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-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.
102 Founders Court
Post Office Box 2086
Orangeburg, South Carolina 29116-2086
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held May 20, 2008
TO THE SHAREHOLDERS:
The Annual Meeting of the Shareholders of Community Bankshares, Inc., a
South Carolina corporation, will be held at the Carolina Room, 1225 Orangeburg
Mall Circle, Orangeburg, South Carolina at 3:00 p.m., on Tuesday, May 20, 2008,
for the following purposes:
(1) To elect four directors to each serve three-year terms; and to elect
one director to serve a one-year term.
(2) To transact such other business as may properly come before the Annual
Meeting or any adjournment thereof.
You are only entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof if you were a record holder of our common stock at the close
of business on April 4, 2008.
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 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 18, 2008
COMMUNITY BANKSHARES, INC.
102 Founders Court
Post Office Box 2086
Orangeburg, South Carolina 29116-2086
PROXY STATEMENT
For the Annual Meeting of Shareholders
to be Held May 20, 2008
-------------------------------------------------
We are providing this Proxy Statement in connection with the solicitation
of proxies by the Board of Directors of Community Bankshares, Inc. for use at
our Annual Meeting of Shareholders to be held at the Carolina Room, 1225
Orangeburg Mall Circle, Orangeburg, South Carolina at 3:00 p.m. on Tuesday, May
20, 2008, or at any adjournment of the meeting (the "Annual Meeting"), for the
purposes set forth in the accompanying Notice of Annual Meeting of Shareholders.
Throughout this Proxy Statement, we use terms such as "we", "us", "our" and "our
Company" to refer to Community Bankshares, Inc., and terms such as "you" and
"your" to refer to our shareholders.
We may solicit proxies in person or by mail, telephone or other electronic
means through our directors, officers and regular employees, none of whom will
be specially compensated for doing so. We will also ask banking institutions,
brokerage firms, custodians, nominees and fiduciaries to forward solicitation
materials to the beneficial owners of our common stock held of record by such
persons, and we will reimburse the reasonable forwarding expenses. We will pay
all of the costs of solicitation of proxies. We first began mailing this Proxy
Statement to our shareholders on or about April 18, 2008.
Our principal executive offices are located at 102 Founders Court,
Orangeburg, South Carolina 29115, and our telephone number is (803) 535-1060 or
(888) 329-1060.
ANNUAL REPORT
Our Annual Report on Form 10-K covering our fiscal year ended December 31,
2007, including financial statements, constitutes our Annual Report to
Shareholders and is included (without exhibits) with this Proxy Statement. The
Annual Report does not form any part of the material for solicitation of
proxies.
MATTERS TO BE VOTED ON AT THE ANNUAL MEETING OF SHAREHOLDERS
Election of Directors
Our Bylaws 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. All directors serve until their successors are elected and
qualified to serve. Our Board has nominated four existing directors, Thomas B.
Edmunds, Henrietta C. Guthrie, Wm. Reynolds Williams and Charles E. Fienning,
for election by the shareholders at the 2008 Annual Meeting to serve for
three-year terms. Our Board has nominated one existing director, J. Richard
Williamson, for election by the shareholders at the 2008 Annual Meeting to serve
for a one-year term. Henrietta C. Guthrie and J. Richard Williamson were elected
by our Board on March 31, 2008, and have not previously been elected by
shareholders. They were both recommended to our Board for election by
non-management directors. We recommend a vote "FOR" all of the Board's nominees.
If any of the nominees were to 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 our Board of Directors may recommend. Our
Board of Directors has no reason to believe that any of the nominees will be
unable or unwilling to serve if elected.
The terms of J. M. Guthrie and Martha Rose C. Carson, both of whom have
served on our Board and the Board of our Bank since their respective
organizations, will expire at the 2008 Annual Meeting and, in accordance with
the Board's established mandatory retirement policy, they have not been
nominated for reelection. Mr. Guthrie is Mrs. Guthrie's father-in-law. There are
no other family relationships among any of our directors, nominees or executive
officers.
VOTING PROCEDURES AND MATTERS RELATING TO PROXIES
Voting
If you hold your shares of record in your own name, you can vote your
shares by marking the enclosed proxy form, dating it, signing it, and returning
it to us in the enclosed postage-paid envelope. If you are a shareholder of
record, you can also attend the Annual Meeting and vote in person. If you hold
your shares in street name with a broker or other nominee, you can direct your
vote by submitting voting instructions to your broker or nominee in accordance
with the procedure on the voting card provided by your broker or nominee. If you
hold your shares in street name, you may attend the Annual Meeting, but you may
not vote in person without a proxy appointment from a shareholder of record.
Revocation of Proxy
If you are a record shareholder and execute and deliver a proxy, you have
the right to revoke it at any time before it is voted by delivering to William
W. Traynham, President, Community Bankshares, Inc., at 102 Founders Court,
Orangeburg, South Carolina 29115, or by mailing to Mr. Traynham at P.O. Box
2086, Orangeburg, South Carolina 29116-2086, an instrument which by its terms
revokes the proxy. If you are a record shareholder, you may also revoke your
proxy by delivering to us a duly executed proxy bearing a later date. Written
notice of your revocation of a proxy or delivery of a later dated proxy will be
effective when we receive it. Your attendance at the Annual Meeting will not in
itself constitute revocation of a proxy. However, if you are a record
shareholder and desire to do so, you may attend the meeting and vote in person
in which case the proxy will not be used. If you hold your shares in street name
with a broker or other nominee, you may change or revoke your proxy instructions
by submitting new voting instructions to the broker or other nominee.
Quorum, Vote Required and Method of Counting Votes
Our only voting security is our no par value common stock, each share of
which entitles the record holder to one vote on each matter to come before the
Annual Meeting. At the close of business on April 4, 2008, (the "Record Date"),
we had issued and outstanding 4,444,356 shares of common stock, which were held
of record by approximately 2,084 persons. You are only entitled to notice of and
to vote on matters that come before the Annual Meeting if you were our
shareholder of record at the close of business on the Record Date. Although
shares of our common stock may be transferred subsequent to the Record Date, 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 our 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. Our directors, officers and regular
employees 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.
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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. "Plurality" means that if there are more nominees than positions to be
filled, the individuals who receive the largest number of votes cast for the
positions to be filled will be elected as directors. Because the number of
nominees for election at the 2008 Annual Meeting is expected to be the same as
the number of positions to be filled, we expect that all of the Board of
Directors' nominees will be elected. 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 is not permitted.
Actions to be taken by the Proxies
Our Board of Directors selected the persons named as agents in the
accompanying form of proxy. When the form of proxy enclosed is properly executed
and returned, the shares that it represents will be voted at the meeting. Unless
you otherwise specify therein, your 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. In each case where you have
appropriately specified how the proxy is to be voted, it will be voted in
accordance with your specifications. Our Board of Directors is not aware of any
other matters that may be presented for action at the Annual Meeting of
Shareholders, but if other matters do properly come before the meeting, the
persons named in the proxy intend to vote on such matters in accordance with
their best judgment.
SHAREHOLDER PROPOSALS
If you wish to present a proposal for action at the 2009 Annual Meeting of
Shareholders, you must deliver the proposal to our President, William W.
Traynham, at our executive offices, 102 Founders Court, Orangeburg, South
Carolina, or mail it to Mr. Traynham at P.O. Box 2086, Orangeburg, South
Carolina 29116-2086. If you wish for us to include any such proposal in our
proxy statement and form of proxy for the 2009 Annual Meeting of Shareholders,
you must send or deliver the proposal in time for Mr. Traynham to receive it no
later than December 20, 2008. If any shareholder proposal is not received by Mr.
Traynham by March 4, 2009, the persons named as proxies in the proxy materials
relating to that meeting will use their discretion in voting the proxies when
the proposal is raised at the meeting. Only proper proposals that are timely
received will be included in our proxy statement and proxy.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of March 27, 2008, the number and percentage
of outstanding shares beneficially owned by (i) each of our directors and
director nominees, (ii) each person named in the Summary Compensation Table, and
(iii) all of our executive officers and directors as a group. We do not know of
anyone who owns more than 5% of our outstanding common stock. Except as
indicated in the footnotes to the table, each person named has sole voting and
dispositive power with respect to the shares shown.
Name of Beneficial Owner Amount and Nature of % of Class
Beneficial Ownership
-------------------- -----------
E. J. Ayers, Jr. (1) ................... 88,780 1.99%
Alvis J. Bynum (2) ..................... 33,685 *
Martha Rose C. Carson (3) .............. 66,629 1.50%
Anna O. Dantzler (4) ................... 90,500 2.03%
Thomas B. Edmunds (5) .................. 20,000 *
Samuel L. Erwin (6) .................... 35,014 *
Charles E. Fienning (7) ................ 16,535 *
Henrietta C. Guthrie (8) ............... 4,365 *
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Name of Beneficial Owner Amount and Nature of % of Class
Beneficial Ownership
-------------------- -----------
J. M. Guthrie (9) ...................... 170,000 3.81%
Richard L. Havekost (10) ............... 35,550 *
J. V. Nicholson, Jr. (11) .............. 135,000 3.04%
Samuel F. Reid, Jr. (12) ............... 53,702 1.20%
Charles P. Thompson, Jr. ............... 30,022 *
William W. Traynham, Jr. (13) .......... 63,331 1.42%
Wm. Reynolds Williams (14) ............. 12,127 *
J. Richard Williamson(15) .............. 25,022 *
Michael A. Wolfe (16) .................. 56,997 1.28%
All executive officers and
directors as a group (20
persons)(17) ........................... 964,209 20.96%
*Less than one percent
(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 5,000 shares subject to stock
options which are currently exercisable.
(2) 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.
(3) Includes 10,250 shares subject to stock options which are currently
exercisable. Of the total shares shown as beneficially owned by Mrs.
Carson, 10,250 shares are pledged as collateral.
(4) 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.
(5) Includes 10,000 shares held by Lucy Edmunds, Mr. Edmunds' wife.
(6) Includes 30,000 shares subject to stock options which are currently
exercisable.
(7) Includes 5,070 shares owned by Suzanne S. Fienning, Mr. Fienning's wife;
and 3,150 shares subject to stock options which are currently exercisable.
(8) Includes 1,571 shares held in trust for Caroline R. Guthrie, Mrs. Guthrie's
child.
(9) 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.
(10) Includes 4,050 shares subject to stock options which are currently
exercisable.
(11) Includes 67,500 shares owned by Ellen Nicholson, Mr. Nicholson's wife.
(12) 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.
(13) Includes 18,436 shares owned jointly with Margaret S. Traynham, Mr.
Traynham's wife; 15,250 shares subject to stock options which are currently
exercisable. Of the total shares shown as beneficially owned by Mr.
Traynham, 15,000 shares are pledged as collateral.
(14) Includes 600 shares owned jointly with Mary T. Williams, Mr. Williams'
wife.
(15) Includes 1,264 shares held in trust for Dr. Williamson's son; and 4,050
shares subject to stock options which are currently exercisable.
(16) Includes 2,497 shares owned by Mr. Wolfe's wife, Joye McGrady Wolfe, as
custodian for minor children; and 10,250 shares subject to stock options
which are currently exercisable. Of the total shares shown as beneficially
owned by Mr. Wolfe, 13,646 shares are pledged as collateral.
(17) Includes 152,850 shares subject to stock options which are currently
exercisable.
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MANAGEMENT
Directors and Nominees
The table below shows the age, business experience for the past five years,
and term in office for each of our directors and nominees. Each of our directors
is also a director of our wholly-owned subsidiary, Community Resource Bank (our
"Bank").
Name (and age) Director Since Business Experience During the Past 5 Years
-------------- -------------- -------------------------------------------
Nominees for Election to Serve Until 2011
Thomas B. Edmunds (70) 2002 Chairman of the Board of Directors of our Company since
Columbia, S.C January, 2007; retired financial consultant, Merrill Lynch.
Henrietta C. Guthrie (53) 2008 Chief Financial Officer for Orangeburg Calhoun Technical
Orangeburg, S.C. College since 1996; Certified Public Accountant.
Wm. Reynolds Williams (62) 1998 Attorney, Managing Partner, Willcox, Buyck & Williams, P.A.
Charles E. Fienning (65) 2005 President and Chief Executive Officer of Sumter Packaging
Sumter, S. C. Corporation since 1984.
Nominee for Election to Serve Until 2009
J. Richard Williamson (54) 2008 Physician.
Orangeburg, S. C.
Current Directors Whose Term Expire in 2010
Samuel L. Erwin (40) Orangeburg, 2005 Chief Executive Officer of our Company since January 2005;
S.C. Senior Vice President and Commercial Relationship Manager
for Carolina National Bank from June 2002 to December 2004;
Senior Vice President and Market President for First Union
National Bank from January 2000 to June 2002.
Anna O. Dantzler (69) 1994 Retired since 1989; former customer service representative
Orangeburg, S.C. for Orangeburg National Bank.
Richard L. Havekost (68) 1998 Licensed professional engineer; Principal in Raldex, Inc.
Florence S.C. (investor in motel properties); Principal and Secretary of
RDBP, Inc. (retail beverage store); from 1967 to 1993,
employed by Nucor Corp. in various capacities, including Vice
President of Nucor Corp. and General Manager of the Florence
Division.
Samuel F. Reid, Jr. (60) 1994 Attorney, Horger, Barnwell & Reid.
Orangeburg, S.C.
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Name (and age) Director Since Business Experience During the Past 5 Years
-------------- -------------- -------------------------------------------
Current Directors Whose Terms Expire in 2009
E. J. Ayers, Jr. (75) 1987* Chairman of the Board of Directors of our Company from
Orangeburg, S.C. January 1999 until January 2007; Chief Executive Officer of
our Company from January 1999 until December 2004.
Alvis J. Bynum (70) 1996 Retired President, Cities Supply Co. (waterwork supplies
Sumter, S.C. distributor)
J. V. Nicholson, Jr. (63) 2002 Retired dentist.
Ridgeway, S.C
Charles P. Thompson, Jr. (61) 2007 Pharmacist, developer of medical office parks.
Orangeburg, S.C.
* Includes service as Director of Orangeburg National Bank prior to formation of
the Company in 1992.
Executive Officers
Information about Mr. Erwin, our Chief Executive Officer is set forth above
under "--Directors." William W. Traynham (age 52) has served as our President
and Chief Financial Officer since 1992. Michael A. Wolfe (age 50) is our
Executive Vice President and has served as President of Community Resource Bank
since June 2006. Prior to that time, Mr. Wolfe had been President and Chief
Executive Officer of our former subsidiary, Orangeburg National Bank, since
1992.
COMMITTEES OF THE BOARD OF DIRECTORS
Audit Committee
We have a separately designated standing Audit Committee established in
accordance with Section 3(a)(58)(A) of the Securities Exchange Act of 1934. Our
Audit Committee is comprised of Alvis J. Bynum, Anna O. Dantzler, Thomas B.
Edmunds, Charles E. Fienning (chairman), Henrietta C. Guthrie, and Richard L.
Havekost all of whom are non-employee directors. Each member of the Audit
Committee is independent as defined in Section 121A of the American Stock
Exchange's listing standards, as modified or supplemented (the "AMEX Rules"),
and also meets the independence standards of the Securities and Exchange
Commission's Rule 10A-3(b). Our Audit Committee is responsible for appointment
of the independent auditors and oversees the internal and external audit
function. The Audit Committee acts pursuant to a written charter adopted by our
Board of Directors, a copy of which is available on our website at
www.communitybanksharesinc.com. The Audit Committee met ten times in 2007.
Compensation Committee
We have a Compensation Committee comprised of Alvis J. Bynum (chairman), J.
M. Guthrie, Charles E. Fienning, J. V. Nicholson and Wm. Reynolds Williams. Each
member of our Compensation Committee is independent as defined in the AMEX
Rules. The Compensation Committee acts pursuant to a written charter adopted by
our Board of Directors, a copy of which is available on our website at
www.community-banksharesinc.com. The Compensation Committee met five times
during 2007.
The Compensation Committee reviews our compensation policies and recommends
to the Board the compensation levels and compensation programs for executive
officers and directors. The ultimate decisions about compensation levels and
compensation programs are made by our full Board, which may accept or reject the
recommendations of the Committee. Our Compensation Committee has delegated to
Mr. Erwin, our Chief Executive Officer, authority to set the amounts and types
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of compensation to be paid to our executive officers, other than Mr. Erwin, Mr.
Wolfe and Mr. Traynham; provided, however, only our Compensation Committee or
our Board has authority to approve any stock-based compensation. Mr. Erwin makes
recommendations to our Compensation Committee as to the amounts and types of
compensation to be paid to Mr. Erwin, Mr. Wolfe and Mr. Traynham and the
committee makes the final decision with respect to their compensation. The
Compensation Committee does not delegate its authority to any other persons.
However, the Committee does delegate responsibility for administering parts of
our compensation programs to our Human Resources Department. Neither the
Committee nor management uses compensation consultants to determine or recommend
the amount or form of executive officer or director compensation, except with
respect to the Community Bankshares 2007 Equity Plan. Grant Thornton, LLP, an
executive compensation consulting firm, advised us in connection with
development of a long-term equity plan and prepared the 2007 Equity Plan for us.
Governance and Nominating Committee
We have a Governance and Nominating Committee comprised of Alvis J. Bynum,
Martha Rose C. Carson, Thomas B. Edmunds, Richard L. Havekost, and Samuel F.
Reid, Jr. (chairman). Each member of our Governance and Nominating Committee is
independent as defined in the AMEX Rules. The Committee operates pursuant to a
charter approved by our Board of Directors, a copy of which is available on our
website at www.communitybanksharesinc.com. The Governance and Nominating
Committee met twice during 2007.
GOVERNANCE MATTERS
Board Member Independence
The American Stock Exchange's Listing Standards require that a majority of
the members of our Board of Directors be independent as defined by the AMEX
Rules. We have determined that the following directors are independent under the
listing standards: E. J. Ayers, Jr., Alvis J. Bynum, Martha Rose C. Carson, Anna
O. Dantzler, Thomas B. Edmunds, Charles E. Fienning, Henrietta C. Guthrie, J. M.
Guthrie, Richard L. Havekost, J. V. Nicholson, Jr., Samuel F. Reid, Jr., Charles
P. Thompson, Jr., Wm. Reynolds Williams and J. Richard Williamson. As disclosed
under "Certain Relationships and Related Transactions" our independent
directors, members of their immediate families and some of their affiliates may
from time to time have loan and deposit relationships with our Bank. These
relationships are not considered by our Board to compromise their independence.
Director Nomination Process
In recommending director candidates, our Nominating Committee takes into
consideration such factors as it deems appropriate based on our current needs.
These factors generally 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, commitment to a significant financial investment
in our stock, and the interrelationship between the candidate's experience and
business background and our 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 committee will consider candidates recommended by shareholders for
nomination as a Board of Directors' nominee if the shareholders comply with the
following requirements. If you wish to recommend a director candidate to the
committee for consideration as a Board of Directors' nominee, you must submit in
writing to the committee 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. You must deliver this information to our Nominating
Committee at our address and the committee must receive it no later than January
15 in any year for your candidate to be considered as a potential Board of
Directors' nominee at the Annual Meeting of Shareholders for that year. The
committee 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
committee's other candidates receive.
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Director candidates recommended by shareholders will not be considered for
recommendation by the committee as potential Board of Directors' nominees if the
shareholder recommendations are received later than January 15 in any year.
Nevertheless, 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
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 our existing management, must be made in writing and must be
delivered or mailed to our President, not less than 30 days prior to any meeting
of shareholders called for the election of directors. The presiding officer of
the meeting may disregard nominations not made in accordance with these
requirements, and upon his instructions, the vote tellers shall disregard all
votes cast for each such nominee.
Attendance at Meetings of the Board of Directors and Shareholder Meetings
Our Board of Directors held 15 meetings during 2007. Each current director,
except Wm. Reynolds Williams, attended at least 75% of the total number of
meetings of our Board of Directors and committees on which he or she served
during the period in 2007 for which he or she served as director.
We encourage, but do not require, our directors to attend annual meetings
of shareholders. Last year, 12 of our 13 directors attended the annual meeting
of shareholders.
Shareholder Communications with the Board of Directors
If you wish to send communications to the Board of Directors, you should
mail them addressed to the intended recipient by name or position in care of:
Corporate Secretary, Community Bankshares, Inc., P.O. Box 2086, Orangeburg,
South Carolina 29116. 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, 2007 and
2006, the compensation awarded to, earned by or paid to our executive officers
and the chief executive officer of our Bank.
8
Summary Compensation Table
Name and Year Salary Bonus Option Non- All Total
Principal ($) ($) Awards Equity Other ($)
Position ($)(1) Incentive Compen-
Plan sation
Compensation ($)(3)
($)(2)
---- -------- ------- ------- ------------ ------- -------
Samuel L. Erwin 2007 $219,570 $ 0 $26,531 $ 0 $26,490 $272,591
Chief Executive Officer 2006 $204,250 $24,250 $ 0 $45,750 $24,916 $299,166
of Community
Bankshares, Inc. and
Community Resource Bank
William W. Traynham 2007 $159,490 $ 0 $ 0 $ 0 $18,999 $178,489
President of Community 2006 $151,791 $ 0 $ 0 $61,000 $13,021 $225,812
Bankshares and Chief
Financial Officer of
Community Bankshares
and Community Resource
Bank
Michael A. Wolfe 2007 $180,614 $ 0 $ 0 $ 0 $15,385 $195,999
President of Community 2006 $168,916 $ 0 $ 0 $68,804 $14,510 $252,230
Resource Bank and
Executive Vice
President of Community
Bankshares, Inc.
(1) For 2007, this is the amount we recognized for financial statement
reporting purposes with respect to the fiscal year in accordance with
Financial Accounting Standard 123R. Although we granted options to
purchase 10,000 shares to Mr. Erwin for 2006 under the terms of our
employment agreement with him, we granted these options on December
31, 2005, and, accordingly, we did not recognize any dollar amounts
for financial statement reporting purposes in accordance with
Financial Accounting Standard 123R relating to such options in 2006.
The assumptions we used in valuation are set forth in Note 12 to our
Consolidated Financial Statements included in our Annual Report on
Form 10-K for the year ended December 31, 2007.
(2) These amounts were incentive awards pursuant to the Senior Management
Incentive Plan. See "--Overview of Executive Compensation Program -
Incentive Compensation and Bonus" for a discussion of the plan.
(3) For 2007, includes our contributions to the Bank's 401(k) Plan on
behalf of the named persons, premiums for medical insurance,
disability insurance and life insurance, and automobile allowances in
the amounts shown below:
Name 401(k) Medical & dental Disability Life ins. Auto allow. Club dues Total
---- ------ ---------------- ---------- --------- ----------- --------- -----
Mr. Erwin $ 8,777 $3,863 $1,116 $1,514 $9,000 $2,220 $26,490
Mr. Traynham $10,185 $3,863 $2,772 $ 379 $ 0 $1,800 $18,999
Mr. Wolfe $ 7,225 $3,863 $1,542 $ 379 $ 0 $2,376 $15,385
9
Overview of Executive Compensation Program
The following discussion provides information about our compensation
program for all of our executive officers, as well as a specific discussion for
our Chief Executive Officer, our President and Chief Financial Officer, and our
Executive Vice President and President of our Bank.
General
The components of compensation for our executive officers include base
salary, cash incentive awards, insurance and other related benefits, and
equity-based awards. The framework of these components is reviewed and approved
annually by the Compensation Committee. Our objectives in setting, and reasons
for paying, each element of executive compensation are:
o To attract, retain and motivate executive officers who are responsible
for carrying out our strategic plans;
o To maintain a compensation structure that is competitive in our
marketplace;
o To promote internal equity as determined by the relative value of each
executive officer's role in executing our strategic plans;
o To link annual incentive cash awards with specific profitability goals
and individual performance results; and
o To provide long-term equity-based incentive awards that help align the
interests of management with the interests of shareholders.
Compensation is designed to reward our individual executive officers both
for their personal performance and for performance of our Company with respect
to profitability and growth in shareholder value.
Our Compensation Committee has delegated to Mr. Erwin, our Chief Executive
Officer, authority to set the amounts and types of compensation to be paid to
our executive officers, other than Mr. Erwin, Mr. Wolfe and Mr. Traynham;
provided, however, only our Compensation Committee or our Board has authority to
approve any equity-based compensation. Mr. Erwin makes recommendations to our
Compensation Committee as to the amounts and types of compensation to be paid to
Mr. Wolfe and Mr. Traynham and the Committee makes the final decision with
respect to their compensation. Mr. Erwin's base salary, maximum possible
incentive compensation and stock option awards for the first three years of his
employment were provided for in the employment agreement he entered into with us
on January 1, 2005. During those three years, the actual amount of any incentive
compensation and any other elements of compensation not fixed by the agreement
to be paid to Mr. Erwin were recommended by the Compensation Committee to the
Board and the Board made the final decision. After the first three years of his
employment agreement, beginning in 2008, the Compensation Committee makes
recommendations to the Board about the amounts and types of compensation to be
awarded to Mr. Erwin and the Board will make the final decision.
The Compensation Committee makes its decisions about allocations between
long-term and current compensation, allocations between cash and non-cash
compensation, and allocations among various forms of compensation, in its
discretion based on the Committee's subjective assessment of how these
allocations will best meet the Committee's overall compensation goals. Mr. Erwin
makes his decisions and recommendations about these allocations based on the
parameters set by the Committee.
The Committee believes that reasonable levels of base salary and broad
based benefits are necessary for us to remain competitive in hiring and
retaining senior executives. The Committee has designed both short-term cash and
long-term equity-based incentive compensation to motivate our senior executives
to strive for exemplary levels of performance in carrying out our strategic
plans. To date, amounts realizable from prior compensation have not been a
factor in the determination of equity-based awards for senior executives.
10
Components of 2007 Executive Compensation
During 2007, executive compensation consisted primarily of two key
components: base salary and an opportunity for cash incentive awards. We also
provided various additional benefits to executive officers, including health,
life and disability plans, employment and change of control arrangements, and
perquisites. For 2007, base salary comprised approximately 90% of total
executive officer compensation, benefit plans comprised approximately 7% of
total executive officer compensation, and perquisites comprised approximately 3%
of total executive officer compensation. We did not pay any incentive
compensation to any of our executive officers in 2007, and we did not award them
any stock options, other than the options to purchase 10,000 shares we had
previously committed to award to Mr. Erwin under his Employment Agreement. The
Compensation Committee based its decision to allocate executive officer
compensation in this manner on its subjective assessment of how such allocation
would meet our goals of remaining competitive with the compensation practices of
a group of surveyed companies and of linking compensation to our corporate
performance and individual executive officer performance.
A more detailed discussion of each of these components of executive
compensation, the reasons for awarding such types of compensation, the
considerations in setting the amounts of each component of compensation, the
amounts actually awarded for the periods indicated, and various other related
matters is set forth in the sections and tables below.
Factors Considered in Setting Compensation
Use of Market Surveys and Peer Group Data
To remain competitive in the executive workforce marketplace, we believe it
is important to consider comparative market information about compensation paid
to executive officers of other financial institutions in our market area, the
State of South Carolina and the Southeastern United States, as well as
compensation paid to other executives with similar levels of skills and
responsibility in those areas. We want to be able to attract and retain highly
skilled and talented executive officers who have the ability to carry out our
short- and long-term goals. To do so, we must be able to compensate them at
levels that are competitive with compensation offered by other companies in our
business or geographic marketplace that seek similarly skilled and talented
executives.
The market survey information we use is derived from publicly available
compilations provided in surveys prepared by the South Carolina Bankers
Association ("SCBA") and the American Bankers Association ("ABA"). The banks
included in the SCBA survey we used with respect to 2007 compensation, all of
which are located in South Carolina, are:
o Bank of Clarendon o Independence National Bank
o Bank of York o Islands Community Bank
o Capital Bank o Lowcountry National Bank
o Carolina National Bank o Mutual Savings Bank
o Coastal Federal Bank o Peoples National Bank
o Community First Bank o Pickens Savings and Loan Association
o Conway National Bank o Provident Community Bank
o Crescent Bank o Security Federal Bank
o First Bank o South Carolina Bank and Trust
o First Citizens Bank o Synovus Financial Corp.
o First Community Bank o The Bank of South Carolina
o First National Bank of the South o The Citizens Bank
o Greer State Bank o Williamsburg First National Bank
o Heritage Community Bank
11
The SCBA survey reports results by asset size, and we use the results for
banks with greater than $300 million in assets for comparative purposes. The
banks in the ABA survey information we use are not specifically named, but are
located in the Southeast and range in size from $100 million to $1 billion in
assets.
We believe the financial institutions included in the market survey
information we consider are an appropriate group to use for compensation
comparisons because they align well with our asset levels, the nature of our
business and workforce, and the talent and skills required for successful
operations. The companies we use for comparisons may change from time to time
based on the factors discussed above.
Other Factors Considered
In addition to considering market survey comparisons, in setting
compensation we consider each executive's knowledge, skills, scope of authority
and responsibilities and job performance, as well as our perception of the
fairness of the compensation paid to each executive in relation to what we pay
our other executive officers. As noted above, the committee also considers
recommendations from our Chief Executive Officer in setting compensation for
executive officers.
We review our compensation program and levels of compensation paid to all
of our executive officers annually and make adjustments based on the foregoing
factors as well as other subjective factors.
Timing of Executive Compensation Decisions
We routinely perform annual salary reviews and make incentive pay decisions
in January of each year at the first regularly scheduled Compensation Committee
and Board meetings. Incentive awards are paid and salary increases are effective
in February. We may also make compensation determinations at other times during
the year in the case of newly hired executives or promotions of existing
employees that could not be deferred until the next Board of Directors meeting.
The Committee does not time any form of compensation award, including
equity-based awards, to coincide with the release of material non-public
information.
Base Salaries
The Committee initially sets base salaries at levels believed to be
externally competitive and internally equitable. As noted above, in determining
external competitiveness, we consider peer group comparisons from survey data
for executives with similar levels of skill and responsibility at other
financial institutions of comparable size and complexity in our market area, the
State of South Carolina and the Southeastern United States. In determining
internal equity, we consider criteria such as the executive's knowledge,
experience, skill, scope of decisions to be made, and level of authority.
The Committee determines increases in base salary by the use of formal
salary increase guidelines. These guidelines are based upon individual
performance and the individual's position within the salary range for his or her
position. Performance is evaluated on a scale of 1 (unsatisfactory) to 5
(outstanding), and the current salary level is evaluated as below minimum,
minimum to mid-point, mid-point to maximum, and over maximum. An individual
employee's results on both scales will determine any increase in base salary.
The guidelines for 2007 resulted in an average 3% increase.
As noted above, the base salaries for each of Mr. Erwin's first three years
of employment were specified in his employment agreement with us. For 2007, the
agreement set his base salary at $219,570. After the initial three years, the
contract provides that the Board will periodically review his base salary and
may increase (but may not decrease) his base salary in accordance with our
salary administration policies and procedures. Mr. Erwin may consult with the
Committee and the Board with respect to his compensation.
Base salaries for each of Messrs. Erwin, Traynham, and Wolfe for 2007 are
set forth in the "Salary" column of the Summary Compensation Table. For 2008,
the Committee has set executive officer base salaries at the following amounts:
Mr. Erwin- $227,500; Mr. Traynham - $164,125; and Mr. Wolfe - $187,125.
Incentive Compensation and Bonus
Under our Senior Management Incentive Plan, annual cash incentive awards
are directly linked to performance of our executive officers and our Company.
12
Fifty percent of each executive officer's incentive award is determined by our
financial performance, and the other fifty percent of the award is determined by
the individual executive's performance in achieving goals established at the
beginning of the year. We set an individual incentive award target of 40% of
base salary for each executive officer, and awards can range from 0 to 150% of
this target depending on individual performance and our financial performance.
The plan further provides that, regardless of individual performance, no
payments will be made if we fail to earn at least 75% of our budgeted net
income.
For 2007, incentive award targets as a percentage of base salary were 40%
of base salary for Mr. Traynham and Mr. Wolfe. As noted above, actual awards
could range from 0% to 150% of these targets depending on our financial
performance and the performance of the individuals based on goals established at
the beginning of the year and appraised by Mr. Erwin at the end of year.
Our Company's financial goals for 2007 with respect to which executive
compensation was measured were to achieve annual return on assets and return on
equity at levels that would cause us to earn consolidated net income of at least
$5.5 million and to improve our asset quality by reducing charge offs and
nonaccrual loans. Our net income for 2007 was $2 million, a decline of almost
50% from our net income for 2006. However, on a positive note in 2007, our
management made numerous improvements in the lending area, including hiring new
loan personnel, improving our risk management systems, implementing more
extensive loan reviews, redesigning loan approval processes, increasing our use
of technology, and more actively managing our problem and potential problem
loans. These improvements have helped us to make significant progress toward our
goals of improving our asset quality, and we expect them to continue to
contribute toward our progress in this area throughout 2008 and beyond.
Based on its assessments of our financial performance in 2007, and because
we failed to meet the minimum financial performance level of 75% of budgeted net
income, the Committee recommended no cash incentive awards under the Senior
Management Incentive Plan for 2007 for Messrs. Erwin, Traynham or Wolfe.
Equity Awards
From time to time, we have granted stock options to our executive officers.
We set stock option awards at levels we believe to be competitive with other
financial institutions/companies of similar size and to advance our goal of
retaining key executives. Stock option awards provide an incentive that focuses
each executive's attention on managing our Company from the perspective of a
stockholder with an equity stake in the business. Because we set the exercise
price at the fair market value of our common stock on the date of grant, the
economic value of stock options awarded is directly tied to the future
performance of our stock and will provide value to the recipient only when the
price of our stock increases over the exercise price. Stock option awards for
executive officers are approved by the Board of Directors. We believe that the
costs to our Company of granting options as opposed to paying additional cash
compensation, both in terms of the impact on earnings under the new accounting
rules for options and potential dilution of the outstanding common stock, are
far-outweighed by the benefits provided to us in terms of providing incentives
to our executive officers to increase earnings and shareholder value. Pursuant
to the terms of his Employment Agreement, we awarded options to purchase 10,000
shares to Mr. Erwin in 2007. We did not award options to either Mr. Traynham or
Mr. Wolfe in 2007.
In 2007, shareholders approved the 2007 Equity Plan, which is further
discussed below under the caption "--2007 Equity Plan." Under the 2007 Plan, in
addition to options, we may award restricted stock, unrestricted stock, stock
appreciation rights and performance units. In March, 2008, we awarded
time-vesting restricted stock and stock appreciation rights to 25 officers,
including Messrs. Erwin, Traynham and Wolfe. Our considerations in setting
equity awards other than stock options are similar to those discussed above for
stock options.
Other Benefits
We provide our executive officers with the same insurance benefits we
provide to all our other employees, and make contributions to our 401(k) plan on
their behalf on the same basis as we make contributions for all other employees.
We also provide supplemental disability insurance coverage for executive
officers and certain other senior officers because our group disability
insurance plan that covers all employees has maximum dollar benefits that limit
the coverage for executive officers. The amount of supplemental disability
coverage we provide to our executive officers is intended to allow them the same
level of benefits as a percentage of base salary as is provided under our group
plan to all other employees.
13
We also pay country club dues for some of our executives. In addition, we
encourage, and pay for our executives and their spouses to attend banking
conventions and seminars. The Compensation Committee has determined that these
benefits play an important role in our executive officers' business development
activities on behalf of our Company.
Pursuant to the terms of his employment agreement, we provide Mr. Erwin
with a $9,000 annual automobile allowance and life insurance.
All of the foregoing additional elements of compensation awarded to named
executives in 2007 were set at levels believed to be competitive with other
financial institutions in South Carolina. The Compensation Committee has
determined that providing such benefits helps to retain key executives and is an
important factor in keeping our executive compensation packages competitive in
our market area.
Employment Agreements
We have entered into employment agreements with each of Messrs. Erwin,
Traynham and Wolfe. These agreements are described under - "Employment
Agreements." As discussed in that section, the agreements provide, among other
things, for payments to our executive officers upon termination of their
employment other than for cause or upon a change of control. The events set
forth as triggering events for the payments were selected because they are
events similar to those provided for in many employment agreements for executive
officers of financial institutions throughout South Carolina. It has become
increasingly common in South Carolina for community financial institutions to
provide for such payments under such conditions in order to retain key
personnel.
Tax and Accounting Considerations
We expense salary, bonus and incentive compensation and benefit costs as
they are incurred for tax and accounting purposes. Salary, bonus and incentive
compensation, and some benefit payments are taxable to the recipient as ordinary
income. The tax and accounting treatment of the various elements of compensation
is not a major factor in our decision making with respect to executive
compensation. To maintain flexibility in compensating executive officers in a
manner designed to promote varying corporate goals, the Committee has not
adopted a policy requiring all compensation to be deductible.
Security Ownership Guidelines and Hedging of Securities
We do not have any formal security ownership guidelines for our executive
officers, but most of our executive officers own a significant number of shares.
We do not have any policies regarding our executive officers' hedging the
economic risk of ownership of our shares.
Financial Restatement
The Board of Directors does not have a policy with respect to adjusting
retroactively any cash or equity based incentive compensation paid to our
executive officers where payment was conditioned on achievement of certain
financial results that were subsequently restated or otherwise adjusted in a
manner that would reduce the size of an award or payment, or with respect to
recovery of any amount determined to have been inappropriately received by an
individual executive. If such a restatement were ever to occur, the Board would
expect to address such matters on a case-by-case basis in light of all of the
relevant circumstances.
Employment Agreements
We have entered into employment agreements with our Chief Executive
Officer, Samuel L. Erwin, our President and Chief Financial Officer, William W.
Traynham, and our Executive Vice President and the President of our Bank,
Michael A. Wolfe. Each agreement was for an initial term of three years.
Beginning on the third anniversary, and on each subsequent annual anniversary,
the agreements are automatically extended for an additional year unless notice
14
that the agreement will not be extended is given to the employee at least 90
days prior to the anniversary. We entered into the agreement with Mr. Erwin
January 1, 2005, with Mr. Traynham February 15, 2005, and with Mr. Wolfe October
2, 2006 (a revised contract upon his appointment as President of the Bank).
Accordingly, the automatic annual extensions of the agreements have commenced
for Mr. Erwin and Mr. Traynham. The remaining term of Mr. Wolfe's contract at
December 31, 2007 was 21 months, after which period automatic annual extensions
of his agreement will also commence.
Each agreement provides for a base salary; eligibility for bonuses and
participation in incentive compensation plans as determined by the Board;
benefits such as club dues, 401(k) plan participation and contribution matching,
health and dental insurance, reimbursement of employment related expenses,
vacation, and participation in other benefits generally provided to Company
employees. In addition, Mr. Erwin's agreement provides for the granting of stock
options, an automobile allowance, and life insurance. All of these elements of
compensation are discussed above. The agreements also provide for the payment of
benefits after termination of the executive's employment under the circumstances
discussed below.
If, within six months following a change of control of our Company, we
terminate the executive's employment, or if the executive terminates his
employment for good reason, we are required to pay him a lump sum of twice the
amount of his annual base salary in effect at the date of termination. If,
however, this amount would equal or exceed the base amount under Internal
Revenue Code section 280G, it will be adjusted to have a value of three times
the base amount under Section 280G less $100. This provision of the agreements
is initially effective for a period of five years from the effective date of the
agreements. Commencing on the first anniversary after the date of the
agreements, and on each annual anniversary thereafter, effectiveness of this
provision will automatically be extended for an additional year unless we give
notice 30 days prior to the anniversary date that it will not be extended. The
executive is not required to mitigate his loss of income and any income he
receives will not reduce the amounts we are required to pay him. If the
executive dies after a change of control and while we still owe him payments
under this provision of the agreement, we are required to make the payments to
his devisee or designee.
The agreements provide that a "change of control" of our Company will be
deemed to have occurred if any of the following events occurs: (i) any person or
group acting in concert, directly or indirectly, acquires more than 50% of the
voting power over our stock; (ii) any person or group acting in concert acquires
within a 12-month period ownership of stock possessing more than 50% of the
total voting power over our stock; or (iii) we are merged with or into any other
entity and the persons who were our shareholders immediately prior to the merger
do not continue to own stock having voting control over more than 50% of the
voting securities of the surviving entity immediately after the merger.
If there has been no change of control and the executive terminates his
employment for good reason or we terminate him other than for cause, we are
required to continue to pay the executive for the remaining term of the
agreement his base salary at the rate in effect immediately prior to the date of
termination, and to continue to provide him with, or pay for him to obtain, the
same, or substantially similar, insurance coverages as those he would have had
had he remained an employee. We must also pay him his base salary through the
end of the month of termination, any bonus awarded but not yet paid, any
benefits to which he is entitled as a result of termination under the terms of
any other plans or arrangements to which he is a party, and any unpaid expenses
we owe him. If a termination under this provision occurs during the last twelve
months of the term of the agreement, the base salary will be paid and benefits
will be provided for twelve months.
The agreements define "good reason" as any of the following: (i) our
failure to comply with any material provision of the agreement; (ii) the
material diminution of the executive's authority and duties under the agreement;
or (iii) a material diminution in the executive's base compensation.
If we terminate the executive's employment for cause, if the executive
terminates his employment other than for good reason or as a result of death,
disability or retirement, we must pay him his base salary through the end of the
month of termination, any bonus awarded but not yet paid, any benefits to which
he is entitled as a result of termination under the terms of any other plans or
arrangements to which he is a party, and any unpaid expenses we owe him.
The agreements require the executives to abide by all of our rules and
procedures designed to protect our confidential information and to preserve and
maintain all such information in strict confidence during their employment with
us and for as long after termination of employment as the confidential
15
information remains, in our sole opinion, proprietary and confidential.
Additionally, prior to the later of (i) the end of the term of employment, (ii)
the date of termination or (iii) the completion of base salary payments in the
event of termination by the executive for good reason or by us other than for
cause, the agreements prohibit the executive, within a 25 mile radius of any of
our operating offices (with respect to Messrs. Erwin and Mr. Wolfe), or within a
25 mile radius of the location of his office with the Company or any of its
subsidiaries (with respect to Mr. Traynham), from managing, operating or being
employed by, participating in, or being connected in any manner with the
management, operation, or control of any business engaged in the businesses in
which we are engaged on the date of termination. The agreements also provide
that, regardless of the circumstances of termination of employment, for a period
of 12 months after the termination of his employment, or the completion of base
salary payments in the event of termination by the executive for good reason or
by us other than for cause, the executive will not solicit the business or
patronage, directly or indirectly, from any of our customers, and the executive
will not seek to or assist others to persuade any of our employees engaged in
similar work or related to our work to discontinue employment with us or seek
employment or engage in any business in which we are engaged.
The foregoing descriptions of the Employment Agreements are merely
summaries of such agreements, do not create any rights, 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.
Outstanding Equity Awards at 2007 Fiscal Year-End
The following table provides information about stock options held by our
executive officers at the end of 2007. Our executive officers had no other forms
of equity awards at that time. Mr. Erwin's options were awarded pursuant to the
terms of his employment agreement. All of the options in the table below were
issued pursuant to our 1997 Stock Option Plan. Our equity plans are described
below under the captions "--1997 Stock Option Plan" and "2007 Equity Plan."
Name Number Number Option Option
of of Exercise Expiration
Securities Securities Price Date (1)
Underlying Underlying ($)
Unexercised Unexercised
Options Options
(#) (#)
Exercisable Unexercisable
------------ ------------- ------- --------
Samuel L. Erwin 10,000 0 $18.00 1/3/10
10,000 0 $17.00 12/30/10
10,000 0 $17.00 1/3/12
William W. Traynham 5,250 0 $12.83 2/17/09
5,000 0 $11.00 2/26/11
5,000 0 $18.85 10/27/13
Michael A. Wolfe 5,250 0 $12.83 2/17/09
5,000 0 $11.00 2/26/11
5,000 0 $18.85 10/27/13
(1) Messrs. Traynham's and Wolfe's options were granted ten years prior to the
expiration dates shown, and Mr. Erwin's options were granted five years
prior to the expiration dates shown.
Pension Benefits and Nonqualified Deferred Compensation
We do not currently provide any retirement or pension plans (other than our
401(k) plan), or any defined contribution or other plans that provide for
deferral of compensation on a basis that is not tax-qualified.
16
Potential Payments upon Termination of Employment or Change of Control
Payments we would be required to make to our executive officers under their
employment agreements in the event of termination of their employment under
various circumstances, including in the event of a change of control of our
Company, are discussed above under the caption "--Employment Agreements."
In addition, under our Senior Management Incentive Plan, if the executive
leaves our Company for reason of death, disability, or retirement, he or she
would be eligible for a pro-rata award from the plan based on the number of
months worked.
Director Compensation
We paid directors' fees of $500 per month during 2007 to all outside
directors, except the Chairman who received $1,000 per month. Community Resource
Bank paid directors' fees of $500 per month during 2007. We only pay directors'
fees to outside directors. The table below shows the amount of fees we and the
Bank paid to each of our individual directors for service on the corporate and
Bank boards in 2007. We do not provide any other forms of compensation to our
outside directors.
2007 Director Compensation
Name Fees Total
Earned or
Paid in
Cash ($)
------- -------
E. J. Ayers, Jr. $12,000 $12,000
Alvis J. Bynum $12,000 $12,000
Martha Rose C. Carson $12,000 $12,000
Anna O. Dantzler $12,000 $12,000
Thomas B. Edmunds $18,000 $18,000
Charles E. Fienning $12,000 $12,000
J. M. Guthrie $12,000 $12,000
Richard L. Havekost $12,000 $12,000
J. V. Nicholson, Jr. $12,000 $12,000
Samuel F. Reid, Jr. $12,000 $12,000
Wm. Reynolds Williams $12,000 $12,000
2007 Equity Plan
Shareholders approved our 2007 Equity Plan at the 2007 Annual Meeting. The
2007 Equity Plan reserves a total of 350,000 shares for issuance under the plan.
Awards may be in the form of incentive stock options, nonqualified stock
options, restricted stock, unrestricted stock, stock appreciation rights, or
performance units. Awards may be subject to performance goals. Our directors,
officers and employees, and directors, officers and employees of our
subsidiaries are eligible to participate in the 2007 Plan. Our Board of
Directors and Compensation Committee of the Board administer the 2007 Plan and
choose the persons to receive awards under the 2007 Plan and set the terms of
the awards. The following is a brief summary of the terms of the 2007 Plan.
If any award is forfeited, terminates, expires or lapses without being
exercised, or if any stock appreciation right is exercised for cash, shares of
common stock subject to such awards will again be available for distribution in
connection with awards under the plan. If the option price of any option or the
17
exercise price of any other award is satisfied by delivering shares of common
stock to us (by either actual delivery or by attestation), only the number of
shares of common stock delivered to the participant net of the shares of common
stock delivered to us or attested to will be deemed delivered for purposes of
determining the maximum number of shares of common stock available for delivery
under the plan. If we use the cash proceeds of the exercise of an option to
acquire shares of our common stock on the open market, an equal number of shares
will not be deemed to have been delivered for purposes of determining the
maximum number of shares of common stock available for delivery under the plan.
To the extent any shares of our common stock subject to an award are not
delivered to a participant because such shares are used to satisfy an applicable
tax-withholding obligation, such shares will not be deemed to have been
delivered for purposes of determining the maximum number of shares of common
stock available for delivery under the plan.
In the event of certain types of corporate transactions or restructurings,
such as stock splits, mergers, consolidations, separations, spin-offs,
reorganizations, liquidations, reorganizations, or other distributions, the
Committee or the Board shall make adjustments in the aggregate number and kind
of shares reserved for issuance under the 2007 Equity Plan, in the maximum share
limitations upon stock options, incentive stock options, stock appreciation
rights and other awards to be granted to any individual, in the number, kind and
option price or exercise price of outstanding stock options and stock
appreciation rights, in the number and kind of shares subject to other
outstanding awards granted under the plan, and any other equitable substitutions
or adjustments that Committee or the Board determine to be appropriate in their
sole discretion.
Performance goals relating to the payment or vesting of an award that is
intended to qualify as "performance-based compensation" under Section 162(m) of
the Internal Revenue Code will be comprised of one or more of the following
performance criteria as the Committee may deem appropriate:
o Earnings per share (actual or targeted growth);
o Net income after capital costs;
o Net income (before or after taxes);
o Return measures (including, but not limited to, return on average
assets, risk-adjusted return on capital, or return on average equity);
o Efficiency ratio;
o Full-time equivalency control;
o Stock price (including, but not limited to, growth measures and total
shareholder return);
o Noninterest income compared to net interest income ratio;
o Expense targets;
o Operating efficiency;
o EVA(R);
o Credit quality measures;
o Customer satisfaction measures;
o Loan growth;
o Deposit growth;
o Net interest margin;
o Fee income; and
o Operating expense.
Any of the performance criteria listed may be applied solely with reference
to our Company and/or any subsidiary or relatively between our Company and/or
any subsidiary and one or more unrelated entities. In addition, different
performance criteria may be applied to individual participants or to groups of
participants and, as specified by the Committee, may be based on results
achieved (i) separately by our Company or any subsidiary, (ii) any combination
of our Company and the subsidiaries or (iii) any combination of business units
or divisions of our Company and the subsidiaries. With respect to each
performance period, the Committee will establish the performance goals in
writing no later than the earlier of 90 days after the beginning of the
performance period or expiration of 25 percent of the performance period.
Performance goals for awards not intended to comply with Section 162(m) may
include the performance criteria listed above but may use other criteria as
well.
Except as specifically provided in an award agreement or by the change in
control provisions of the 2007 Equity Plan, the termination of an award
recipient's service with us will have the following effects on awards
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outstanding following the termination: (a) if the termination is due to the
death, disability or retirement of the award recipient, the awards will become
fully vested and exercisable; (b) in every other case, any awards that are not
vested and/or exercisable on the date of termination will immediately terminate
and be of no further force and effect; (c) if the recipient's termination is for
any reason other than death, disability, retirement or discharge for cause (as
defined in the plan), the recipient's options or SARs that are exercisable on
the date of termination shall be exercisable until the earlier of three months
from the date of termination or the expiration date of such option or SAR; (d)
upon termination of an award recipient for cause, any unexercised options or
SARs of the recipient shall expire immediately and any non-vested restricted
stock awarded to such recipient shall be forfeited; (e) upon the award
recipient's death any options or SARs that are then exercisable shall be
exercisable by the decedent's personal representative until the earlier of one
year from the date of death or the expiration date of the award; (f) upon
termination due to disability, the award recipient may exercise any options or
SARs which are exercisable on the date of termination until the earlier of one
year from the date of termination or the expiration date of the award; (g) upon
termination due to retirement, the award recipient may exercise any options or
SARs that are exercisable on the date of retirement until the earlier of one
year from the date of termination or the expiration date of the award but, if
the recipient dies before exercising all of the options or SARs, the decedent's
personal representative may exercise such remaining options or SARs before the
earlier of one year from the date of death or the expiration date of the award;
and (h) a performance unit award shall terminate if there is a termination of
service of the award recipient before the end of the applicable performance
period.
Unless provided otherwise by the Committee, in the event of a change in
control (as defined in the plan), if we are not the surviving corporation and
the survivor or acquiror does not assume outstanding awards or substitute
equivalent awards or if the award recipient is terminated without cause within
24 months following a change in control, then all outstanding awards will become
immediately exercisable or vested or unrestricted and, in the case of
performance awards, will be deemed to be fully earned.
The Board of Directors may at any time amend, suspend, or discontinue the
plan but may not impair the rights of a holder of outstanding awards without the
holder's consent except for an amendment made to comply with applicable law,
stock exchange rules or accounting rules. No amendment may be made without the
approval of our shareholders to increase the shares issuable under the plan,
expand the types of awards grantable, materially expand the class of employees
eligible to participate, materially change the method of determining the
exercise price of options, delete or limit the prohibition of repricing options,
extend the expiration date of the plan, or to the extent such approval is
required by applicable law or stock exchange rules. The Committee may amend the
terms of any outstanding stock option or other award but no such amendment may
cause a "qualified performance-based award" to cease to qualify for the Section
162(m) exemption or impair the rights of any holder without the holder's consent
except an amendment made to cause the plan or award to comply with applicable
law, stock exchange rules or accounting rules.
The foregoing description of the 2007 Equity Plan is merely a summary of
that plan, does not create any rights, and is qualified in its entirety by
reference to the 2007 Equity Plan, which is included in the Company's filings
with the Securities and Exchange Commission.
1997 Stock Option Plan
Our 1997 Stock Option Plan, as amended, reserved a total of 785,600 shares
for issuance under the plan. Options could be granted pursuant to the plan to
persons who were our employees or employees of any of our subsidiaries
(including officers and directors who were employees) at the time of grant, and
to our non-employee directors. Non-employee directors were only eligible to be
granted non-qualified stock options. The 1997 Plan terminated on March 16, 2007,
and grants may no longer be made under the plan, but outstanding options may
continue to be exercised until the earlier of ten years from the date of grant
or the date set as the expiration date in the individual award agreements with
participants. At the time the 1997 Plan terminated, no options were outstanding
with respect to 425,439 of the shares reserved for issuance.
All incentive stock options under the 1997 Plan were required to have an
exercise price not less than the fair market value of common stock at the date
of grant, as determined by our Board of Directors. Non-qualified options were to
have such exercise prices as determined by our Board of Directors at the time of
grant, and such exercise prices could be less than fair market value. No options
may be exercised after ten years from the date of grant, options may not be
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transferred except by will or the laws of descent and distribution, and options
may be exercised only while the optionee is an employee of our Company, within
three months after the date of termination of employment, or within twelve
months of death or disability. 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 our receipt of consideration.
As of March 31, 2008, there were outstanding incentive options to purchase
177,861 shares and nonqualified options to purchase 182,300 shares.
The foregoing description of the 1997 Plan is merely a summary of that
plan, does not create any rights, and is qualified in its entirety by reference
to the 1997 Plan, which is included in the Company's filings with the Securities
and Exchange Commission.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of its business, our Bank makes loans to, accepts
deposits from, and provides other banking services to, certain of our directors
and executive officers, their associates, and members of their immediate
families. Loans are made on substantially the same terms, including interest
rates, collateral and repayment terms, as those prevailing at the time for
comparable transactions with persons not affiliated with the Bank, and do not
involve more than the normal risk of collectibility or present other unfavorable
features. Such loans are processed through the Bank's normal credit approval
procedures, but ultimate approval authority rests with the Board of Directors of
the Bank. Rates paid on deposits and fees charged for other banking services,
and other terms of these transactions, are also the same as those prevailing at
the time for comparable transactions with other persons. Our Bank expects to
continue to enter into transactions in the ordinary course of business on
similar terms with our directors, officers, principal stockholders, their
associates, and members of their immediate families. Loans outstanding to such
persons at December 31, 2007 and 2006 totaled $6,574,000 and $4,051,000,
respectively. None of such loans have been on non-accrual status, 90 days or
more past due, or restructured at any time.
From time to time we may also enter into other types of business
transactions or arrangements for services with our directors, officers,
principal shareholders or their associates. These types of transactions or
services might include, among others, purchases of furnishings and provision of
legal services. We only enter into such arrangements if we determine that the
prices or rates offered are comparable to those available to us from
unaffiliated third parties. Our Board approves such transactions on a case by
case basis. We do not have written policies or procedures with respect to such
approvals.
The law firm of Horger, Barnwell & Reid, L.L.P., in which Samuel F. Reid,
Jr., one of our directors, is a partner, provided legal services to us in 2007,
and is continuing to provide legal services to us in 2008. The law firm of
Willcox, Buyck & Williams, P.A., in which Wm. Reynolds Williams, also one of our
directors, is a member also provided legal services to us in 2007, and is
continuing to provide legal services to us in 2008.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING
COMPLIANCE
As required by Section 16(a) of the Securities Exchange Act of 1934, our
directors, executive officers and certain individuals are required to report
periodically their ownership of our 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 us, it appears that all such reports for
these persons were filed in a timely fashion during 2007, except one Form 4 for
Mr. Wolfe reporting one transaction relating to the exercise of stock options.
It is our corporate practice to assist directors with filing of Section 16(a)
reports.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Our Audit Committee has appointed J. W. Hunt & Company, LLP, independent
certified public accountants, as our independent auditors for the current fiscal
year ending December 31, 2008. A representative of J. W. Hunt & Company, LLP is
expected to be present at the 2008 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.
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Fees Billed by Independent Auditors
The following table shows the aggregate fees expected to be billed by, and
billed by J.W. Hunt & Company, LLP, our independent auditors, for audit services
provided to us and to our subsidiaries in connection with our consolidated
financial statements and reports for the fiscal years ended December 31, 2007
and 2006, and for other services rendered during fiscal years 2007 and 2006, as
well as all out-of-pocket costs billed, or expected to be billed, to us in
connection with these services.
Fee Category 2007 % of Total 2006 % of Total
---- ---------- -------- ----------
Audit Fees .............................. $ 96,550 85% 110,200 80%
Audit-Related Fees ...................... 6,150 6% 8,885 7%
Tax Fees:
Tax compliance/preparation ........ 10,300 9% 15,200 11%
Other tax services ................ - - 3,200 2%
-------- --------
Total tax fees .................... 10,300 9% 18,400 13%
-------- ---- --------
All Other Fees .......................... - - - -
-------- --------
Total Fees .............................. $113,000 100% $137,485 100%
-------- ========
Audit Fees: Audit fees include fees billed to us for professional services
provided in connection with the audit of our consolidated financial statements
and review of the interim condensed consolidated financial statements included
in our quarterly reports, and services that are normally provided by our
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 to us for
assurance and related services that are reasonably related to the performance of
the audit or review of our 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 fees include fees billed to us 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. J.W. Hunt & Company, LLP did not provide us with any other
services in either year.
In making its decision to appoint J.W. Hunt & Company, LLP as our
independent auditors for the fiscal year ending December 31, 2008, our 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.
Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of
Independent Auditors
Our Audit Committee pre-approves all audit and permitted non-audit services
(including the fees and terms thereof) provided by our 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.
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General pre-approval of certain audit, audit-related and tax services is
granted by our Audit 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 2007, all
audit and permitted non-audit services were pre-approved by the Committee.
AUDIT COMMITTEE REPORT
The Audit Committee of our Board of Directors has reviewed and discussed
with our management our audited financial statements for the year ended December
31, 2007. Our Audit Committee has discussed with our independent auditors, J. W.
Hunt & Company, LLP, the matters required to be discussed by Statement on
Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1 AU
section 380), as adopted by the Public Company Accounting Oversight Board in
Rule 3200T. Our 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, (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), as adopted by the Public Company Accounting
Oversight Board in Rule 3600T, and has discussed with J. W. Hunt & Company, LLP,
their independence. Based on the review and discussions referred to above, our
Audit Committee recommended to our Board of Directors that the audited financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2007 for filing with the Securities and Exchange Commission.
Alvis J. Bynum Richard L. Havekost
Anna O. Dantzler Thomas B. Edmunds
Charles E. Fienning, Chairman
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K
We are providing you a copy of our Annual Report on Form 10-K for the year
ended December 31, 2007, including financial statements (but not including
exhibits), free of charge, with this Proxy Statement. You may obtain copies of
exhibits to the Form 10-K by making a written request to William W. Traynham,
President, Community Bankshares, Inc., Post Office Box 2086, Orangeburg, South
Carolina 29116. We will charge you 20(cent) per page for copies of the exhibits.
You may also download copies of the Form 10-K and exhibits from the Securities
and Exchange Commission website at http://www.sec.gov. The 10-K is also
available on our website at www.communitybanksharesinc.com.
REFERENCES TO OUR WEBSITE ADDRESS
References to our website address throughout this Proxy Statement and the
accompanying materials are for informational purposes only, or to fulfill
specific disclosure requirements of the Securities and Exchange Commission's
rules or the American Stock Exchange. These references are not intended to, and
do not, incorporate the contents of our website by reference into this Proxy
Statement or the accompanying materials.
INCORPORATION BY REFERENCE
The Audit Committee Report shall not be deemed to be filed with the
Securities and Exchange Commission, nor deemed incorporated by reference into
any of our prior or future filings under the Securities Act of 1933, as amended,
or the Securities Exchange Act of 1934, as amended, except to the extent we
specifically incorporate such information by reference.
OTHER BUSINESS
We do 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,
the persons named in the accompanying proxy intend to vote such proxy in
accordance with their best judgment.
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PROXY
COMMUNITY BANKSHARES, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING OF SHAREHOLDERS - Tuesday, May 20, 2008
Michael A. Wolfe and William W. Traynham 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 20, 2008, 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: Thomas B. Edmunds, Henrietta C. Guthrie, Wm.
Reynolds Williams and Charles E. Fienning
NOMINEE: One Year Term: James Richard Williamson
2. 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.)
THIS PROXY 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: , 2008 -------------------------------------
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