compensation
The Company pays directors who are not employees of the Company or its
subsidiaries $200 per month for service as directors. In addition, Orangeburg
National Bank pays monthly fees of $600 to its non-employee directors. Director
fees paid by the Company in 1996 totalled $21,600 and director fees paid by
Orangeburg National Bank in 1996 totalled $50,400.
Employee Benefit Plans
401(K) Plan
Effective January 1, 1990, Orangeburg National Bank established a defined
contribution plan pursuant to Internal Revenue Code Section 401(k). The Plan was
assumed by the Company upon acquisition of Orangeburg National
7
<PAGE>
Bank. All employees who have completed 1,000 hours of service during a
twelve-month period and have attained age 18 will participate as of the January
1 or July 1 closest to the date on which the employee meets the eligibility
requirements.
A participant may elect to make tax deferred contributions up to a maximum
of 10% of eligible compensation. The Company will make a matching contribution
on behalf of each participant in the amount of 100% of the deferral, not
exceeding 3% of the participant's compensation. The Company may also make
elective contributions determined at the discretion of the Board of Directors.
The Company's contributions for the years ended December 31, 1996 and 1995, were
$90,348 and $68,975, respectively.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Orangeburg National Bank has loan and deposit relationships with some of
the directors of the Company and Orangeburg National Bank 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, 1996, were $2,606,183. 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 and Reid, in which Samuel F. Reid, a
director of the Company, is a partner, provided legal services to the Company in
1996, and such firm is continuing to provide legal services to the Company in
1997.
In 1996, Martha Rose C. Carson, a director of the Company provided interior
decorating services to Sumter National Bank and Orangeburg National Bank. The
fees for such services totaled $78,214. Of this amount, $64,731 related to
decorating and furnishing Sumter National Bank. In the opinion of the Company,
these fees were reasonable in relation to the services provided.
During the year ended December 31, 1996, Orangeburg National Bank had
outstanding a loan to Edisto Aquatic, a partnership in which two of the five
partners are sons of Hugo S. Sims, Jr., Chairman of the Board and Chief
Executive Officer of the Company. The original principal amount of the loan was
$349,951 at a floating interest rate equal to prime. The loan was made in June
1990 and was initially unsecured, but was subsequently secured with several
pieces of real estate. The loan matured in 1993 and was renewed until October
1996. In January 1995, this loan was placed on nonaccrual status and has been
turned over to attorneys for collection. The balance of the loan at December 31,
1996, was $108,152. Management expects that liquidation of the collateral will
cover the outstanding loan balance.
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 1996.
8
<PAGE>
ADOPTION OF 1997 EMPLOYEE STOCK OPTION PLAN
The Board of Directors is also seeking approval of the shareholders of the
1997 Employee Stock Option Plan. A copy of the proposed 1997 Employee Stock
Option Plan is included herewith as Exhibit A and incorporated herein by
reference. The following is a summary of the 1997 Employee Stock Option Plan and
is qualified in its entirety by reference thereto.
On March 17, 1997, subject to shareholder approval, the Board of Directors
of the Company adopted the 1997 Employee Stock Option Plan, which reserves
53,000 shares of Common Stock for issuance pursuant to the exercise of options
which may be granted pursuant to the 1997 Employee Stock Option Plan. Of the
53,000 shares reserved for issuance under the plan, 15,000 shares are reserved
for issuance pursuant to exercise of non-qualified stock options and the
remainder are reserved for issuance upon the exercise of "incentive stock
options" within the meaning of the Internal Revenue Code. Options may be granted
pursuant to the 1997 Employee Stock Option 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, 1996, the Company had 54 full
time employees. 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 1997 Employee Stock Option Plan and
determines the number of shares covered by options granted under the 1997
Employee Stock Option 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 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 1997 Employee
Stock Option Plan will terminate on March 16, 2007, and no options will be
granted thereunder after that date. Neither the Company nor the recipient of
incentive stock options will have federal income tax consequences from the
issuance or exercise of the options. Recipients of nonqualified options will
recognize, as ordinary income, the difference between the fair market value of
the optioned shares on the date of exercise and the exercise price for federal
income tax purposes and the Company will be able to expense a like amount.
Because of the discretion given to the Board of Directors in selecting the
employees to whom grants of options will be made and the number of options
granted the benefits or amounts any individual might receive under the 1997
Employee Stock Option Plan are not presently determinable.
The Board of Directors has adopted the 1997 Employee Stock Option Plan
because the Board of Directors believes that stock options provide an
inexpensive way to reward and provide incentives to key employees. Since
incentive stock options issued under the plan are only valuable to the recipient
if the value of the stock rises, the future benefit to the recipient is linked
to benefit to the shareholders. Although non-qualified options can be issued for
less than fair market value, the Board of Directors does not expect to use that
feature except in unusual circumstances such as the recruitment of a key
employee.
The Board of Directors believes that adoption of the 1997 Employee Stock
Option Plan is in the best interest of the shareholders and recommends a vote
FOR the 1997 Employee Stock Option Plan.
INDEPENDENT ACCOUNTANTS
The Board of Directors, upon the recommendation of 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, 1997, subject to ratification by the
shareholders. A representative of J. W. Hunt & Company, LLP is expected to be
present at the 1997 Annual Meeting and will be given the opportunity to make a
statement on behalf of the firm if he so desires, and will respond to
appropriate questions from shareholders.
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AVAILABILITY OF ANNUAL REPORT ON FORM 10-KSB
The Company prepares an integrated Annual Report to the Shareholders
that includes all the information and disclosures required by generally accepted
accounting principles. Information required by Form 10-KSB is included in the
integrated Annual Report. The Annual Report to Shareholders is enclosed
herewith. Copies of exhibits to the Form 10-KSB will be provided upon written
request therefor to William W. Traynham, President, Community Bankshares, Inc.,
Post Office Box 2086, Orangeburg, South Carolina 29116. A charge of 20 cents per
page will be made for any such copies.
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.
By Order of the Board of Directors
William W. Traynham
President
Orangeburg, South Carolina
April 1, 1997
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EXHIBIT A
COMMUNITY BANKSHARES, INC.
1997 STOCK OPTION PLAN
SECTION I - PURPOSE OF THE PLAN
The purpose of this Plan is to provide Community Bankshares, Inc. (the
"Company"), and its subsidiaries with an effective means of attracting,
retaining and motivating officers and other employees to encourage them to
invest in common stock, no par value, of the Company ("Common Stock"), thereby
increasing their proprietary interest in the Company's success. Subject to the
limitations set forth below, the Plan provides for the granting of incentive
stock options within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended ("Code"), and nonstatutory stock options to eligible employees.
SECTION II - ADMINISTRATION
The Plan shall be administered by the Board of Directors of the Company
(the "Board"). Subject to the express provisions of the Plan, the Board shall
have full authority, in its discretion, to determine the individuals to whom,
and the time or times at which, options shall be granted, and the number of
shares to be subject to each option, and the terms of each option. Subject to
the express provisions of the Plan, the Board shall also have full authority (a)
to interpret the Plan, (b) to prescribe, amend and rescind rules and regulations
relating to the Plan, (c) to determine the terms and provisions of the
respective options, which terms and provisions need not be the same in each
case, and including such terms and provisions as shall be requisite in the
judgment of the Board to provide for stock options which qualify as "incentive
stock options" under Section 422A of the Code as the same is and shall be
amended from time to time, including any amendment which supersedes Section
422A, and (d) to make all other determinations deemed necessary or advisable in
administering the Plan. The determinations of the Board on matters referred to
in this Section shall be conclusive. The Board may, from time to time, appoint a
committee constituted of not less than two Directors who are not currently
officers or employees of the Company or any of its subsidiaries and who qualify
to administer the Plan as contemplated by Rule 16b-3 under the Securities
Exchange Act of 1934, or any successor rule, and may delegate to such committee
full power and authority to do and perform all acts and things required or
permitted to be taken or done by the Board herein, and all responsibilities and
duties placed upon the Board herein. Actions of such committee shall be by
majority vote and any action by majority vote of the committee, either with or
without a meeting, shall be binding on the committee.
<PAGE>
SECTION III - ELIGIBILITY
The employees eligible to participate in the Plan shall consist of
full-time officers and other full-time employees of the Company and its
subsidiaries, whether or not such employees are directors of the Company, as
determined by the Board. Subject to the limitations of the Plan, the Board
shall, after consultation with and consideration of the recommendation of
management, select the employees to participate.
SECTION IV - SHARES SUBJECT TO THE PLAN
A total of fifty-three thousand (53,000) shares of the no par value
common stock of the Company shall be subject to the Plan. Such total number of
shares is subject to adjustment pursuant to Section XI hereof. Of such shares,
38,000 shall be reserved for issuance pursuant to exercise of incentive stock
options within the meaning of the Internal Revenue Code and 15,000 shall be
reserved for issuance pursuant to exercise of non-qualified stock options.
Should any option expire or terminate without being fully exercised, the
unpurchased shares subject thereto may again be optioned pursuant to the
provisions hereof. Such shares may be either authorized but unissued shares, or
treasury shares, at the discretion of the Board.
SECTION V - OPTION PRICE
The purchase price of the common stock subject to option shall be
determined by the Board, provided, however, that the purchase price of common
stock subject to incentive stock options shall not be less than 100% of the fair
market value of the common stock, as determined by the Board at the time of the
grant of the option; and, further, provided, that in the case of an incentive
stock option granted to any person then owning more than 10% of the voting power
of all classes of the Company's stock, the purchase price per share of the stock
subject to option shall be not less than 110% of the fair market value of the
stock on the date of grant of the option, determined in good faith as aforesaid.
The purchase price of shares purchased upon the exercise of the option is to be
paid in full in cash as at the time of election to exercise the option.
SECTION VI - TERMS OF OPTION AND TERMS OF EXERCISE
Each option shall be exercisable pursuant to the terms of this
paragraph at any time and from time to time during the period commencing one
year from the date of the original grant of the option and ending not more than
ten years from the date of the grant.
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The term of the option, once it is granted, may be reduced only on
account of termination of employment or death of the optionee as provided in
Section VIII and Section IX. At any time and from time to time when any option
or portion thereof is exercisable, the same may be exercised in whole or in
part. Except as provided in Section VIII and Section IX hereof, no option shall
be exercisable unless, at the time of the exercise, the holder thereof is then,
and has been continuously since such option was granted, an employee of the
Company. Leave of absence from employment by the Company when granted by the
Company because of temporary illness or disability, or to permit service with
the armed forces, or for any other reason, to the extent permitted under the
Code and applicable regulations, shall not be considered as interruption or
termination of employment for any purpose under the Plan.
The Optionee shall also be subject to the following:
A. With respect to an Incentive Stock Option granted under this Plan,
the aggregate fair market value of shares of Common Stock subject to such
Incentive Stock Option and the aggregate fair market value of shares of Common
Stock or stock of any affiliate (or a predecessor of the Company or an
affiliate) subject to any other incentive stock option (within the meaning of
Section 422A of the Code) of the Company and its affiliates (or a predecessor
corporation of any such corporation), to the extent such options become first
exercisable in any calendar year, may not (with respect to any holder) exceed
$100,000, determined as of the date the Incentive Stock Option is granted.
B. Any options granted by the Board which are in excess of the fair
market value limitations set forth in Paragraph (A) of this subsection shall be
deemed "non-statutory" or "non-qualified" and shall not be incentive stock
options granted hereunder.
Notwithstanding anything to the contrary contained in this Plan, the
Board may, in its sole discretion: (i) grant non-qualified options to any
eligible employee; and (ii) grant non-qualified options for up to 15,000 shares
of Common Stock to one or more key employees with exercise prices and/or terms
which do not conform to the requirements of Section V and VI hereof. Non-
qualified options granted by the Board or deemed such by reason of this
subparagraph shall be so designated in the Stock Option Agreement entered into
between the Company and the optionee.
C. The right to exercise any option granted hereunder shall be
forfeited in the event the optionee shall be dismissed or resign as the
consequence of the commission of a crime involving moral turpitude.
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SECTION VII - EXERCISE OF OPTIONS
The options granted hereunder shall be exercisable only upon delivery
to the Company at its main office of a written notice: (1) stating the
optionee's election to exercise, (2) specifying the number of shares to be
purchased and (3) enclosing payment for the shares purchased in full in cash. As
promptly as practicable thereafter, a certificate or certificates for the number
of shares to which the notice refers shall be issued, provided, however, that
the time of such delivery may be postponed by the Company for such period as may
be required by the Company with reasonable diligence to comply with applicable
listing requirements of any securities exchange or to comply with applicable
state or federal law. In no case may a fraction of a share be purchased or
issued under the Plan.
An employee shall not, by reason of the Plan and the granting to him of
any option hereunder, have or thereby acquire any rights of a shareholder of the
Company with respect to the shares covered by such option unless and until his
ownership shall have been recorded on the stock record books of the Company and
a certificate for such shares shall have been issued and delivered to him.
SECTION VIII - TERMINATION OF EMPLOYMENT
If the employment by the Company or any of its subsidiaries of any
employee to whom an option has been granted is terminated because of his
retirement, or for disability with the approval of the Company or any of its
subsidiaries, or for any other reason except death, the employee shall have the
right at any time within three (3) months thereafter (but in any event no later
than the date of the expiration period) to exercise his option with respect to
the number of shares which were immediately purchasable by him at the time of
termination of employment, and his right to purchase any remaining shares shall
terminate forthwith. In the event employment is terminated due to disability as
defined under Section 105(d)(4) of the Internal Revenue Code, the employee shall
have the right at any time within one year thereafter (but in any event no later
than the date of the expiration of the option period) to exercise such option.
SECTION IX - DEATH OF HOLDER OF OPTION
In the event of the death of an employee to whom an option has been
granted while he is in the employ of the Company or any of its subsidiaries, any
option or unexercised portion thereof granted to him shall be exercisable at any
time prior to the expiration of one year after the date of such death (but in
any event no later than the date of the expiration of the option period), but
only by the estate of the decedent or by the person or persons to whom such
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deceased employee's rights under the option shall pass by the deceased
employee's will or by the laws of descent and distribution of the state of his
domicile at the time of his death, and then only if and to the extent that such
deceased employee was entitled to exercise the option at the date of his death.
The estate of the decedent or the person or persons so exercising such option
after the deceased employee's death shall, simultaneously with the delivery of
notice to exercise and the payment for the shares purchased, deliver to the
Company such proof of the right of such estate or such person or persons to
exercise the option as may reasonably be required by the Board and counsel.
SECTION X - OPTIONS NOT TRANSFERABLE
Options granted under the Plan shall not be transferable otherwise than
by will or by the laws descent and distribution, or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder, and shall be
exercisable during the optionee's lifetime only by the employee to whom the
option is granted.
SECTION XI - ADJUSTMENT OF SHARES
In the event of stock dividends, stock splits, recapitalization,
combination or exchange of shares, merger, consolidation, reorganization,
liquidation and the like, the number of shares subject to the Plan, and the
number of shares, the option price, and the exercise date thereof subject to any
option, shall be appropriately adjusted by the Board, whose determination shall
be conclusive.
SECTION XII - LISTING AND REGISTRATION OF SHARES
It is contemplated that the issuance and sale of shares under the Plan
will be exempt from registration under the state and federal Securities Acts. If
the Board shall determine in its discretion that the listing, registration or
qualification of the shares covered by the Plan upon any national securities
exchange or under any state or federal law, or the consent or approval of the
Office of the Comptroller of the Currency or of any other governmental
regulating body, is necessary or desirable as a condition, or in connection
with, the sale or purchase of shares subject to the Plan, no shares will be
delivered unless and until such listing, registration, qualification, consent or
approval shall have been effected or obtained, or otherwise provided for, free
of any conditions not acceptable to the Board.
SECTION XIII - AMENDMENT, SUSPENSION AND TERMINATION
The Board may at any time amend, suspend or terminate the Plan,
provided, however, that the Board shall not, without the
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approval of the shareholders of the Company, amend the Plan to: (a) increase the
maximum number of shares as to which options may be granted, (b) change the
class of employees to whom options may be granted. The Board may not modify,
impair, or cancel any existing option without the consent of the holder thereof.
This Plan will terminate automatically at the close of business on March 16,
2007 unless terminated prior thereto as hereinabove provided. Termination of the
Plan shall not affect any unexercised option granted prior to termination of the
Plan.
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