First Community Bancshares, Inc.
One Community Place
Bluefield, Virginia 24605-0989

 

Notice of 2006
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 the Corporate Offices of First Community Bancshares, Inc., located at 29 College Drive, Bluefield, Virginia, at 3:00 p.m. local time on Tuesday April 25, 2006, for the purpose of considering and voting upon the following items as more fully discussed herein.

 

 

Only stockholders of record at the close of business on March 7, 2006 are entitled to notice of and to vote at such meeting or at any adjournment thereof.

 

By Order of the Board of Directors

 

 

Robert L. Buzzo, Secretary

 

 

	1.	By telephone: (866) 540-5760 until 11:59 p.m. eastern daylight time on April 24, 2006; or
	2.	On the internet at http://www.proxyvoting.com/fcb until 11:59 p.m. eastern daylight time on April 24, 2006; or
	3.	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.

 

 

 

PROXY STATEMENT

 

Annual Meeting of Stockholders

To Be Held on Tuesday, April 25, 2006

 

The Board of Directors of First Community Bancshares, Inc. (the “Corporation”) solicits the enclosed proxy for use at the Annual Meeting of Stockholders of the Corporation (the “Annual Meeting”), which will be held on Tuesday, April 25, 2006, at 3:00 p.m. local time at The Corporate Offices of First Community Bancshares, Inc., 29 College Avenue,, Bluefield, Virginia, and at any adjournment thereof.

 

The expenses of the solicitation of the proxies for the Annual 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 21, 2006.

 

Voting

 

Shares of common stock (par value $1 per share) (“Common Stock”) 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.”

 

Any stockholder has the power to revoke his proxy at any time before it is voted. A proxy may be revoked at any time prior to its exercise by the filing of written notice of revocation with the secretary of the Corporation, by delivering to the Corporation a duly executed proxy bearing a later date, or by attending the Annual Meeting and voting in person. However, if you are a stockholder whose shares are not registered in your own name, you will need additional documentation from your record holder to vote personally at the Annual Meeting.

 

The Board of Directors has fixed March 7, 2006 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. Shareholders of the Corporation do not have cumulative voting rights.

 

The presence in person or by proxy of a majority of the shares of the Common Stock entitled to vote is necessary to constitute a quorum at the Annual Meeting. Directors are elected by a plurality of the votes cast with a quorum present. The three persons who receive the greatest number of votes of the holders of Common Stock represented in person or by proxy at the Annual Meeting will be elected directors of the Corporation. Abstentions are considered in determining the presence of a quorum but will not affect the vote required for the election of directors. All of the proposals for consideration at the Annual Meeting are considered “discretionary” items upon which brokerage firms may vote in their discretion on behalf of their clients if such clients have not furnished voting instructions.

 

As of the close of business on March 7, 2006, the outstanding shares of the Corporation consisted of 11,229,852 shares of Common Stock.

 

1. ELECTION OF DIRECTORS

 

The Corporation’s Board of Directors is comprised of nine directors, including eight non-employee directors, divided into three classes with staggered terms. All directors are elected for three-year terms. All directors have been determined to be independent by the Board of Directors except for Mr. John M. Mendez, who is employed by the Corporation as President and Chief Executive Officer.

 

The nominees for the Board of Directors to serve until the Annual Meeting of Stockholders in 2009 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.

 

No director or executive officer of the Corporation is related to any other director or executive officer of the Corporation by blood, or marriage or adoption, except for Mr. Stafford who is the father of Mr. Stafford, II.

 

 

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH OF THE
NOMINEES FOR DIRECTOR.

								Director of
						Principal Occupation and Employment		Corporation				Class of
Name		Age				Last Five Years; Principal Directorships		Since				Directors
Allen T. Hamner			64			Professor of Chemistry, West Virginia Wesleyan College; Director, First Community Bank, N. A.; Member of Audit, Compensation, Nominating and Executive Committees			1993				2007
B. W. Harvey			74			Retired Former President, Highlands Real Estate Management, Inc. (a company which provides commercial property leasing services); Director and Chairman First Community Bank, N. A.; Financial Expert on Audit Committee; Member of the Nominating and Executive Committees; Member of the Bank Loan Committee			1989				2007
John M. Mendez			51			President and Chief Executive Officer of the Corporation; Director, Executive Vice President, First Community Bank, N. A.; Past Vice President, Chief Financial Officer & Secretary of the Corporation; Past Senior Vice President — Finance & Chief Administrative Officer, First Community Bank, N. A.			1994				2007
Robert E. Perkinson, Jr.			58			Former Mayor of City of Bluefield, W.Va.; Past Vice President-Operations, MAPCO Coal, Inc., Permac, Inc., Race Fork Coal Company, and South Atlantic Coal, Inc., (all coal mining operations); Director, First Community Bank, N. A.; Chairman of Audit Committee; Chairman of Bank Loan Committee			1994				2008
William P. Stafford			72			President, Princeton Machinery Service, Inc. (a machinery manufacturing and repair company); Chairman of the H. P. & Anne S. Hunnicutt Foundation; Chairman of the Board of the Corporation; Director, First Community Bank, N. A.; Chairman of Executive Committee; Member of the Bank Loan Committee			1989				2008

3

Director of

Principal Occupation and Employment

Corporation

Class of

Name

Age

Last Five Years; Principal Directorships

Since

Directors

Harold V. Groome, Jr.

61

Chairman, Groome Transportation, Inc.; Chairman, Groome Transportation of Georgia, Inc. (providers of personal and business transportation services); Director, Churchill Casualty, Ltd.; Director, First Community Bank, N. A.; Member of the Bank Trust Committee; Member of Audit Committee and Chairman of Compensation Committee

2003

2008

								Officer of
						Principal Occupation and Employment		Corporation
Name		Age				Last Five Years; Principal Directorships		Since
Robert L. Buzzo			55			President and Director of First Community Bank, N. A.; Vice President and Secretary of the Corporation; past Chief Executive Officer of First Community Bank — Bluefield, a division of First Community Bank, N. A.			2000
E. Stephen Lilly			47			Chief Operating Officer of the Corporation; Senior Vice President and Chief Operating Officer of First Community Bank, N. A.; past Vice President-Operations of First Community Bank, N. A.			2000
Mark A. Wendel*			47			Chief Financial Officer of the Corporation; Senior Vice President-Finance of First Community Bank, N. A.; past Corporate Controller of BankAtlantic Bancorp; past Chief Accounting Officer and Corporate Controller			2005
Robert L. Schumacher*			54			Senior Vice President and General Counsel and Secretary of First Community Bank, N. A.; Past Chief Financial Officer and Senior Vice President-Finance of the Corporation; Past Senior Vice President and Senior Trust Officer of First Community Bank, N. A			2000

*		On November 15, 2005, the Board of Directors appointed Mark A. Wendel to the position of Chief Financial Officer. Robert L. Schumacher simultaneously moved from the position of Chief Financial Officer to the position of Senior Vice President and General Counsel of First Community Bank, N. A. and continues to serve as Secretary of First Community Bank, N. A.

4

5

6

		Amount and Nature
		of Beneficial
		Ownership as of				Percent of
Name and Address of Beneficial Owner or		March 7,				Common
Number of Persons in Group		2006				Stock
The H. P. & Anne S. Hunnicutt Foundation(1)			1,222,100				10.86	%
P.O. Box 309, Princeton, WV 24740
The Corporation’s Directors and Officers:
Robert L. Buzzo(2)			39,870				*
Harold V. Groome, Jr.(12)			20,562				*
Allen T. Hamner(3)(4)			17,525				*
B. W. Harvey(3)			20,588				*
I. Norris Kantor(13)			31,460				*
E. Stephen Lilly(7)			31,061				*
John M. Mendez(8)			62,392				*
A. A. Modena(3)			30,345				*
Robert E. Perkinson, Jr. (3)(9)			50,034				*
Robert L. Schumacher(10)			24,746				*
William P. Stafford(11)			247,358				2.20	%
William P. Stafford, II			153,775				1.37	%
Mark A. Wendel(14)			15,000				*
All Directors and Executive Officers as a Group (Twelve Persons)			759,717				6.75	%

*		Represents less than 1% of the outstanding shares.
(1)		Information obtained from a Schedule 13G dated March 17, 2003. The H. P. and Anne S. Hunnicutt Foundation (“Foundation”) is a charitable, tax-exempt, private foundation. The Foundation was created by the family of two directors, William P. Stafford and William P. Stafford, II. Neither director exercises sole voting or dispositive power over the shares held by the Foundation.
(2)		Includes 14,717 shares allocated to Mr. Buzzo’s Employee Stock Ownership and Savings Plan (“ESOP”) account. Also includes 24,862 shares issuable upon exercise of currently exercisable options granted under the 1999 Stock Option Plan.
(3)		Includes 6,050 shares issuable upon exercise of currently exercisable options granted under the Directors’ Option Plan.
(4)		Includes 4,712 shares held by Mr. Hamner’s wife.

7

(5)		Includes 1,544 shares held by Mr. Harvey’s wife.
(7)		Includes 2,167 shares allocated to Mr. Lilly’s ESOP account. Also includes 26,970 shares issuable upon exercise of currently exercisable options granted under the 1999 Stock Option Plan.
(8)		Includes 18,058 shares allocated to Mr. Mendez’s ESOP account. Also includes 40,312 shares issuable upon exercise of currently exercisable options granted under the 1999 Stock Option Plan.
(9)		Includes 23,901 shares held by the Robert E. Perkinson, Sr. Trust, 5,138 shares held by the Robert E. Perkinson, Jr. Trust in which Mr. Perkinson is deemed to share beneficial ownership and 5,938 shares held as agent for Mr. Perkinson’s wife. Mr. Perkinson is co-trustee of the Robert E. Perkinson, Sr. Trust and holds a remainder interest therein with two of his siblings, and he is co-trustee and sole beneficiary of the Robert E. Perkinson, Jr. Trust.
(10)		Includes 12,762 shares allocated to Mr. Schumacher’s ESOP account. Also includes 11,914 shares issuable upon exercise of currently exercisable options granted under the 1999 Stock Option Plan.
(11)		Includes 43,905 shares held by Stafford Farms LLC as to which Mr. Stafford is deemed to share beneficial ownership. Also includes 162,632 shares held jointly by Mr. Stafford and his wife, and 1,901 shares held by Mr. Stafford’s wife.
(12)		Includes 7,746 shares issuable upon exercise of currently exercisable options granted under The CommonWealth Bank Option Plan.
(13)		Includes 4,460 shares issuable upon exercise of currently exercisable options granted under the Directors’ Option Plan.
(14)		Includes 15,000 shares issuable upon exercise of currently exercisable options granted under the 2004 Omnibus Stock Option Plan.

8

	•	the plan for, and Independent Registered Public Accounting Firm’s 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 effectiveness of the Corporation’s internal accounting controls, and accounting, financial and auditing personnel; and,
	•	the establishment and maintenance of an environment at the Corporation that promotes ethical behavior

9

		2005				2004
Audit Fees		$	601,234			$	519,610
Audit-Related Fees			—				7,800
All Other Fees			—				—
Tax Fees			—				—

10

Executive Compensation for the Three Years Ended December 31, 2005

 

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 year ended December 31, 2005.

 

 

 

Stock Options

 

In 1999, the Corporation instituted a Stock Option Plan (the “Plan”) to encourage and facilitate investment in the Common Stock of the Corporation 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 Corporation’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 332,750 shares. Total options granted under the Plan at December 31, 2005 represent the right to acquire an aggregate of 268,320 shares. Under the Plan, an optionee is deemed to have been granted options in five annual installments on January 1 of each year beginning January 1, 1999 through January 1, 2003. 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 Corporation’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.

 

In addition, the 2003 acquisition of The CommonWealth Bank added additional stock options of 120,155 shares (124,380 shares adjusted by the merger conversion factor of .9015 and the 10% stock dividend in 2003). These options included awards to employees and directors and were issued by The CommonWealth Bank in 12 grants beginning in 1994 and ending in 2002 with adjusted exercise prices ranging from $4.75 to $17.40. These options are fully vested and are exercisable for up to ten years following the grant date. At December 31, 2005, 11,318 options shares were outstanding and exercisable under the former CommonWealth Plan.

 

At its regularly scheduled meeting in January 2004, the Board of Directors adopted an additional plan, the 2004 Omnibus Stock Option Plan (the “2004 Plan”) of the Corporation, which was subsequently approved by the stockholders of the Corporation at the 2004 Annual Meeting. A total of 200,000 shares of Common Stock were reserved for future issuance pursuant to the 2004 Plan. The Board shall, in its discretion, determine from time to time which employees, officers, directors, consultants or independent contractors will participate in the Plan and receive awards under the Plan.

 

The Purpose of the Plan is to promote the long-term success of the Corporation and the creation of shareholder value by (a) encouraging officers, employees, directors and individuals performing services for the Corporation as consultants or independent contractors to focus on critical long-range objectives, (b) encouraging the attraction and retention of officers, employees, directors, consultants and independent contractors with exceptional qualifications, and (c) linking officers, employees, directors, consultants and independent contractors directly to shareholder interests through ownership of the Corporation. The Plan seeks to achieve this purpose by providing for awards in the form of options to purchase shares of the Corporation. Awards may be granted individually or in tandem with other awards.

 

The Board may from time to time grant to eligible participants awards of incentive stock options or non-qualified stock options; provided however that awards of incentive stock options shall be limited to employees of the Corporation or any of its subsidiaries. Options intended to qualify as incentive stock options generally must have an exercise price at least equal to the fair market value of a share of Common Stock at the time of grant. Non-qualified stock options may have an exercise price that is equal to, below, or above the fair market value of a share of

Common Stock at the time of grant. The exercise price applicable to a particular award shall be set forth in each individual award agreement.

 

The Board may from time to time grant restricted stock awards to eligible participants in such amounts, on such terms and conditions, and for such consideration, including no consideration or such minimum consideration as may be required by law, as it shall determine.

 

The Board may, in its discretion, grant performance awards which become payable on account or attainment of one or more performance goals established by the Board. Performance awards may be paid by the delivery of Common Stock or cash, or any combination thereof, as determined in the sole discretion of the Board.

 

Incentive stock options and non-qualified stock options granted to participants shall become vested so that 25% of the option award shall vest as of the date of the grant and 25% of the option award shall vest on each one year anniversary thereafter, so that 100% of such option award shall be vested as of the third anniversary of the date of grant, unless otherwise determined in the discretion of the Board and memorialized in the stock award agreement. Notwithstanding the foregoing, no vesting shall occur on or after the date that an employee’s employment or personal services contract with the Corporation or any of its subsidiaries terminates for any reason other than his death, disability or retirement. In determining the number of shares of Common Stock with respect to which such awards are vested and/or exercisable, fractional shares will be rounded up to the nearest whole number if the fraction is 0.5 or higher, and down if it is less.

 

Awards granted to a participant shall generally be exercisable at any time on or after it vests until the earlier of (i) ten (10) years after its date of grant or (ii) the date that is six (6) months (ninety (90) days in the case of incentive stock options granted to employees) following the last day on which the participant is employed or renders services for the benefit of the Corporation or its subsidiaries.

 

The following table details options granted to executive officers in fiscal year 2005 under the 2004 Plan

 

Options Deemed Granted in Last Fiscal Year

 

 

 

 

Option Exercises in Last Fiscal Year

 

The following table sets forth certain information concerning exercises of stock options by the executive officers listed in the Summary Compensation Table during the fiscal year ended December 31, 2005 and options held at December 31, 2005.

 

 

 

 

Wrap Plan

 

The Corporation maintains a non-qualified Supplemental 401(k) Plan (“Wrap Plan”) for the purpose of providing deferred compensation which cannot be accumulated under the Qualified ESOP/401(k) Combined Plan provisions because of deferral and covered compensation limitations on tax-qualified pension plan benefits. The Corporation makes a non-qualified matching credit on employee contributions at the rate established in the 401(k) Plan (100% in 2005) of up to 6% of compensation deferred and also makes contributions in lieu of Qualified ESOP contributions for compensation in excess of the $205,000 compensation limit. Contributions under the Wrap Plan in 2005 for the covered persons are included in the Summary Compensation Table and are as follows: Mendez — $6,820; Buzzo — $2,415; Lilly — $4,616; and Schumacher — $1,750.

 

Executive Retention Plan

 

In 1999, the Corporation 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 62) targeted at 15% of final compensation projected at an assumed 3% salary progression rate. Benefits under the Executive Retention Plan become payable at Normal Retirement age 62 or at Early Retirement Age 60. Actual benefits payable under the Executive 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 Corporation’s tax-effected cost of funds for that plan year. Benefits under the Executive Retention Plan are dependent on the performance of the insurance contracts and are not guaranteed by the Corporation.

 

In connection with the Executive Retention Plan, the Corporation 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 Corporation 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 Executive Retention Plan. The Corporation 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 Executive 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.

 

The vesting schedule under the plan provides for graded vesting of benefits. Benefits under the Executive Retention Plan, which begin to accrue with respect to years of service under the Plan, vest 25% after five years, 50% after ten years, 75% after 15 years, and an additional 5% per year thereafter, with vesting accelerated to 100% at age 62.

 

Directors’ Supplemental Retirement Plan

 

In 2001, the Corporation established a Directors’ Supplemental Retirement Plan for its non-employee directors. This Plan provides for a benefit upon retirement from service on the Board at specified ages depending upon length of service. Benefits under the Supplemental Retirement Plan become payable at age 70, 75 and 78 depending upon the individual director’s age and original date of election to the Board. Actual benefits payable under the Supplemental Retirement 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 Corporation’s tax-effected cost of funds for that plan year. Benefits under the Supplemental Retirement Plan are dependent on the performance of the insurance contracts and are not guaranteed by the Corporation.

 

In connection with the Directors’ Supplemental Retirement Plan, the Corporation has also entered into Life Insurance Endorsement Method Split Dollar Agreements (the “Agreements”) with certain directors covered under

the Plan. Under the Agreements, the Corporation shares 80% of death benefits (after recovery of cash surrender value) with the designated beneficiaries of the directors under life insurance contracts referenced in the Supplemental Retirement Plan. The Corporation 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 Supplemental Retirement Plan also contains provisions for change of control, as defined, which allow the directors 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 director voluntarily terminates his service within 90 days following the change in control.

 

The Supplemental Retirement Plan was designed to retain the future services of directors. Benefits become payable in a lump sum commencing 30 days following termination of service, except for cause, prior to retirement age as defined in the Plan document.

 

Indemnification Agreements

 

The Corporation and its subsidiary bank have Indemnification Agreements for all directors, executive officers Mendez, Buzzo, Lilly, Schumacher and certain other officers. The Indemnification Agreements indemnify each director and officer to the fullest extent permitted by law. The Indemnification Agreements cover all expenses (including attorneys fees), judgments, fines and amounts paid in settlement, if such settlement is approved in advance by the Corporation, paid in any matter relating to the director’s or officer’s role as the Corporation’s director, officer, employee or agent when serving as its representative with respect to another entity. A director or officer would not be entitled to indemnification in connection with a proceeding or claim initiated by such director or officer voluntarily and that is not a defense.

Comparative Performance of the Corporation

 

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, 2005 with cumulative total shareholder return of: (1) The Standard & Poor’s 500 market index (“S&P 500”); and (2) a group of 23 Peer Bank Holding Companies (Asset Size & Regional Peer Group).

 

First Community Bancshares, Inc.

 

 

 

 

OTHER MATTERS

 

All properly executed proxies received by the Corporation will be voted at the Annual Meeting in accordance with the specifications contained thereon. The Board of Directors knows of no other matter that may properly come before the Annual Meeting for action. However, if any other matter does properly come before the Annual Meeting, the persons named in the proxy materials enclosed will vote in accordance with their judgment upon such matter.

 

ANNUAL REPORTS

 

A copy of the Corporation’s Form 10-K for the year ended December 31, 2005 accompanies this Proxy Statement. Such report is not part of the proxy solicitation materials.

 

Upon receipt of a written request, the Corporation will furnish to any stockholder without charge a copy of the Corporation’s Annual Report on Form 10-K for fiscal 2005 required to be filed under the Exchange Act. Such written requests should be directed to the Chief Financial Officer, First Community Bancshares, Inc., P. O. Box 989, One Community Place, Bluefield, Virginia 24605-0989. The Form 10-K is not part of the proxy solicitation materials.

 

STOCKHOLDERS’ PROPOSALS

 

Shareholders may communicate with the Board of Directors by sending a letter to the First Community Bancshares, Inc. Board of Directors, c/o Corporate Secretary, First Community Bancshares, Inc., P.O. Box 989, Bluefield, Virginia 24605- 0989. The Corporate Secretary has the authority to disregard any inappropriate communications or to take other appropriate actions with respect to any such inappropriate communications. If deemed an appropriate communication, the Corporate Secretary will submit the correspondence to the Chairman of the Board or to any specific director to whom the correspondence is directed.

 

If any stockholder intends to include a proposal in the Corporation’s proxy statement for the 2007 Annual Meeting, such proposal must be submitted to Robert L. Buzzo, Corporate Secretary, First Community Bancshares, Inc., P.O. Box 989, Bluefield, Virginia, 24605-0989, and received by the Corporation at its principal executive offices on or before November 21, 2006. Otherwise, such proposal will not be considered for inclusion in the Corporation’s Proxy Statement for such meeting. In order to be considered for possible action by stockholders at the 2007 Annual Meeting of Stockholders, stockholder proposals not included in the Corporation’s proxy statement must be submitted to Robert L. Buzzo, Corporate Secretary, at the address set forth above, no later than February 6, 2007.

 

Shareholders are urged to properly complete, execute and return the enclosed form of proxy or vote via the Internet or toll free number provided elsewhere in the proxy material.

 

By Order of the Board of Directors

 

 

Robert L. Buzzo, Secretary to the Board

 

March 21, 2006

 

APPENDIX A

 

FIRST COMMUNITY BANCSHARES, INC.
AUDIT COMMITTEE CHARTER

 

The Board of Directors of First Community Bancshares, Inc. (the “Company”) has constituted and established an Audit Committee (the “Committee”) with authority, responsibility, and specific duties as described in this Audit Committee Charter.

 

 

The Committee shall consist of three or more directors, each of whom is “independent” as such term is defined in the Sarbanes-Oxley Act of 2002 (the “Act”) and regulations promulgated thereunder and under the rules of the NASDAQ National Market.

 

Each director shall be free from any relationship that, in the opinion of the Board of Directors, as evidenced by its annual selection of such Committee members, would interfere with the exercise of independent judgment as a Committee member. Each Committee member shall be able to read and understand financial statements (including the company’s balance sheet, income statement and cash flow statement).

 

 

The Committee shall have access to all records of the Company, and may exercise such powers, as are appropriate and necessary to its purpose. The Committee shall perform the following functions:

 

(1) Understand the accounting policies used by the Company for financial reporting and tax purposes and approve their application; it shall also consider any significant changes in accounting policies that are proposed by management or required by regulatory or professional authorities.

 

(2) Review the Company’s audited financial statements and related footnotes and the “Management’s Discussion and Analysis” portion of the annual report on Form 10-K prior to the filing of such report, and recommend to the Board of Directors whether such financial statements shall be incorporated by reference in the Company’s annual report on Form 10-K, based upon the Committee’s review and discussions with its independent public accounting firm.

 

(3) Review the Company’s unaudited financial statements and related footnotes and the “Management Discussion and Analysis” portion of the Company’s Form 10-Q for each interim quarter and ensure that the independent public accounting firm also reviews the Company’s interim financial statements before the Company files its quarterly report on Form 10-Q with the Securities and Exchange Commission (the “SEC”.)

 

(4) Study the format and timeliness of financial reports presented to the public or used internally and, when indicated, recommend changes for appropriate consideration by management.

 

(5) Meet with the Company’s legal counsel to review legal matters that may have a significant impact on the Company or its financial reports.

 

(6) Work to ensure that management has been diligent and prudent in establishing accounting provisions for probable losses or doubtful values and in making appropriate disclosures of significant financial conditions or events.

 

(7) Review press releases submitted by management in connection with the release of quarterly, annual, or special financial statements. In respect thereto, recommend to the Chairman of the Board any changes that appear necessary to conform releases with appropriate professional practice.

 

(8) Review and reassess the adequacy of this Charter annually.

A-2

A-3

C.	MEETINGS

A-4