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SCHEDULE 14A
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
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 under sec.240.14a-12
FIRST COMMUNITY BANCSHARES, 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.
[ ] $125 per Exchange Act Rules O-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2)of Schedule 14A.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule O-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
O-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:
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FIRST COMMUNITY LOGO
FIRST COMMUNITY BANCSHARES, INC.
ONE COMMUNITY PLACE
BLUEFIELD, VIRGINIA 24605-0989
NOTICE OF 2001
ANNUAL MEETING OF STOCKHOLDERS
To The Stockholders of First Community Bancshares, Inc.:
The ANNUAL MEETING of Stockholders of First Community Bancshares, Inc. will
be held at Fincastle Country Club, Double Gates, Bluefield, Virginia, at 2:30
p.m. local time on April 24, 2001, for the purpose of considering and voting
upon the following items as more fully discussed herein.
1. Election of three directors to serve as members of the Board of
Directors, Class of 2004.
2. Removal of James L. Harrison, Sr. as a director of the Corporation for
cause.
3. Ratification of the selection of Ernst & Young, Charleston, West
Virginia, as independent auditors for the year ending December 31, 2001.
4. Transacting such other business as may properly come before the meeting,
or any adjournment thereof.
Only stockholders of record at the close of business on March 9, 2001 are
entitled to notice of and to vote at such meeting or at any adjournment thereof.
By Order of the Board of Directors
/s/ Robert L. Buzzo
Robert L. Buzzo, Secretary
IMPORTANT
TO ENSURE YOUR SHARES ARE REPRESENTED AT THE ANNUAL MEETING, PLEASE
COMPLETE, SIGN AND RETURN THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE WHETHER OR
NOT YOU PLAN TO ATTEND THE MEETING. AN ADDRESSED RETURN ENVELOPE IS ENCLOSED FOR
YOUR CONVENIENCE. YOU MAY REVOKE YOUR PROXY AT ANY TIME PRIOR TO THE TIME IT IS
VOTED.
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PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON TUESDAY, APRIL 24, 2001
The Board of Directors of First Community Bancshares, Inc. (the
"Corporation") solicits the enclosed proxy for use at the Annual Meeting of
Stockholders of First Community Bancshares, Inc., which will be held on Tuesday,
April 24, 2001 at 2:30 p.m. local time at Fincastle Country Club, Double Gates,
Bluefield, Virginia, and at any adjournment thereof.
The expenses of the solicitation of the proxies for the meeting, including
the cost of preparing, assembling and mailing the notice, proxy statement and
return envelopes, the handling and tabulation of proxies received, and charges
of brokerage houses and other institutions, nominees or fiduciaries for
forwarding such documents to beneficial owners, will be paid by the Corporation.
In addition to the mailing of the proxy material, solicitation may be made in
person, by telephone or by other means by officers, directors or regular
employees of the Corporation.
This Proxy Statement and the proxies solicited hereby are being first sent
or delivered to stockholders of the Corporation on or about March 24, 2001.
VOTING
Shares of Common Stock (par value $1 per share) represented by proxies in
the accompanying form, which are properly executed and returned to the
Corporation, will be voted at the Annual Meeting in accordance with the
stockholder's instructions contained therein. In the absence of contrary
instructions, shares represented by such proxies will be voted FOR the election
of the nominees as described herein under "Election of Directors," FOR removal
of James L. Harrison, Sr. as a Director and FOR ratification of the selection of
Ernst & Young as independent public auditors for the year ended December 31,
2001. Any stockholder has the power to revoke his proxy at any time before it is
voted.
The Board of Directors has fixed March 9, 2001 as the record date for
stockholders entitled to notice of and to vote at the Annual Meeting. Shares of
Common Stock outstanding on the record date are entitled to be voted at the
Annual Meeting and the holders of record will have one vote for each share so
held in the matters to be voted upon by the stockholders. There are no
cumulative voting rights.
Directors are elected by a plurality of votes present in person or by proxy
and entitled to vote, assuming a quorum is present. All other matters coming
before the meeting will be determined by majority vote of those present in
person or by proxy and entitled to vote. Abstentions and broker non-votes for
shares represented at the meeting thus have no direct effect on the election of
directors but have the effect of negative votes on other matters to be
considered.
As of the close of business on March 9, 2001, the outstanding shares of the
Corporation consisted of 9,051,335 shares of Common Stock.
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1. ELECTION OF DIRECTORS
The Corporation's Board of Directors is comprised of eleven directors,
including ten non-employee directors, divided into three classes with staggered
terms. All directors are elected for three-year terms.
The nominees for the Board of Directors to serve until the Annual Meeting
of Stockholders in 2004 are set forth below. All nominees are currently serving
on the Corporation's Board of Directors. In the event any nominee is unable or
declines to serve as a director at the time of the Annual Meeting, the proxies
will be voted for any nominee who shall be designated by the present Board of
Directors to fill the vacancy. In the event that additional persons are
nominated for election as directors, the proxy holders intend to vote all
proxies received by them for the nominees listed below. All nominees named
herein have consented to be named and to serve as directors if elected.
YOUR BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES FOR
DIRECTOR.
Principal Occupation and Director of
Employment Last Five Years; Corporation Class of
Name Age Principal Directorships Since Directors
-------------------------------------------------------------------------------------------------------
Allen T. Hamner 59 Professor of Chemistry, West Virginia Wesleyan 1993 2004
College; Director, First Community Bank, N. A.
B. W. Harvey 69 President, Highlands Real Estate Management, 1989 2004
Inc.; Director, First Community Bank, N. A.
John M. Mendez 46 President and Chief Executive Officer of the 1994 2004
Corporation; Director, Executive Vice
President and Secretary, First Community Bank,
N. A.; Director & Chairman, United First
Mortgage, Inc.; Past Vice President, Chief
Financial Officer & Secretary of the
Corporation; Past Senior Vice
President - Finance & Chief Administrative
Officer, First Community Bank, N.A.
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CONTINUING DIRECTORS
The following persons will continue to serve as members of the Board of
Directors until the Annual Meeting of Stockholders in the year of the expiration
of their designated terms (except in the case of Mr. Harrison in the event Item
2 of this proxy statement receives the requisite greater than two-thirds vote).
The name, age, principal occupation and certain biographical information for
each continuing director are presented below:
Principal Occupation and Director of Class
Employment Last Five Years; Corporation of
Name Age Principal Directorships Since Directors
-------------------------------------------------------------------------------------------------------
Sam Clark 69 Agent, State Farm Insurance; Director, First 1993 2002
Community Bank, N. A.
James L. Harrison, Sr. 53 Practicing CPA; Past President & Chief 1989 2003
Executive Officer of the Corporation; Past
President & Director, First Community Bank,
N.A.; Past Director & Chairman, United First
Mortgage, Inc. See Item 2 herein.
I. Norris Kantor 71 Of Counsel, Katz, Kantor & Perkins, 1989 2003
Attorneys-at-Law; Director, First Community
Bank, N. A.
A. A. Modena 72 Retired Executive Vice President and Secretary 1989 2003
of the Corporation; Director, First Community
Bank, N. A.
Robert E. Perkinson, Jr. 53 Past Vice President-Operations, MAPCO Coal, 1994 2002
Inc.; Permac, Inc.; Race Fork Coal Company;
South Atlantic Coal, Inc.
William P. Stafford 67 President, Princeton Machinery Service, Inc.; 1989 2002
Chairman of the Board of the Corporation;
Director, First Community Bank, N. A.
William P. Stafford, II 37 Attorney, Brewster, Morhous & Cameron; 1994 2003
Director, First Community Bank, N. A.
W. W. Tinder, Jr. 75 Chairman & Chief Executive Officer, Tinder 1989 2002
Enterprises, Inc.; President, Tinco Leasing
Corporation (Real Estate Holdings); Director,
First Community Bank, N. A.
COMPENSATION OF DIRECTORS
During 2000, non-employee members of the Board of Directors received a
director's fee of $500 per month. Directors of the Corporation may also be
reimbursed for travel or other expenses incurred in attendance at Board or
committee meetings. Directors who are employees of the Corporation receive no
additional compensation for service on the Board or its committees.
MEETING ATTENDANCE
The Board of Directors held twelve meetings during 2000. All directors and
those nominees, who are currently directors, attended at least 75% of all
meetings of the Board and any committee of which they were a member, except Mr.
Harrison who attended 71% of such meetings.
BOARD COMMITTEES
The Board of Directors of the Corporation has an Audit Committee consisting
of Chairman Harvey and Messrs. Hamner and Stafford, all non-employee members of
the Board, and independent under the Nasdaq rules defining an independent
director. The Audit Committee of the Board of Directors, which held six
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meetings during 2000, reviews and acts on reports to the Board with respect to
various auditing and accounting matters, the scope of the audit procedures and
the results thereof, the internal accounting and control systems of the
Corporation, the nature of service performed for the Corporation by and the fees
to be paid to the independent auditors, the performance of the Corporation's
independent and internal auditors and the accounting practices of the
Corporation. The Audit Committee also recommends to the full Board of Directors
the independent auditors to be appointed by the Board, subject to stockholders'
ratification. The 2000 Report of the Audit Committee is presented on page 9 of
this Proxy Statement.
The Board of Directors has a Compensation Committee that was formed in May,
1999 consisting of non-employee Directors Hamner, Tinder, and William P.
Stafford, II. The Compensation Committee reviews and considers the form and
amount of compensation and contractual employment terms of the President and
Chief Executive Officer of the Corporation. Recommendations of the Compensation
Committee are made to the Board of Directors. The 2000 Report of the
Compensation Committee is presented on page 8 of this Proxy Statement
The Board of Directors of the Corporation has an Executive Committee
consisting of seven members including the Chairman and Chief Executive Officer.
The Executive Committee held seven meetings during 2000. The Executive Committee
is empowered to act on behalf of the Board on most Corporate matters not
involving business combinations.
The Board does not maintain a Nominating Committee.
TRANSACTIONS WITH DIRECTORS AND OFFICERS
Some of the directors and officers of the Corporation and members of their
immediate families are at present, as in the past, customers of the
Corporation's subsidiary bank, and have had and expect to have transactions with
the bank. In addition, some of the directors and officers of the Corporation
are, as in the past, also officers of or partners in entities that are customers
of the bank and have had and expect to have transactions with the bank. Such
transactions were made in the ordinary course of business, were made on
substantially the same terms, including interest rates and collateral, as those
prevailing at the time for comparable transactions with other persons, and did
not involve more than normal risk of collectibility or present other unfavorable
features.
Two of the directors, Messrs. Harrison and Stafford, II, are members of
professional firms which provide accounting, legal and/or other services on a
fee basis to the Company. Mr. Harrison is a practicing CPA with Brown, Edwards &
Company, a regional accounting firm. Brown, Edwards & Company performs limited
scope audit services and provides accounting and advisory services to the
Company. The Company paid $60,350 for these professional services in the year
2000.
Mr. Stafford, II is a practicing attorney with Brewster, Morhous & Cameron,
a Bluefield, WV law firm which provides general legal services to the Company.
The Company paid $79,564 for these professional services in the year 2000.
REPORTS OF CHANGES IN BENEFICIAL OWNERSHIP
Directors, executive officers and principal shareholders of the Corporation
are required to file Initial Statements of Beneficial Ownership and Changes of
Beneficial Ownership of holdings in the Corporation's stock. These filings on
Form 3, Form 4 and Form 5 are to be filed with the Securities and Exchange
Commission within various time frames following a change in status or changes in
the level of beneficial ownership. During 2000, a filing pursuant to these
requirements was inadvertently made on a late basis by Director Harrison.
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PRINCIPAL STOCKHOLDERS
The following sets forth information with respect to those persons who, to
the knowledge of management, beneficially owned more than 5% of the
Corporation's outstanding stock as of March 9, 2001. All shares are subject to
the named entity's sole voting and investment power.
Title of Shares Beneficially Percent
Class Name and Address of Beneficial Owner Owned of Class
--------------------------------------------------------------------------------------
Common The H. P. & Anne S. Hunnicutt Foundation (1) 1,010,000 11.18%
---------------
(1) William P. Stafford is deemed a beneficial owner of the same shares by
virtue of his position as President of the Foundation.
OWNERSHIP OF COMMON STOCK BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of the Common Stock
of the Corporation as of March 9, 2001, by each director and nominee, each
executive officer named in the Summary Compensation Table, and all directors and
executive officers as a group including each executive officer named in this
Proxy Statement.
Percent of Class
Name of Group Number of Shares Beneficially Owned
---------------------------------------------------------------------------------------------------
Robert L. Buzzo 10,015 *
Sam Clark 52,194 *
Allen T. Hamner 6,985 *
James L. Harrison, Sr. 48,744 *
B. W. Harvey 10,011 *
I. Norris Kantor 22,060 *
E. Stephen Lilly 4,022 *
John M. Mendez 18,662 *
A. A. Modena 26,778 *
Robert E. Perkinson, Jr. (1) 35,562 *
Robert L. Schumacher 9,410 *
William P. Stafford (2) 192,536 2.13%
William P. Stafford, II 151,478 1.68%
W. W. Tinder, Jr. 55,962 *
All Directors and Executive Officers 644,419 7.19%
as a Group (Fourteen Persons)
---------------
(1) Mr. Perkinson serves as Co-trustee of the Trust Under Agreement for Robert
E. Perkinson, Sr., and by virtue of voting power is deemed to share
beneficial ownership of an additional 104,373 shares held by Trust, or 1.16%
of the Corporation's outstanding stock.
(2) Mr. Stafford serves as President of The H. P. and Anne S. Hunnicutt
Foundation, and by virtue of voting power is deemed to share beneficial
ownership of an additional 1,010,000 shares held by the Foundation, or 11.18
% of the Corporation's outstanding stock.
* Less than one percent.
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REPORT ON EXECUTIVE COMPENSATION
The Board of Directors maintains a Compensation Committee (the "Committee")
whose role is the establishment and management of employment terms and the form
and levels of compensation paid to the President and Chief Executive Officer
("CEO"). The CEO manages compensation of other executive officers named in the
Compensation Table.
It is the responsibility of the Compensation Committee to develop proposed
contractual terms of employment and establish a framework for a competitive
compensation package for the CEO and other senior executives that adequately
rewards performance and provides incentives for retention. In carrying out its
responsibilities, the Compensation Committee considers: i) the need to retain
competent and effective management personnel; ii) competitive terms and levels
of compensation relative to other companies of comparable size and operation
within the commercial banking industry; iii) past performance of the CEO as
measured against predetermined goals and objectives; iv) comparative performance
of the CEO as benchmarked against peer groups of comparable commercial banks;
and v) the achievement of overall corporate goals.
The Committee establishes current compensation based primarily on review of
competitive salary practices by similarly sized banking organizations locally
and nationally giving appropriate weight to regional differences in cost of
living and contrasting relative performance of the Company and the designated
peer group. In performing this analysis, the Committee utilized the Sheshunoff
Executive Compensation Survey as well as compensation data from other
specifically identified banking peers.
In 2000, with a change in senior management, the Committee reviewed the
employment contract of the President and Chief Executive Officer. Based on that
review and upon the Committee's recommendation to the Board of Directors, a new
employment contract ("contract") was adopted for the President and Chief
Executive Officer. The new three-year contract contains similar terms of
employment and provides for salary continuation for a period of 35 months in the
event of termination within three years of a change in control of ownership. The
contract also provides for salary continuation for a period of 30 months in the
event of termination without cause, absent a change in control of ownership.
The Committee recommended to the Board of Directors a two-tiered incentive
compensation strategy for the President and Chief Executive Officer based upon
the Company meeting specific financial benchmarks and an additional
discretionary incentive based upon both the financial and non-financial
performance of company.
This report shall not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Securities Exchange Act of 1934,
unless First Community Bancshares, Inc. specifically incorporates this report by
reference. It will not otherwise be filed under such Acts.
Allen T. Hamner
William P. Stafford, II
W. W. Tinder, Jr.
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REPORT OF THE AUDIT COMMITTEE
The Audit Committee of the Board is responsible for providing independent,
objective oversight of the Corporation's accounting functions and internal
controls. The Audit Committee is composed of independent directors, and acts
under a written charter adopted and approved by the Board of Directors. Each of
the members of the Audit Committee is independent as defined by Corporation
policy and by the listing standards of the National Association of Securities
Dealers. A copy of the Audit Committee Charter is attached to this proxy
statement as Appendix A.
The responsibilities of the Audit Committee include recommending to the
Board an accounting firm to be engaged as the Corporation's independent
auditors. Additionally, and as appropriate, the Audit Committee reviews and
evaluates, and discusses and consults with management, internal audit personnel
and the independent auditors regarding, the following:
- the plan for, and independent auditors' report on, each audit of the
Corporation's financial statements
- the Corporation's financial disclosure documents, including all financial
statements and reports sent to shareholders
- changes in the Corporation's accounting practices, principles, controls
or methodologies, or in its financial statements
- significant developments in accounting rules
- the adequacy of the Corporation's internal accounting controls, and
accounting, financial and auditing personnel
- the establishment and maintenance of an environment at the Corporation
that promotes ethical behavior
This year the Audit Committee revised its Audit Committee Charter,
incorporating the new standards set forth in Securities Exchange Commission
regulations and the listing standards of the National Association of Securities
Dealers. After appropriate review and discussion, the Audit Committee determined
that the Committee fulfilled its responsibilities under the Audit Committee
Charter.
The Audit Committee is responsible for recommending to the Board that the
Corporation's financial statements be included in its annual report. The
Committee took a number of steps in making this recommendation and held six
meetings during fiscal year 2000. First, the Audit Committee discussed with its
independent public auditors those matters the accountant communicated to and
discussed with the Audit Committee under applicable auditing standards,
including information regarding the scope and results of the audit. These
communications and discussions are intended to assist the Audit Committee in
overseeing the financial reporting and disclosure process. Second, the Audit
Committee discussed the accountant's independence with that firm and received a
letter from the accountant concerning independence as required under applicable
independence standards for auditors of public companies. This discussion and
disclosure informed the Audit Committee of the auditors' independence, and
assisted the Audit Committee in evaluating such independence. Finally, the Audit
Committee reviewed and discussed, with the Corporation management and the
accounting firm, the Corporation's audited consolidated balance sheet at
December 31, 2000 and consolidated statement of income, cash flows and
stockholders' equity for the year then ended. Based on discussions with the
auditors concerning the audit, the independence discussions, and the financial
statement review, and such other matters deemed relevant and appropriate by the
Audit Committee, the Audit Committee recommended to the Board (and the Board
approved) that these financial statements be included in the Corporation's 2000
Annual Report on Form 10-K filed with the Securities and Exchange Commission.
B.W. Harvey, Audit Committee Chair
William P. Stafford, Audit Committee Member
Allen T. Hamner, Audit Committee Member
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EXECUTIVE COMPENSATION FOR THE YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998
The following summary compensation table sets forth information concerning
compensation for services in all capacities awarded to, earned by, or paid to
the Corporation's President and Chief Executive Officer and to other executive
officers of the Corporation whose salary and bonus exceeded $100,000 during the
years ended December 31, 2000, 1999 and 1998.
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
---------------------
Awards Payouts
---------- -------
Securities
Underlying LTIP
Name of Individual/ Other Annual Options Payouts
Capacities Served Year Salary Bonus Compensation (1) # $
-----------------------------------------------------------------------------------------------------
John M. Mendez 2000 $185,460 $30,780 $10,512 11,660 $--
President & 1999 $157,193 $ -- $ 6,156 11,660 $--
Chief Executive Officer 1998 $154,970 $14,969 $ 8,062 -- $--
of the Corporation;
Executive Vice
President & Secretary,
First Community Bank,
N. A.; Director &
Chairman of United
First Mortgage, Inc.
Robert L. Buzzo 2000 $110,080 $14,450 $ 7,715 6,253 $--
Vice President and 1999 $ 82,121 $ -- $ 7,416 6,253 $--
Secretary of the 1998 $ 81,977 $ 3,154 $21,499 -- $--
Corporation; President
of First Community
Bank, N.A.; Chief
Executive Officer of
the Bluefield Division
of First Community
Bank, N.A.
E. Stephen Lilly 2000 $ 94,569 $21,035 $ 8,035 6,240 $--
Chief Operating Officer 1999 $100,379 $ -- $ 4,819 6,240 $--
of the Corporation 1998 $ 87,217 $ 2,183 $ 5,862 -- $--
Robert L. Schumacher 2000 $ 99,540 $ 7,943 $ 9,427 7,658 $--
Senior Vice President, 1999 $ 97,469 $ -- $ 7,571 7,658 $--
Finance of the 1998 $ 96,314 $14,293 $ 8,974 -- $--
Corporation
James L. Harrison, Sr. 2000 $137,830 $12,246 $ 2,520 -- $--
Former President, Chief 1999 $219,651 $ -- $29,965 -- $--
Executive Officer & 1998 $199,619 $ -- $46,609 -- $--
Director of the
Corporation, President
& Director of First
Community Bank, N.A.;
Director of United
First Mortgage, Inc.
(2)
---------------
(1) Other annual compensation includes non-qualified deferred compensation
agreements, deferred bonuses and non-cash fringe benefits.
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(2) Employment with the Corporation ceased on June 11, 2000; however, James L.
Harrison, Sr. continues to serve as a director of First Community
Bancshares, Inc. (See Item 2 herein.)
STOCK OPTIONS
In 1999, the Company instituted a Stock Option Plan to encourage and
facilitate investment in the common stock of the Company by key executives and
to assist in the long-term retention of service by those executives. The Plan
covers key executives as determined by the Company's Board of Directors from
time to time. Options under the Plan were granted in the form of non-statutory
stock options with the aggregate number of shares of common stock available for
grant under the Plan set at 275,000 shares. Total options currently available
under the Plan at December 31, 2000 represent the rights to acquire 191,932
shares with deemed grant dates of January 1st for each year 1999 through 2003
resulting in the deemed grant of 38,387 shares in each year of the five-year
deemed grant period. All stock options granted pursuant to the Plan vest ratably
on the first through the seventh anniversary dates of the deemed grant date. The
option price of each stock option is equal to the fair market value of the
Company's common stock on the date of each deemed grant during the five-year
grant period. Vested stock options granted pursuant to the Plan are exercisable
for a period of five years after the date of the grantee's retirement (provided
retirement occurs at or after age 62), disability, or death. If employment is
terminated other than by retirement at or after age 62, disability, or death,
vested options must be exercised within 90 days after the effective date of
termination. Any option not exercised within such period will be deemed
cancelled.
In the event of a change of control or upon dissolution of the corporation,
the stock options granted under the Plan continue to vest and are exercisable in
accordance with the terms of the original grant. Change of control provisions
further provide that any optionee who is terminated without cause by the
corporation, its successor or affiliate during the 12 months preceding, or at
any time following a change of control, and any participant who remains employed
by the corporation or any affiliate during the 90-day period following a change
of control and thereafter resigns, shall continue to receive grants on the
deemed grant dates and vest as if the optionee continued to be employed, and
optionee, or his estate, shall be entitled to exercise such options within five
years after death or attainment of age 62, whichever first occurs.
OPTIONS DEEMED GRANTED IN LAST FISCAL YEAR
Individual Grants
--------------------------------------------------------------------------------
Number of % of Total Present Value of
Securities Options Grant at Date of
Underlying Granted to Exercise or Grant Using
Options Employees in Base Price Expiration Options
Name Granted (#) Fiscal Year ($/Sh) (1) Dates (2) Pricing Model (3)
----------------------------------------------------------------------------------------------------------
John M. Mendez 11,660 30.37% 19.36 03/01/22 38,128
Robert L. Buzzo 6,253 16.29% 19.36 04/01/17 20,449
E. Stephen Lilly 6,240 16.26% 19.36 07/01/25 20,405
Robert L. Schumacher 7,658 19.95% 19.36 04/01/18 25,042
6 Optionees (including
the 4 listed above) 38,387 100.00% 19.36 From 01/01/14 125,525
To 07/01/25
---------------
(1) Plan participants may use previously owned shares to pay for an option's
exercise price. Additionally, plan participants may have the Company
withhold their shares due upon exercise of an option to satisfy their
required tax withholding obligations.
(2) Options expire 5 years after the executive's retirement date, death or
disability. In the event of termination other than retirement, death or
disability, options must be exercised within 90 days of effective date of
termination. If not exercised within that period, options are deemed
cancelled. For purposes of this table, retirement age is assumed to be age
62.
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(3) The present value of grant at date of grant values options using the
Black-Scholes model with the following assumptions: risk-free interest rate
of 6.00%, dividend yield of 5.21%, and volatility of the expected market
price of the Company's common stock of 26.1%.
OPTION EXERCISES IN LAST FISCAL YEAR
The following table lists the number of shares underlying unexercised
options as well as values for "in-the-money" options. Options are "in-the-money"
if the 2000 year-end share price is higher than the exercise price. No options
were exercised for the listed officers in 2000, and no shares were acquired on
exercise.
Underlying Unexercised In-the-Money Options
Options at Fiscal Year End at Fiscal Year End
--------------------------- ---------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------------------------------------------------------------------
John M. Mendez -- 23,320 -- --
Robert L. Buzzo -- 12,506 -- --
E. Stephen Lilly -- 12,480 -- --
Robert L. Schumacher -- 15,316 -- --
EXECUTIVE RETENTION PLAN
In 1999, the Company established an Executive Retention Plan for key
members of senior management, including the individuals named in the Summary
Compensation Table. This Plan provides for a benefit at normal retirement (age
65) targeted at 15% of final compensation projected at an assumed 3% salary
progression rate. Benefits under the Plan become payable at age 62. Actual
benefits payable under the Retention Plan are dependent on an indexed retirement
benefit formula that accrues benefits equal to the aggregate after-tax income of
associated life insurance contracts less the Company's tax-effected cost of
funds for that plan year. Benefits under the Plan are dependent on the
performance of the insurance contracts and are not guaranteed by the Company.
In connection with the Executive Retention Plan, the Company has also
entered into Life Insurance Endorsement Method Split Dollar Agreements (the
"Agreements") with the executives covered under the Retention Plan. Under the
Agreements, the Company shares 80% of death benefits (after recovery of cash
surrender value) with the designated beneficiaries of the executives under life
insurance contracts referenced in the Retention Plan. The Company as owner of
the policies retains a 20% interest in life proceeds and a 100% interest in the
cash surrender value of the policies.
The Retention Plan also contains provisions for change of control, as
defined, which allow the executives to retain benefits under the Plan in the
event of a termination of service, other than for cause, during the twelve
months prior to a change in control or anytime thereafter, unless the executive
voluntarily terminates his employment within 90 days following the change in
control.
Because the Retention Plan was designed to retain the future services of
key executives, no benefits are payable under the Plan in the event of voluntary
or involuntary termination prior to retirement age of 62.
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COMPARATIVE PERFORMANCE OF THE COMPANY
The following chart was compiled by SNL Securities, LC and compares
cumulative total shareholder return on the Corporation's Common Stock for the
five-year period ended December 31, 2000 with cumulative total shareholder
return of: (1) The Standard & Poor's 500 market index ("S&P 500"); and (2) a
group of five Peer Bank Holding Companies (First Community Bancshares' Peer
Group) which was selected by management of the Corporation based upon relative
asset size and geographic location; and (3) a group of 21 Peer Bank Holding
Companies (Asset Size & Regional Peer Group) selected to replace the original
peer group which has been diminished in number due to mergers and acquisitions.
Three of the five Bank Holding Companies in First Community Bancshares' Peer
Group are also included in the Asset Size & Regional Peer Group. Both peer
groups are presented in this transition year. Subsequent years will present only
the Asset Size and Regional Peer Group; the newly constituted, larger peer
group.
PERFORMANCE GRAPH
PERIOD ENDING
---------------------------------------------------------------
INDEX 12/31/95 12/31/96 12/31/97 12/31/98 12/31/99 12/31/00
----- -------- -------- -------- -------- -------- --------
First Community Bancshares, Inc. 100.00 109.10 158.89 157.36 128.57 126.83
S&P 500 100.00 122.86 163.86 210.64 254.97 231.74
First Community Bancshares Peer Group* 100.00 131.97 189.72 182.04 156.10 150.41
Asset Size & Regional Peer Group** 100.00 120.13 185.37 175.98 142.48 132.56
---------------
* First Community Bancshares, Inc. Peer Group consists of five banks used in
the 2000 fiscal year ending Total Return Analysis. The financial institutions
which comprise the Peer Group are: WesBanco, Inc., City Holding Company,
United Bankshares, Inc., One Valley Bancorp, Inc. (which, as of year end
2000, had been acquired by BB & T Corp.), and Pocahontas Bankshares Corp.
(which had a name change and is now called First Century Bankshares, Inc.).
** Asset Size & Regional Peer Group, used by First Community Bancshares for
comparison in the fiscal year ending December 31, 2000, consists of 21
institutions that have an asset size of $1 billion to $5 billion and are
located in the southeast region.
The graph assumes an initial investment of $100 on December 31, 1995 in the
Corporation's common stock and each of the comparative investments with
dividends from each of the investments reinvested at year-end in additional
shares of stock at the then current market value.
EMPLOYMENT CONTRACT
Under the provisions of an employment contract with Mr. Mendez, in the
event of a change in control of the Corporation, Mr. Mendez may elect to
terminate services and be compensated at his annual salary for the balance of
the term of the contract or for a period of thirty months, whichever is greater.
In the event Mr. Mendez is dismissed for reasons other than cause, as defined,
he will be compensated at his annual salary for the balance of the term of the
three-year contract, or thirty months, whichever is greater.
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EMPLOYEE STOCK OWNERSHIP PLAN
The individuals listed in the Summary Compensation Table are covered under
an Employee Stock Ownership and Savings Plan ("ESOP"). Contributions under the
ESOP feature are made annually at the discretion of the Board of Directors.
Allocations of those contributions to participants' accounts are made on the
basis of relative W-2 compensation (up to $170,000). Allocations to the accounts
of the individuals named in the Summary Compensation Table for the 2000 year
were: Buzzo -- $13,225; Lilly -- $12,364; Mendez -- $17,000;
Schumacher -- $11,958.
SAVINGS PLAN
The Plan also provides a 401(k) Savings feature and matches employee
contributions at the rate of 25% up to 6% of compensation. Matching
contributions for 2000 for the covered persons listed in the Summary
Compensation Table were as follows: Buzzo -- $1,340; Lilly -- $1,261;
Mendez -- $2,323; and Schumacher -- $1,214.
WRAP PLAN
The Corporation maintains a non-qualified Supplemental 401(k) Plan ("Plan")
for the purpose of providing deferred compensation which cannot be accumulated
under the Basic Plan provisions above because of deferral and covered
compensation limitations on tax-qualified pension plan benefits. The Company
makes a non-qualified matching credit on employee contributions at the rate of
25% up to 6% of compensation under the 401(k) feature of the basic plan and also
makes contributions in lieu of basic plan ESOP contributions for compensation in
excess of the $170,000 compensation limit. Contributions under this Plan in 2000
for the covered persons listed in the Summary Compensation Table were as
follows: Buzzo -- $641; Lilly -- $604; Mendez -- $1,262; and Schumacher -- $581.
2. REMOVAL OF DIRECTOR
In June of 2000, James L. Harrison, Sr. was terminated as President and
Chief Executive Officer of the Corporation, President and Director of First
Community Bank, N.A., a subsidiary of the Corporation, and Director of United
First Mortgage, Inc., a subsidiary of the bank. Termination from these positions
followed an employee complaint and an investigation which established to the
satisfaction of the Board of Directors of the Corporation that serious
violations of personnel policies of the Corporation and the bank had occurred.
Corporate law generally requires a vote of the stockholders to remove a
director, and the Articles of Incorporation of the Corporation further provide
that a director of the Corporation can only be removed for cause relating to the
performance of his duties as a director. The removal of Mr. Harrison as director
of the bank and the mortgage company was possible because the Corporation is the
sole shareholder of the bank, and the bank is the sole shareholder of the
mortgage company. However, the Corporation's board of directors does not have
the authority under applicable law to remove Mr. Harrison as a director of the
Corporation, even if such cause exists.
The chairman of the Corporation's board of directors requested Mr.
Harrison's resignation from the Corporation's board, but he declined to honor
this request. Accordingly, the Executive Committee of the Board of Directors is
asking the stockholders to accomplish this result at a meeting of the
Corporation duly called for such purpose. The Committee has unanimously
concluded, after consultation with counsel and extensive discussion, that the
conduct which led to Mr. Harrison's dismissal reflects on his performance as a
director and constitutes due cause for removal, and that it is inappropriate for
a former employee terminated under these circumstances to continue service in
such a critical position as director of the Corporation.
Because applicable law requires that removal be accomplished by the
affirmative vote of the holders of more than two-thirds of the outstanding
common stock of the Corporation, your vote is especially important. If you do
not return your proxy, this has the effect of a vote against removal.
THE BOARD OF DIRECTORS OF THE CORPORATION UNANIMOUSLY (WITH THE EXCEPTION OF MR.
HARRISON) SUPPORTS THIS REQUEST, AND ASKS THAT YOU VOTE IN FAVOR OF REMOVAL.
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3. RATIFICATION OF THE SELECTION OF INDEPENDENT AUDITORS
Pursuant to the Bylaws of the Corporation, stockholders will be asked to
ratify the selection of Ernst & Young, Charleston, West Virginia, as independent
auditors of the Corporation and its subsidiaries for the fiscal year ended
December 31, 2001. Ernst & Young served as independent auditors for the
Corporation for the fiscal year ended December 31, 2000. The firm Deloitte &
Touche previously served as independent auditors and examined the financial
statements of the Corporation and its subsidiaries from 1985 through 1999. The
Audit Committee of the Board of Directors recommended to the Board of Directors
a change in the independent auditors for 2000 based upon proposals received in
January 2000. Ernst & Young was selected as a qualified national firm based upon
its qualifications, proposed staffing, estimated fees and its proximity to the
Company's operations from its Charleston, West Virginia office. Ernst & Young
has no relationship with the Corporation or its subsidiaries except in its
capacity as proposed Independent Auditor. In connection with its audit of the
Corporation's financial statements for the year ended December 31, 2001, Ernst &
Young will review the Corporation's annual reports to stockholders and its
filings with the Securities and Exchange Commission and will conduct reviews of
quarterly reports to stockholders.
The Audit Committee of the Board of Directors has recommended to the Board
of Directors that Ernst & Young be appointed as independent auditors for the
year ended December 31, 2001. The Board of Directors has made that appointment
and recommends that the stockholders ratify the selection of Ernst & Young as
independent auditors for the ensuing year.
A representative of Ernst & Young is expected to be present at the meeting.
Inquiries or questions of Ernst & Young may be directed to Mr. Paul Arbogast,
Managing Partner, Ernst & Young, 900 United Center, Charleston, West Virginia
25301, (304) 343-8971.
INDEPENDENT AUDITOR FEES
Fees for the last annual audit which included services in conjunction with
the required quarterly and annual reporting to both shareholders and the
Securities Exchange Commission were $85,000. All other fees were $69,500,
including audit related services of $34,500 for tax planning assistance and the
review of a business combination completed in the fourth quarter of 2000, and
fees of $35,000 for non-audit services incurred in conjunction with the proposed
creation of an additional loan subsidiary. Audit related services generally
include fees for statutory audits, business acquisitions, accounting
consultations, and SEC registration statements. The Company's Audit Committee
has considered whether the provision of additional non-audit services by Ernst &
Young is compatible with maintaining auditor independence.
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OTHER MATTERS
All properly executed proxies received by the Corporation will be voted at
the meeting in accordance with the specifications contained thereon. The Board
of Directors knows of no other matter that may properly come before the meeting
for action. However, if any other matter does properly come before the meeting,
the persons named in the proxy materials enclosed will vote in accordance with
their judgment upon such matter.
STOCKHOLDERS' PROPOSALS
If any stockholder intends to present a proposal at the 2002 Annual
Meeting, such proposals must be received by the Corporation at its principal
executive offices on or before November 16, 2001. Otherwise, such proposal will
not be considered for inclusion in the Corporation's Proxy Statement for such
meeting.
You are urged to properly complete, execute and return the enclosed form of
proxy.
By Order of the Board of Directors
Robert L. Buzzo, Secretary to the Board
March 24, 2001
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APPENDIX A
FIRST COMMUNITY BANCSHARES, INC.
AUDIT COMMITTEE CHARTER
ORGANIZATION
This charter governs the operations of the Audit Committee. The Committee
shall review and reassess the charter at least annually and obtain the approval
of the Board of Directors. The Committee shall be appointed by the Board of
Directors and shall consist of at least three directors, each of whom are
independent of management and the Company. Members of the Committee shall be
considered independent if they have no relationship that may interfere with the
exercise of their independence from management and the Company. All Committee
members shall be generally knowledgeable in financial and auditing matters,
including at least one member with accounting or related financial management
expertise. The Chairman of the Board of Directors of the Corporation will be a
permanent member of the Audit Committee. Other Directors' terms shall be
staggered with one and two year terms. The Committee shall annually elect a
Chairman from among the members.
STATEMENT OF POLICY
The Audit Committee shall provide assistance to the Board of Directors in
fulfilling their oversight responsibility to the stockholders, potential
stockholders, the investment community, and others relating to the Company's
financial statements and the financial reporting process, the systems of
internal accounting and financial controls, the internal audit function, the
annual independent audit of the Company's financial statements, and the legal
compliance and ethics programs as established by management and the Board. In so
doing, it is the responsibility of the Committee to maintain free and open
communication between the Committee, independent auditors, the internal auditors
and management of the Company. In discharging its oversight role, the Committee
is empowered to investigate any matter brought to its attention with full access
to all books, records, facilities, and personnel of the Company and the power to
retain outside counsel or other experts for this purpose. Members of the Audit
Committee are to be present at all meetings either in person, proxy or other
technological means, unless extenuating circumstances prevail. As necessary or
desirable, the Chairman may request that members of management, the Director of
Auditing, and representatives of the independent auditors be present at the
Audit Committee meetings.
RESPONSIBILITIES AND PROCESSES
The primary responsibility of the Audit Committee is to safeguard the
Company's assets and to oversee the financial integrity of the Company's
accounting, auditing and reporting practices and such other duties as directed
by the Board. The Committee is to report significant developments or issues to
the Board of Directors. The Committee will report on its review of quarterly
financial statements included in the filing of the Company's Quarterly Report on
Form 10-Q and report on its review of the annual financial statements included
in the filing of the Company's Annual Report on Form 10-K. Management is
responsible for preparing the Company's financial statements, and the
independent auditors are responsible for auditing those financial statements.
The Committee, in carrying out its responsibilities, believes its policies and
procedures should remain flexible in order to best react to changing conditions
and circumstances. The Committee should take the appropriate actions to set the
overall corporate "tone" for quality financial reporting, sound business
practices, and ethical behavior.
The following shall be the principal recurring processes of the Audit
Committee in carrying out its oversight responsibilities. The processes are set
forth as a guide with the understanding that the Committee may supplement them
as appropriate.
- The Committee shall have a clear understanding with management and the
independent auditors that the independent auditors are ultimately
accountable to the Board and the Audit Committee, as representatives of
the Company's stockholders. The Committee shall discuss with the auditors
their independence from management and the Company and the matters
included in the written disclosures
A-1
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required by the Independence Standards Board. Annually, the Committee
shall evaluate the work of the independent auditors and recommend to the
Board the selection of the Company's independent auditors for the ensuing
year, subject to stockholders' approval.
- The Committee shall discuss with the internal auditors and the
independent auditors the overall scope and plans for their respective
audits including the adequacy of staffing and compensation. Also, the
Committee shall discuss with management, the internal auditors, and the
independent auditors, the adequacy and effectiveness of the accounting
and financial controls, including the Company's system to monitor and
manage business risk, and the legal and ethical compliance programs.
Further, the Committee shall meet separately with the internal auditors
and the independent auditors, with and without management present, to
discuss the results of their examinations.
- The Committee shall review the interim financial statements with
management and the independent auditors prior to the filing of the
Company's Quarterly Report on Form 10-Q. Also, the Committee shall
discuss the results of the quarterly review and any other matters
required to be communicated to the Committee by the independent auditors
under generally accepted auditing standards. The Chairman of the
Committee may represent the entire Committee for the purposes of this
review.
- The Committee shall review with management and the independent auditors
the financial statements to be included in the Company's Annual Report on
Form 10-K (or the annual report to stockholders if distributed prior to
the filing of Form 10-K), including their judgment about the quality, not
just acceptability, of accounting principles, the reasonableness of
significant judgments, and the clarity of the disclosures in the
financial statements. Also, the Committee shall discuss the results of
the annual audit and all other matters required to be communicated to the
Committee by the independent auditors under generally accepted auditing
standards, including the written disclosures and letter required by the
Independence Standard Board Standard No. 1.
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PROXY FOR ANNUAL MEETING OF STOCKHOLDERS
First Community Bancshares, Inc. o One Community Place,
Bluefield, Virginia 24605
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby constitutes and appoints James L. Miller and Barbara J.
Buchanan, or either of them, attorney and proxy with full power of
substitution, to represent the undersigned at the Annual Meeting of the
Stockholders of First Community Bancshares, Inc. (the "Corporation") to be held
on Tuesday, April 24, 2001, at the Fincastle Country Club, Double Gates,
Bluefield, Virginia, at 2:30 P.M., local time, and any adjournments thereof,
with all power then possessed by the undersigned, and to vote, at that meeting
or any adjournment thereof, all shares which the undersigned would be entitled
to vote if personally present.
1. FOR / / the election of 3 directors - Class of 2004 WITHHOLD AUTHORITY / /
B. W. Harvey John M. Mendez You may withhold authority to vote for any nominee by
Allen T. Hamner lining through or otherwise striking out his name.
2. To remove James L. Harrison, Sr. as a director of the Corporation for cause.
FOR / / AGAINST / / ABSTAIN / /
3. To ratify the selection of the firm of Ernst & Young, Charleston, West Virginia, as independent auditors for the year
ending December 31, 2001.
FOR / / AGAINST / / ABSTAIN / /
4. To vote upon such other business as may properly come before this meeting.
CONTINUED ON THE REVERSE
20
SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED, IF AUTHORITY IS
NOT WITHHELD OR IF NO CHOICE IS SPECIFIED, THIS PROXY WILL BE VOTED FOR ITEMS
1, 2 AND 3 ABOVE.
DATED: ____________________, 2001 ___________________________________
SIGNATURE OF STOCKHOLDER
___________________________________
SIGNATURE OF STOCKHOLDER
/ / PLEASE CHECK IF YOU PLAN TO ATTEND
THE STOCKHOLDERS' MEETING ON APRIL
24, 2001
Please sign your name(s) exactly as
shown imprinted hereon. If more than
one name appears as part of registration
name, all names must sign. If acting in
executor, trustee or other fiduciary
capacity, please sign as such.