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 240.14a-11(c) or 240.14a-12
COMMUNITY BANCSHARES, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Not Applicable
-------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[x ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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 LETTERHEAD]
April 30, 2002
To Our Shareholders:
You are cordially invited to attend the Annual Meeting of Shareholders
(the "Annual Meeting") of Community Bancshares, Inc. (the "Company"), the
holding company for Northwestern National Bank (the "Bank"), which will be
held on Friday, May 31, 2002 at 11:00 a.m., at the Holiday Inn Express, 1700
Winkler Mill Road, Wilkesboro, North Carolina 28697.
The Notice of Annual Meeting and a Proxy Statement, which describe the
formal business to be conducted at the Annual Meeting, follow this letter.
After reading the Proxy Statement, please promptly mark, sign and return
the enclosed proxy in the prepaid envelope to assure that your shares will be
represented. Your shares cannot be voted unless you date, sign and return the
enclosed proxy or attend the Annual Meeting in person. Regardless of the number
of shares you own, your careful consideration of, and vote on, the matters
before our shareholders is important.
A copy of the Company's 2002 Annual Report is also enclosed for your
information.
We look forward to seeing you at the Annual Meeting.
Sincerely,
/s/ Robert F. Ricketts
Robert F. Ricketts
Chairman of the Board
COMMUNITY BANCSHARES, INC.
1301 WESTWOOD LANE - WESTFIELD VILLAGE
WILKESBORO, NORTH CAROLINA 28697
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2002
The Annual Meeting of Shareholders of Community Bancshares, Inc. (the
"Company") will be held on Friday, May 31, 2002 at 11:00 a.m., at the Holiday
Inn Express, 1700 Winkler Mill Road, Wilkesboro, North Carolina 28697, for
the following purposes:
(1) To elect three (3) directors to serve for a term of three years and
until their successors are elected and qualified; and
(2) To transact such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Only shareholders of record at the close of business on April 19, 2002
will be entitled to notice of, and to vote at, the meeting or any
adjournments or postponements thereof.
A Proxy Statement and a proxy solicited by the Board of Directors are
enclosed herewith. Please sign, date and return the proxy promptly. If you
attend the meeting, you may, if you wish, withdraw your proxy and vote in
person.
By Order of the Board of Directors,
/s/ Ronald S. Shoemaker
Ronald S. Shoemaker
President and Chief Executive Officer
Wilkesboro, North Carolina
April 30, 2002
PLEASE COMPLETE AND RETURN THE ENCLOSED PROXY CARD PROMPTLY SO THAT YOUR VOTE
MAY BE RECORDED AT THE MEETING IF YOU DO NOT ATTEND PERSONALLY.
COMMUNITY BANCSHARES, INC.
1301 WESTWOOD LANE - WESTFIELD VILLAGE
WILKESBORO, NORTH CAROLINA 28697
ANNUAL MEETING OF SHAREHOLDERS
MAY 31, 2002
__________________________
PROXY STATEMENT
__________________________
GENERAL INFORMATION
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Community Bancshares, Inc. (the "Company")
for the Annual Meeting of Shareholders to be held on Friday, May 31, 2002, and
any adjournments and postponements thereof (the "Annual Meeting"), at the time
and place and for the purposes set forth in the accompanying notice of the
meeting. The expense of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be paid by the Company. In addition to
solicitations by mail, officers and regular employees of the Company, at no
additional compensation, may assist in soliciting proxies by telephone. This
Proxy Statement and the accompanying proxy card are first being mailed to
shareholders on or about April 30, 2002. The address of the principal executive
offices of the Company is 1301 Westwood Lane - Westfield Village, Wilkesboro,
North Carolina 28697.
Any proxy given pursuant to this solicitation may be revoked by any
shareholder who attends the Annual Meeting and gives oral notice of his election
to vote in person, without compliance with any other formalities. In addition,
any proxy given pursuant to this solicitation may be revoked prior to the Annual
Meeting by delivering to the Secretary of the Company an instrument revoking it
or a duly executed proxy for the same shares bearing a later date. Proxies
which are returned properly executed and not revoked will be voted in accordance
with the shareholder's directions specified thereon. Where no direction is
specified, proxies will be voted for the election of the nominees named herein.
The Board of Directors has fixed the close of business on April 19, 2002 as
the record date (the "Record Date") for the determination of the holders of the
Company's common stock entitled to receive notice of and to vote at the Annual
Meeting and at any adjournments or postponements thereof. Only holders of
record of Common Stock at the close of business on the Record Date will be
entitled to vote at the Annual Meeting. At the close of business on the Record
Date, there were 1,622,302 shares of common stock issued and outstanding.
The holders of shares of common stock outstanding on the Record Date will
be entitled to one vote for each share held of record upon each matter properly
submitted at the Annual Meeting. The presence, in person or by proxy, of at
least a majority of the total number of outstanding shares of Common Stock is
necessary to constitute a quorum at the Annual Meeting. Shares which are
present in person or by proxy but abstain from voting with respect to one or
more proposals voted upon at the Annual Meeting will be included for purposes of
determining a quorum at the Annual Meeting.
AGENDA ITEM ONE
ELECTION OF DIRECTORS
The Board of Directors of the Company consists of nine directors. The
Company's Articles of Incorporation provide for a classified board of directors,
whereby approximately one-third of the members of the Company's Board of
Directors are elected each year at the Company's Annual Meeting of Shareholders.
At each Annual Meeting of Shareholders, successors to the class of directors
whose term expires at the Annual Meeting of Shareholders will be elected for a
three-year term.
Three Class II directors are presently standing for election to the Board.
The Class II directors will serve for a term of three years and until their
successors are elected and qualified.
The Board of Directors recommends the election of the three nominees listed
below. In the event that any nominee withdraws or for any reason is not able to
serve as a director, the proxy will be voted for such other person as may be
designated by the Board of Directors, but in no event will the proxy be voted
for more than three nominees. The affirmative vote of a plurality of all votes
cast at the Annual Meeting by the holders of the Common Stock is required for
the election of the three nominees standing for election. Management of the
Company has no reason to believe that any nominee will not serve if elected.
The following persons have been nominated by management for election to the
Board of Directors as Class II directors, to succeed themselves for a term of
three years, expiring at the 2005 Annual Meeting of the Shareholders, and until
their successors are elected and qualified or until their earlier resignation,
removal from office or death:
LARRY FARTHING, age 55, is an Executive Vice President of the Bank and has
served as an Investment Officer of the Bank since April 1992. Prior to 1992,
Mr. Farthing served as an Investment Officer at 1st American National Bank and
Northwestern Bank.
JACK RAY FERGUSON, age 75, is presently retired. From 1954 to 1985, he
served in various capacities with Lowe's Companies, Inc., including most
recently as manager of the Hendersonville, North Carolina store. Mr. Ferguson
served as Chairman of the Board of Directors of the Company from May 1999 to May
2000.
RONALD S. SHOEMAKER, age 61, has served as President of the Company and the
Bank since June 1990, and has been engaged in the organization of the Company
and the Bank since February 1990. Mr. Shoemaker served as Senior Vice President
and City Executive for Southern National Bank of North Carolina from 1985 to
1988.
The following persons are members of the Board of Directors who are not
standing for election to the Board this year and whose term will continue after
the Annual Meeting.
Class I Directors, serving for a term expiring at the 2004 Annual Meeting
of the Shareholders:
GILBERT R. MILLER, age 72, is presently retired. From 1947 to 1986, Mr.
Miller served as President and Chief Executive Officer of Miller Brothers Lumber
Company.
RANDY D. MILLER, age 46, has served as President of Randy Miller Lumber
Company since 1983. Mr. Miller has also served as President of Randy Miller
Trucking Company since 1983, and as President of Pine Log Company since 1995.
REBECCA ANN SEBASTIAN, age 66, is presently retired. Ms. Sebastian served
as Media Coordinator at the North Wilkesboro Elementary School from 1972 until
her retirement in 1994.
Class III Directors, serving for a term expiring at the 2003 Annual Meeting
of Shareholders:
ROBERT F. RICKETTS, DDS, age 52, is a dentist who has been engaged in
private practice in North Wilkesboro since 1976. Mr. Ricketts has served as
Chairman of the Board of Directors of the Company since May of 2000.
DWIGHT E. PARDUE, age 73, is presently retired. Mr. Pardue served as
Chairman of the Board of Directors of the Company from 1992 until May 1999.
From 1956 to January 1990, Mr. Pardue served in various capacities with Lowe's
Companies, Inc., including most recently Senior Executive Vice President.
R. COLIN SHOEMAKER, age 58, has served as Controller and Office Manager of
Key City Furniture Company, Inc. since 1985.
Each of the above persons (with the exception of Jack Ray Ferguson, Randy
D. Miller and Larry Farthing) has been a director of the Company since 1990.
Mr. Ferguson has been a director of the Company since 1991, Randy D. Miller has
been a director of the Company since 1998 and Larry Farthing has been a director
of the Company since 2001.
RONALD S. SHOEMAKER, President, Chief Executive Officer and a director of
the Company and the Bank, is the brother of R. Colin Shoemaker, a director of
the Company and the Bank. Randy D. Miller, a director of the Company and the
Bank, is the son of Gilbert R. Miller, a director of the Company and the Bank.
EXECUTIVE OFFICERS
RONALD S. SHOEMAKER, the President and Chief Executive Officer of the
Company, is the sole executive officer of the Company.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1994
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, certain officers and persons who own more than 10% of the outstanding
common stock of the Company, to file with the Securities and Exchange Commission
reports of changes in ownership of the common stock of the Company held by such
persons. Officers, directors and greater than 10% shareholders are also
required to furnish the Company with copies of all forms they file under this
regulation. To the Company's knowledge, based solely on a review of the copies
of such reports furnished to the Company and representations that no other
reports were required, during fiscal 2001, the Company has complied with all
Section 16(a) filing requirements applicable to its officers, directors and
greater than 10% shareholders, except that a Form 4, Statement of Changes in
Beneficial Ownership was inadvertently not filed for each of Messrs. Randy D.
Miller and Jack Ray Ferguson (both transactions were subsequently reported on a
Form 5, Annual Statement of Changes in Beneficial Ownership).
MEETINGS OF THE BOARD OF DIRECTORS
AND COMMITTEES OF THE BOARD
The Board of Directors of the Company held seven meetings during the year
ended December 31, 2001. Each director attended at least 75% or more of the
aggregate number of meetings held by the Board of Directors and the committees
on which he or she served. The Company's Board of Directors has four standing
committees - the Executive Committee, the Finance Committee, the Personnel and
Compensation Committee and the Audit Committee.
EXECUTIVE COMMITTEE. The Executive Committee presently consists of Ronald
S. Shoemaker, Robert F. Ricketts, Gilbert R. Miller and Dwight E. Pardue. The
Executive Committee exercises all of the authority of the Board of Directors and
the management of the Company during the period of time between meetings of the
Board of Directors. The Executive Committee held six meetings during 2001.
FINANCE COMMITTEE. The Finance Committee presently consists of R. Colin
Shoemaker, Larry Farthing, Jack Ray Ferguson, Dwight E. Pardue and Ronald S.
Shoemaker. The Finance Committee has been assigned the function of making
recommendations to the full Board regarding real estate requirements, finances
and expenses, and opportunities for the Company. The Finance Committee did not
meet during 2001.
PERSONNEL AND COMPENSATION COMMITTEE. The Personnel and Compensation
Committee presently consists of Robert F. Ricketts, Jack Ray Ferguson, Randy D.
Miller, Rebecca Ann Sebastian and Ronald S. Shoemaker. The Personnel and
Compensation Committee has been assigned the functions of reviewing and
administering the Company's salaries and bonuses and granting options pursuant
to the Company's stock option plan, recommending incentives for hiring qualified
personnel and reviewing executive compensation. The Personnel and Compensation
Committee held two meetings during 2001.
AUDIT COMMITTEE. The Audit Committee presently consists of Larry Farthing,
Rebecca Ann Sebastian, R. Colin Shoemaker and Randy D. Miller. The Audit
Committee has been assigned the principal functions of (i) recommending the
independent auditors, (ii) reviewing and approving the annual report of the
independent auditors, (iii) approving the annual financial statements and (iv)
reviewing and approving summary reports to the auditors' findings and
recommendations. All members of the Audit Committee, with the exception of
Larry Farthing, are "independent" as such term is defined in Rule 4200(a)(15)
of the National Association of Securities Dealers' (the "NASD") listing
standards. As an employee of the Bank, Mr. Farthing is not "independent"
under the definition provided by the NASD. The Board of Directors has not
adopted an Audit Committee Charter. The Audit Committee held five meetings
during 2001.
The Board of Directors does not have a standing directors nominating
committee, such function being reserved to the full Board of Directors. Any
shareholder entitled to vote for the election of directors may nominate a
person or persons for election as a director only if written notice of such
shareholder's intention to make any such nomination is given to the Company not
less than 90 days nor more than 120 days prior to the annual meeting; provided,
however, that if less than 100 days' notice or prior public disclosure of the
date of the annual meeting is given or made to shareholders, notice by the
shareholder will be timely if received not later than the close of business on
the seventh day following the day on which such notice of the date of the annual
meeting or such public disclosure was given or made. Notice of the date of the
annual meeting shall be deemed to have been given by the Company more than 100
days in advance of the annual meeting if the annual meeting is called on the
last Friday in May, without regard to when notice or public disclosure thereof
is made. Each notice of a shareholder's intention to make a nomination shall
set forth: (a) the name and address of the shareholder who intends to make the
nomination; (b) a representation that such shareholder is a holder of record of
shares of the Company entitled to vote at such annual meeting and intends to
appear in person or by proxy at the annual meeting to nominate the person or
persons specified in the notice; (c) as to each person to be nominated (i) such
person's name and address, employment history for the past five years,
affiliations, if any, with the Company and other corporations, the class and
number of shares of the corporation that are owned of record or beneficially by
such person and information concerning any transactions in such shares within
the prior 60 days, whether such person has been convicted in a criminal
proceeding (excluding traffic violations or similar misdemeanors) within the
past five years and the details thereof, whether such person has been a party to
any proceeding or subject to any judgment, decree or final order with respect to
violations of federal or state securities laws within the past five years and
the details thereof, and the details of any contract, arrangement, understanding
or relationships with any person with respect to any securities of the Company,
(ii) such person's written consent to being named as a nominee and to serving as
a director if elected, and (iii) a description of all arrangements and
understandings between the shareholder and each nominee and any other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management and the
independent auditors the audited financial statements of Community Bancshares,
Inc. for the year ended December 31, 2001. The Audit Committee has discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61 (Communication with Audit Committees). In
addition, the Audit Committee has received from the independent auditors the
written disclosures required by Independence Standards Board Standard No. 1
(Independence Discussions with Audit Committees), and discussed with the
independent auditors their independence from Community Bancshares, Inc. and its
management. The Audit Committee has also considered whether the independent
auditors' provision of non-audit services to Community Bancshares is compatible
with the auditors' independence.
In reliance on the review and discussions referred to above, the Audit
Committee recommended to the Board of Directors that the audited financial
statements for fiscal 2001 be included in Community Bancshares' Annual Report on
Form 10-KSB for filing with the Securities and Exchange Commission.
Respectfully submitted,
The Audit Committee
Larry Farthing
Randy D. Miller
Rebecca Ann Sebastian
R. Colin Shoemaker
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of April 19, 2002
with respect to ownership of the outstanding Common Stock of the Company by (i)
all persons known by the Company to beneficially own more than 5% of the
outstanding shares of Common Stock of the Company, (ii) each director and
director nominee of the Company, and (iii) all executive officers and directors
of the Company as a group.
Percent of
Amount and Nature of Outstanding
Name of Beneficial Owner Beneficial Ownership(1) Shares(2)
- ------------------------ ----------------------- ---------
Larry Farthing(2) 15,350 *
Jack Ray Ferguson(3) 231,289 14.2%
Gilbert R. Miller(4) 78,994 4.8%
Randy D. Miller(5) 72,083 4.4%
Dwight E. Pardue(6) 240,647 14.7%
Robert F. Ricketts, DDS(7) 64,947 4.0%
Rebecca Ann Sebastian(8) 69,810 4.3%
R. Colin Shoemaker(9) 32,201 2.0%
Ronald S. Shoemaker(10) 80,878 4.8%
Thomas and Mary Severt(11) 141,188 8.7%
Norma Gail Yearick(12) 89,906 5.5%
All executive officers
and directors as
a group (9 persons)(13) 886,199 50.3%
* Less than 1% of outstanding shares
_______________
(1) Except as otherwise indicated, each person named in this table possesses
sole voting and investment power with respect to the shares beneficially
owned by such person. "Beneficial Ownership" includes shares for which
an individual, directly or indirectly, has or shares voting or
investment power or both and also includes warrants and options which
are exercisable within sixty days of the date hereof. Beneficial
ownership as reported in the above table has been determined in
accordance with Rule 13d-3 of the Securities Exchange Act of 1934. The
percentages are based upon 1,622,302 shares outstanding, except for
certain parties who hold presently exercisable options to purchase
shares. The percentages for those parties who hold presently
exercisable options are based upon the sum of 1,622,302 shares plus the
number of shares subject to presently exercisable options held by them,
as indicated in the following notes.
(2) Includes 12,000 shares subject to presently exercisable stock options.
(3) 10,000 shares subject to presently exercisable stock options. Also
includes 2000 shares held by the Ferguson Educational Trust.
(4) Includes 10,000 shares subject to presently exercisable stock options.
(5) Includes 8,000 shares subject to presently exercisable stock options.
(6) Includes 10,000 shares subject to presently exercisable stock options.
Also includes 1,500 shares owned by Mr. Pardue's spouse and 500 shares
held by Mr. Pardue as custodian for his grandchild.
(7) 10,000 shares subject to presently exercisable stock options.
(8) Includes 10,000 shares subject to presently exercisable stock options.
(9) 10,000 shares subject to presently exercisable stock options. Also
includes 2,240 shares owned by Mr. Shoemaker's wife's IRA.
(10) Includes 60,000 shares subject to presently exercisable stock options.
(11) Includes 1,000 shares subject to presently exercisable stock options.
The Severts' address is P.O. Box 222, Jefferson, North Carolina 28640.
(12) Includes 1,850 owned jointly with her spouse. Mrs. Yearick's address is
17864 Cherryfield Drive, Drayden, Maryland 20630.
(13) Includes 140,000 shares subject to presently exercisable stock options.
EXECUTIVE COMPENSATION
The following table provides certain summary information for the fiscal
years ended December 31, 2001, 2000 and 1999 concerning compensation paid or
accrued by the Company to or on behalf of the Company's Chief Executive Officer.
The Chief Executive Officer is the Company's sole executive officer.
SUMMARY COMPENSATION TABLE
Annual Long Term
Compensation Compensation
-------------------------------- -------
Other All
Annual No. of Other
Compen- Options Compen-
Name and Salary Bonus sation Awarded sation
Principal Position Year ($) ($) ($)(1) (#) ($)(2)
- ------------------ ---- ------ ------ ------ ------ ------
Ronald S. Shoemaker 2001 118,584 50,000 18,757 0 5,186
President and Chief 2000 111,665 20,000 16,431 0 5,104
Executive Officer 1999 101,674 25,000 15,270 10,000 4,267
_______________________________
(1) Includes an annual automobile allowance of $6,600 and insurance premiums
totaling $12,157, $9,831, and $8,670 paid by the Company in 2001, 2000
and 1999 respectively.
(2) Represents the Company's matching contribution under its 401(k) Plan.
COMPENSATION OF DIRECTORS
On May 28, 1999, the Board of Directors adopted the following compensation
schedule for members of the Board of Directors: (i) each outside director
receives $2000 as annual compensation; (ii) each director receives $100 for each
board meeting attended; and (iii) each director receives $50 for each committee
meeting attended, but only when the committee meeting is held at a different
time than a regular board meeting. Further, each of the Company's outside
directors receives an automatic annual grant of options to purchase 2,000 shares
of Common Stock of the Company, at the then current fair market value, as
determined by the Company's Board of Directors, on each July 1, provided that
such director has served on the Board of Directors of the Company during the
twelve month period immediately preceding the option grant. All new directors
will also receive an option to purchase 2,000 shares of Common Stock upon their
election to the Board of Directors of the Company.
EMPLOYMENT AGREEMENT
In February 1995, the Company entered into an Employment Agreement with
Ronald S. Shoemaker, pursuant to which Mr. Shoemaker serves as President and
Chief Executive Officer of the Company. The Employment Agreement was for an
initial term of five years, provided, however, that during each of the first
five years, an additional year was added to the term of the agreement, so that
the Employment Agreement is presently scheduled to expire on February 1, 2005.
The Employment Agreement provides for an annual base salary of $84,000 to be
increased at the discretion of the Board of Directors and bonuses to be
determined in the discretion of the Board of Directors. Mr. Shoemaker was also
granted an option to purchase 40,000 shares of Common Stock of the Company,
exercisable over a term of ten years at an exercise price of $10.00 per share.
The Employment Agreement requires the Bank to maintain a key man life insurance
policy on Mr. Shoemaker in the amount of $500,000. The Employment Agreement
provides for certain severance payments to be paid to Mr. Shoemaker in the event
of a change of control of the Company. In the event of a change in control, if
Mr. Shoemaker cannot reach agreement with respect to his employment arrangements
following such change in control, Mr. Shoemaker will be entitled to receive a
lump sum cash payment equal to $300,000. In addition, in the event Mr.
Shoemaker is terminated by the Company without cause, he will receive during the
balance of his term of employment under the Employment Agreement, the annual
base salary which would otherwise be payable to Mr. Shoemaker had he remained in
the employ of the Company.
The Employment Agreement contains noncompete provisions, effective through
The actual date of termination of the Employment Agreement and for a period of
one year thereafter in the event Mr. Shoemaker terminates his employment with
the Company.
STOCK OPTION PLAN
On May 28, 1993, the Company's shareholders approved the 1993 Incentive
Stock Option Plan (the "Plan") for employees who are contributing significantly
to the management or operation of the business of the Company or its
subsidiaries as determined by the committee administering the Plan. The Plan
provides for the grant of up to 400,000 options at the discretion of the Board
of Directors or a committee designated by the Board of Directors to administer
the Plan. The option exercise must be at least 100% (110% in the case of a
holder of 10% or more of the Common Stock) of the fair market value of the stock
on the date the option is granted and the options are exercisable by the holder
thereof in full at any time prior to their expiration in accordance with the
terms of the Plan. Stock options granted pursuant to the Plan will expire on or
before (1) the date which is the tenth anniversary of the date the option is
granted, or (2) the date which is the fifth anniversary of the date the option
is granted in the event that the option is granted to a key employee who owns
more than 10% of the total combined voting power of all classes of stock of the
Company or any subsidiary of the Company.
In May 1994, the Plan was amended to, among other things, provide for the
automatic annual grant of nonqualified options to purchase 2,000 shares of
Common Stock to each of the Company's outside directors at a price equal to the
then-current fair market value of the Common Stock, as determined by the
Company's Board of Directors.
STOCK OPTIONS
No options were granted to or exercised by Ronald S. Shoemaker during 2001.
The following table presents information regarding the value of unexercised
options held at December 31, 2001 by Ronald S. Shoemaker.
Value of
Number of Unexercised
Unexercised Options In-the-Money Options
at Fiscal Year End at Fiscal Year End(1)
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
---- ------------- -------------
Ronals S. Shoemaker 60,000/0 $510,000/$0
____________________________
(1) Dollar values calculated by determining the difference between the
estimated fair market value of the Company's Common Stock at December
31, 2001 ($10.49) and the exercise price of such options.
CERTAIN TRANSACTIONS
The Company's subsidiary, Northwestern National Bank, has outstanding loans
to certain of the Company's directors, executive officers, their associates and
members of the immediate families of such directors and executive officers.
These loans were made in the ordinary course of business, on substantially the
same terms, including interest rates and collateral, as those prevailing at the
time for comparable transactions with persons not affiliated with the Company or
the Bank and do not involve more than the normal risk of collectibility or
present other unfavorable features.
INDEPENDENT PUBLIC ACCOUNTANTS
On October 30, 2001, Community Bancshares, Inc. (the "Company") dismissed
its independent auditors, Francis & Co., CPAs, and on the same date authorized
the engagement of Cherry, Bekaert & Holland, L.L.P., as its independent auditors
for the fiscal year ended December 31, 2001. Each of these actions was approved
by the Board of Directors and the Audit Committee of the Company.
Francis & Co., CPAs, audited the financial statements for the Company for
the fiscal year ended December 31, 2000 and for the fiscal year ended December
31, 1999. Neither of the audit reports of Francis & Co., CPAs, for those years
contained any adverse opinion or a disclaimer of opinion, or was qualified or
modified as to uncertainty, audit scope, or accounting principles.
Except as described herein, in connection with the audits for the fiscal
years ended December 31, 2000 and 1999 and for the unaudited interim period
through September 30, 2001, there were no disagreements with Francis & Co.,
CPAs, on any matter of accounting principle or practice, financial statement
disclosure, or audit procedure or scope which disagreement, if not resolved to
the satisfaction of Francis & Co., CPAs, would have caused it to make reference
to the subject matter of the disagreement in its report.
Further, prior to the engagement of Cherry, Bekaert & Holland, L.L.P.,
neither the Company nor any of its representatives sought the advice of Cherry,
Bekaert & Holland, L.L.P. regarding the application of accounting principles to
a specific completed or contemplated transaction or the type of audit opinion
that might be rendered on the Company's financial statements, which advice was
an important factor considered by the Company in reaching a decision as to the
accounting, auditing or financial reporting issue.
In connection with the audit of the fiscal year ended December 31, 2000 and
for the unaudited interim period through September 30, 2001, Francis & Co.,
CPAs, did not advise the Company that:
(i) internal controls necessary for the Company to develop reliable
financial statements did not exist;
(ii) information had come to its attention that led it to no longer be
able to rely on management's representations, or that made it
unwilling to be associated with the financial statements prepared
by management;
(iii) there existed a need to expand significantly the scope of its
audit, or that information had come to the attention of Francis &
Co., CPAs that if further investigated may materially impact the
fairness or reliability of either: a previously issued audit
report or the underlying financial statements, or the financial
statements issued or to be issued covering the fiscal period
subsequent to the date of the most recent financial statements
covered by an audit report (including information that may prevent
it from rendering an unqualified audit report on those financial
statements).
The Company has selected Cherry, Bekaert & Holland, L.L.P. as its
independent auditors for the fiscal year ended December 31, 2002.
Representatives of Cherry, Bekaert & Holland, L.L.P., are expected to be present
at the Annual Meeting and will have the opportunity to make a statement if they
desire to do so and to respond to appropriate questions.
AUDIT FEES. The aggregate fees billed by Cherry, Bekaert & Holland, L.L.P.
for professional services rendered for the audit of the Company's annual
financial statements for the year ending December 31, 2001 and the review of the
financial statements included in the Company's Forms 10-QSB for that year were
$20,610.
In addition, Francis & Co. billed an aggregate of $71,774 in fees for
professional services in its review, prior to its dismissal, of the Company's
financial statements included in the Company's Forms 10-QSB for the year ended
December 31, 2001
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. During 2001,
neither Cherry Bekaert & Holland, L.L.P., nor Francis & Co. performed any
services with regard to financial information systems design and implementation.
ALL OTHER FEES. During 2001, neither Cherry, Bekaert & Holland, L.L.P.,
nor Francis & Co. performed any non-audit services for the Company.
ANNUAL REPORT ON FORM 10-KSB
The Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 2001, as filed with the Securities and Exchange Commission, is
available to shareholders who make written request therefor to the Company at
1301 Westwood Lane - Westfield Village, Wilkesboro, North Carolina 28697.
Copies of exhibits and basic documents filed with that report or referenced
therein will be furnished to shareholders of record upon request.
SHAREHOLDER PROPOSALS
Any proposal of shareholders to be presented at the 2003 Annual Meeting
must be received at the principal executive offices of the Company not later
than December 31, 2002 directed to the attention of the Corporate Secretary, in
order to be eligible for inclusion in the Company's proxy statement and form of
proxy relating to that meeting. Proxies solicited by the Company for the 2003
Annual Meeting may confer discretionary authority to vote on any proposals
received after March 16, 2003 without a description of them in the proxy
materials for that meeting. Any shareholder proposals must comply in all
respects with the rules and regulations of the Securities and Exchange
Commission and the Company's Bylaws. A copy of the Company's Bylaws may be
obtained by writing to the Corporate Secretary.
OTHER MATTERS
The Board of Directors knows of no other matters to be brought before the
Annual Meeting. However, if any other matter should come before the Annual
Meeting it is the intention of the persons named in the enclosed form of Proxy
to vote the Proxy in accordance with their judgment of what is in the best
interests of the Company.
By Order of the Board of Directors,
/s/ Ronald S. Shoemaker
Ronald S. Shoemaker
President and Chief Executive Officer
Wilkesboro, North Carolina
April 30, 2002
COMMUNITY BANCSHARES, INC.
1301 WESTWOOD LANE - WESTFIELD VILLAGE
WILKESBORO, NORTH CAROLINA 28697
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE 2002
ANNUAL MEETING OF SHAREHOLDERS.
The undersigned hereby appoints Ronald S. Shoemaker and Rebecca Ann
Sebastian, or either of them, with power of substitution to each, the proxies of
the undersigned to vote the Common Stock of the undersigned at the Annual
Meeting of Shareholders of COMMUNITY BANCSHARES, INC. to be held on Friday, May
31, 2002, at 11:00 a.m. at the Holiday Inn Express, 1700 Winkler Mill Road,
Wilkesboro, North Carolina, and any adjournments or postponements thereof:
1. To elect three (3) directors for a terms set forth below and until
their successors are elected and have qualified.
___ FOR all nominees listed below ___ WITHHOLD AUTHORITY to
(except as marked to the vote for all nominees listed
contrary below) below
Class II Directors (to serve for a term expiring at the 2005 Annual Meeting of
Shareholders):
Larry Farthing, Jack Ray Ferguson and Ronald S. Shoemaker
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE WRITE
THAT NOMINEE'S NAME IN THE SPACE PROVIDED BELOW.
2. To vote in accordance with their best judgment with respect to any
other matters that may properly come before the meeting and any adjournments
or postponements thereof.
THE BOARD OF DIRECTORS FAVORS A VOTE "FOR" THE ABOVE PROPOSALS AND UNLESS
INSTRUCTIONS TO THE CONTRARY ARE INDICATED IN THE SPACE PROVIDED, THIS PROXY
WILL BE SO VOTED.
Please date and sign this Proxy exactly as name(s) appears on the mailing
label.
______________________________________
______________________________________
Print Name(s):________________________
NOTE: When signing as an attorney, trustee, executor, administrator or
guardian, please give your title as such. If a corporation or partnership,
give full name by authorized officer. In the case of joint tenants, each
joint owner must sign.
Dated: _______________________________