<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
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:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
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.
[ ] 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:
<PAGE> 2
COMMUNITY BANCSHARES, INC.
To the Shareholders of
Community Bancshares, Inc.:
In connection with the Annual Meeting of Shareholders of Community
Bancshares, Inc. (the "Company") to be held at 10:00 A.M., local time, on
Thursday, March 27, 1997, we enclose a Notice of Meeting and Proxy Statement
containing information concerning those matters which are to be considered at
the meeting.
You are cordially invited to attend the Annual Meeting in person. We
will appreciate your signing and returning the form of proxy in the enclosed
postage-prepaid envelope so that your shares can be voted in the event you are
unable to attend the meeting. Your proxy will, of course, be returned to you if
you are present at the meeting and so request.
We are enthusiastic about the future and appreciate your continued
support. We look forward to seeing you on March 27.
Sincerely yours,
Kennon R. Patterson, Sr.
Chairman and President
PLEASE FILL IN, DATE, SIGN AND MAIL PROMPTLY THE ACCOMPANYING PROXY IN THE
RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, WHETHER OR NOT YOU PLAN TO ATTEND
THE MEETING.
1
<PAGE> 3
COMMUNITY BANCSHARES, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of the shareholders of Community Bancshares, Inc.
(the "Company"), will be held at The Heritage Club, 111 Washington Street NE,
Huntsville, Alabama, on Thursday, March 27, 1997 at 10:00 A.M., local time, for
the following purposes:
1. To elect C.K. Copeland, Stacey W. Mann, Jon M.
Owings, Hodge Patterson, III, and Robert O.
Summerford as Class I directors to serve a three year
term and until their successors are elected and
qualified.
2. To approve the appointment of Dudley, Hopton-Jones,
Sims & Freeman, PLLP, to serve as independent
auditors for the year ending December 31, 1997; and
3. To transact such other business as may properly come
before the meeting or any adjournment thereof.
Shareholders of record at the close of business on January 31, 1997,
are entitled to notice of and to vote at the meeting.
The enclosed Proxy Statement explains the proposals. We urge you to
read these materials carefully.
You are cordially invited to attend the meeting. WHETHER OR NOT YOU
PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE REQUESTED TO COMPLETE, DATE AND
SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. If you
need assistance in completing your proxy, please call the Company at telephone
number (205) 429-1000.
THE CORPORATION'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR
APPROVAL OF ALL THE PROPOSALS PRESENTED.
By Order of the Board of Directors
Bishop K. Walker, Jr.
Secretary
Blountsville, Alabama
March 7, 1997
2
<PAGE> 4
COMMUNITY BANCSHARES, INC.
PROXY STATEMENT FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD MARCH 27, 1997
INTRODUCTION
This Proxy Statement is furnished to shareholders of Community
Bancshares, Inc., a Delaware corporation (the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at the
Annual Meeting of Shareholders to be held March 27, 1997 and at any adjournments
thereof (the "Meeting"), for the purposes of (i) electing five directors of the
Company, (ii) approving the appointment of independent auditors, and (iii)
transacting such other business as may properly come before the Meeting.
The executive offices of the Company are located at Highway 231 South,
P.O. Box 1000, Blountsville, Alabama 35031. This Proxy Statement was mailed to
shareholders of the Company on or about March 7, 1997.
SHAREHOLDERS ENTITLED TO VOTE
Each holder of record of the Company's current $.10 par value common
stock (herein sometimes referred to as "Shares") as of the close of business on
January 31, 1997, will be entitled to vote at the Meeting. Each shareholder will
be entitled to one vote on each proposal for each Company Share held as of such
date. At the close of business on that date, there were 2,000,000 Shares issued
and outstanding, and these were held by approximately 1,284 persons.
Notwithstanding the record date specified above, the Company's stock transfer
books will not be closed and Shares may be transferred subsequent to the record
date, although all votes must be cast in the names of shareholders of record as
of the record date.
VOTES REQUIRED
All matters which may be considered and acted upon by the shareholders
at the Meeting require approval by the affirmative vote of at least a majority
of the valid votes cast.
PROXIES
If the enclosed form of proxy is executed and returned, it may
nevertheless be revoked at any time before it has been exercised; but it if is
not revoked, the Shares represented thereby will be voted by the persons
designated in such proxy. Shares represented by the proxies received will be
voted in favor of (i) the election of all nominees for directors, (ii) approval
of the appointment of Dudley, Hopton-Jones, Sims & Freeman, PLLP, as independent
auditors of the Company for the year ending December 31, 1997 and (iii) in the
best judgment of such proxies as to any other matters which may come before the
Meeting.
3
<PAGE> 5
PRINCIPAL SHAREHOLDERS
The following table sets forth, as of January 31, 1997, certain
information with respect to all those known by the Company to be beneficial
owners of more than 5% of the Company's outstanding common stock, all Company
directors, all nominees for directors, and all directors, nominees for directors
and officers of the Company as a group.
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock Percent of
Beneficially Outstanding
Name and Address Owned (1) Common Stock
- ---------------- --------- ------------
<S> <C> <C>
C. K. Copeland 9,000 0.45%
Trafford, AL
Bryan A. Corr 70,107 (2) 3.51
Oneonta, AL
R. C. Corr, Jr. 131,143 (3) 6.56
Oneonta, AL
Glynn Debter 2,300 0.12
Horton, AL
Edward Ferguson 1,000 0.05
Hanceville, AL
Denny Kelly 27,341 (4) 1.37
Oneonta, AL
John J. Lewis, Jr. 4,389 0.22
Blountsville, Alabama
Stacey W. Mann 11,011 (5) 0.55
Oneonta, Alabama
Loy McGruder 11,192 (6) 0.90
Blountsville, AL
Jon M. Owings 18,000 0.90
Pulaski, TN
Hodge Patterson, III 24,000 (7) 1.20
Pulaski, TN
Kennon R. Patterson, Sr. 208,326 (8) 10.42
Boaz, AL
Kennon R. (Chip) Patterson, Jr. 26,298 (9) 1.31
Boaz, AL
Merritt Robbins 70,732 3.54
New Hope, AL
Robert O. Summerford 31,000 (10) 1.55
Falkville, AL
Bishop K. Walker, Jr. 121,781 (11) 6.09
Arab, AL
R.Wayne Washam 5,201 0.26
</TABLE>
4
<PAGE> 6
<TABLE>
<S> <C> <C>
Arab, AL
First National Bank of Commerce 250,025 (12) 12.50
as Trustee of the Community
Bancshares, Inc. Employee
Stock Ownership Plan ("ESOP")
All Company directors, nominees 753,527 37.68
for directors, and officers as
a group
</TABLE>
- ---------------------------
(1) The Company, in the event of sale, has a right of first refusal with
respect to (i) substantially all Shares held by Company directors,
executive officers and principal shareholders, (ii) substantially all
Shares held by directors, advisory directors, and executive officers of
subsidiaries of the Company, and (iii) all Shares distributed to ESOP
participants.
(2) Includes 60,000 Shares held by Oneonta Telephone Co., Inc., of which
Mr. Corr is Chairman, President and a controlling shareholder.
(3) Includes 60,000 shares held by Oneonta Telephone Co. Inc., Mr. Corr is
Chairman and a controlling shareholder.
(4) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Kelly is a partner. Also includes 5,462 shares
allocated to Mr. Kelly's ESOP account through December 31, 1995.
(5) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Mann is a partner. Also includes 4,849 shares
allocated to Mr. Mann's ESOP account through December 31, 1995.
(6) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. MrGruder is a partner. Also includes 3,148
shares allocated to Mr. McGruder's ESOP account through December 31,
1995.
(7) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Patterson is a partner. Also includes 3,774
shares allocated to Mr. Patterson's ESOP account through December 31,
1995.
(8) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Patterson is a partner. Also includes 14,626
shares allocated to Mr. Patterson's ESOP account through December 31,
1995.
(9) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Patterson is a partner. Also includes 1,854
shares allocated to Mr. Patterson's ESOP account through December 31,
1995.
(10) Includes 17,000 shares held by Summerford Nursing Home and 3,000 shares
held by Summerford Drugs of which Mr. Summerford is Chairman, President
and a controlling shareholder.
(11) Includes 2,045 shares held by Community Investments, a general
partnership of which Mr. Walker is a partner. Also includes 4,804
shares allocated to Mr. Walker's ESOP account through December 31,
1995.
(12) Voting power for shares allocated to participants in the ESOP is
exercised by the participants. The ESOP Committee directs the voting of
unallocated shares.
ELECTION OF DIRECTORS
At the annual meeting of shareholders on March 26, 1996, the
shareholders approved an amendment to the by-laws of the Company providing for a
classified board of directors consisting of three classes with the term of
office of each class expiring in successive years. The Company's by-laws provide
that the number of directors will be fixed from time to time by the vote of the
directors. The current number of directors has been fixed at eighteen. The terms
of the Class I directors expire at this Annual Meeting. The terms of Class II
directors will expire at the 1998 Annual Meeting and the terms of Class III
directors will expire at the 1999 Annual Meeting. The Board of Directors is
recommending the re-election of those persons currently serving as Class I
directors. Each of the Class I directors elected at this Annual Meeting will
serve three year terms expiring at the 2000 Annual Meeting of Shareholders or
until his respective successor is elected and qualified. It is intended that
unless "Withhold Authority" is noted as to all or some of the nominees, proxies
in the accompanying form will be voted at the Annual Meeting for the election of
the nominees named below for the term indicated.
Management proposes to nominate C.K. Copeland, Stacey W. Mann, Jon M.
Owings, Hodge Patterson, III, and Robert O. Summerford
5
<PAGE> 7
for election as directors to hold office until expiration of their of office and
until their successors shall have been elected and qualified. It is intended
that the persons named in the proxy will vote for the election of these persons.
Management believes that all of the nominees will be available and able to serve
as directors, but if for any reason any of these persons should not be available
or able to serve, the proxies may exercise discretionary authority to vote for
substitutes proposed by the Company's Board of Directors. Kennon R. Patterson,
Sr., Denny Kelly, R. C. Corr, Jr., Bishop K. Walker, Jr., Hodge Patterson, III,
C.K. Copeland, Glynn Debter, Loy McGruder, Jon M. Owings, Merritt Robbins,
Robert O. Summerford and Wayne Washam were elected by the shareholders at the
last Annual Meeting. Nominees Kennon R. Patterson, Sr. and Hodge Patterson, III,
are brothers. Kennon R. Patterson, Jr., is the son of Kennon R. Patterson, Sr.,
and the nephew of Hodge Patterson, III. Edward Ferguson is the brother-in-law of
Kennon R. Patterson, Sr. R.C. Corr, Jr., is the father of Bryan A. Corr.
The directors and nominees for directors and the executive officers of
the Company, their ages, length of tenure as directors and as officers,
positions held in the Company and its Subsidiaries and their principal
occupation or employment during the last five years are as follows:
<TABLE>
<CAPTION>
DIRECTOR
NAME, AGE AND POSITION HELD IN OF COMPANY PRINCIPAL EXPERIENCE
THE COMPANY AND ITS SUBSIDIARIES SINCE DURING PAST FIVE YEARS (1)
- -------------------------------- ---------- ---------------------------
<S> <C> <C>
Kennon R. Patterson, Sr. (54) 1983 Chairman, Chief Executive Officer and
Chairman, President, and Chief Executive President of the Company since 1983;
Officer of the Company; Chairman and Chief Executive Officer and President
Chief Executive Officer of Community Community Bank (Alabama) since 1983;
Bank (Alabama); Chairman of Community Chairman of Community Bank (Alabama)
Bank (Tennessee); Director of Community since 1984; Chairman of Community Bank
Appraisals, Inc.; Director of Community (Tennessee) since 1993.
Insurance Corp.; Director of 1st Community
Credit Corporation
Denny Kelly (57) 1986 Director of Community Bank (Alabama)
Director of the Company; Director since 1985: President of Community
and President of Community Bank (Alabama) since 1993; Executive
Bank (Alabama), Director of 1st Community Vice President of Community Bank
Credit Corporation (Alabama) 1985 - 1993.
R.C. Corr, Jr. (71) 1988 Director of Community Bank (Alabama); Director of the
Company; Chairman of Oneonta Telephone Co.;
Director of Community Bank (Alabama) Director of the Company since 1988;
Bishop K. Walker, Jr. (65) 1983 Director of the Company since 1983; Director
Director, Vice Chairman and Secretary of Community Bank (Alabama) since 1984; Executive Vice
General President, Vice President and General Counsel of the
Counsel of the Company; Director and Company since 1987; Senior Vice President
Secretary of Community Bank (Alabama); and General Counsel of Community Bank Chairman and
Community President of (Alabama) 1987 - 1993; President and
Insurance Corp. Director of Community Insurance Corp. since 1987.
Hodge Patterson, III (41) 1993 Director of the Company since 1993; Sr. Vice President
Director of the Company; Vice of Community Bank (Alabama) 1988 - 1993; Vice-Chairman,
Chairman, Chief Executive Officer and President of Community Bank
(Tennessee); Chief Executive Officer and President of
Director and Executive Vice President of Community Bank (Tennessee) since 1993.
Community Bank (Alabama); Director of
Community Appraisals, Inc.
C. K. Copeland (73) 1996 Self-employed agriculture operations.
Director of the Company; Director of Community Bank (Alabama)
Director of Community Bank (Alabama); since 1993.
Director of Community Insurance
Corporation
</TABLE>
6
<PAGE> 8
<TABLE>
<S> <C> <C>
Glynn Debter (62) 1996 Owner - Operator Debter Farms.
Director of the Company;
Director of Community Bank
(Alabama); Director of Community
Appraisals, Inc.
Loy McGruder (56) 1996 Director of Community Bank (Alabama) since
Director of the Company; 1995; Executive Vice President of Community Director
Vice President and Executive Bank (Alabama) since 1994; Sr. Vice
of Community Bank (Alabama); President of Community Bank (Alabama) 1993-94, City
Director of Community Insurance President of Community Bank -- New Hope,
Corp. (1987 - 1993).
Jon M. Owings (59) 1996 Physician; Director of Community Bank
Director of the Company; Director (Tennessee) since 1993.
of Community Bank (Tennessee)
Merritt Robbins (58) 1996 Owner-Operator of Piggly Wiggly Stores.
Director of the Company; Director
of Community Bank (Alabama); Director
of 1st Community Credit Corporation
Robert O. Summerford (66) 1996 Owner-operator of Summerford Nursing Home; Director of
Director the Company; Owner-operator of Summerford Drugs.
of Community Bank (Alabama); Director
of Community Appraisals, Inc.
Wayne Washam (60) 1996 Retired; Assistant Superintendent of Arab City Schools
Company; Director Director of the 1992 - 1996; Director of Community
of Community Bank (Alabama); Director of Bank (Alabama) since 1993.
1st Community Credit Corporation
Bryan A. Corr (36) 1997 Director and President Oneonta Telephone Director of the
Director Company; Company, 1987 - present; Director and
Director Community Bank (Alabama); President of North Alabama
of Community Insurance Corporation Cellular, 1992 - present.
Edward Ferguson (54) 1997 President of 1st Community Credit Corp.
Director of the Company; Director since 1995; Vice President of Security
of Community Bank (Alabama); Mutual Financial Services, Inc. 1993 - 1995;
Chairman and President of Senior Manager of Security Mutual Finance
1st Community Credit Corporation Corp., Inc., 1976 - 1993.
John J. Lewis, Jr. (49) 1997 Various positions with Tyson Foods,
Director of the Company; Director Inc., 1986 - present
of Community Bank (Alabama); Director
of Community Appraisals, Inc.
Stacey W.Mann (44) 1997 Sr. Vice President of Community Bank
Director of the Company; Director (Alabama) 1986 - 1996; Executive Vice
and Executive Vice President of President of Community Bank (Alabama)
Community Bank (Alabama); Director 1997-present
of 1st Community Credit Corporation
</TABLE>
7
<PAGE> 9
<TABLE>
<S> <C> <C>
Kennon R. (Chip) Patterson, Jr. (30) 1997 Sr. Vice President of Community Bank
Director of the Company; Director (Alabama) 1996 - 1997; Executive
and Executive Vice President of Vice President of Community Bank
of Community Bank (Alabama); Director (Alabama) 1997-present
of 1st Community Credit Corporation
</TABLE>
- ------------------------------------------------
The individuals listed above have been employed during the past five
years either in the principal occupations shown or in other executive positions
with the Company or one of its Subsidiaries.
All directors of the Company hold office for three year terms unless
they sooner resign, become disqualified, or are removed except Class II
directors who are currently serving a two year transition term but will serve
three year terms after expiration of the transition term. The officers of the
Company are elected annually by the directors and serve until their successors
are elected and qualified or until their earlier resignation, removal or
disqualification.
Messrs. Kennon R. Patterson, Sr. and Bishop K. Walker, Jr. are
executive officers of the Company.
In 1996, the Board of Directors held 12 regular meetings and one
special meeting. All incumbent directors of the Company attended 75% or more of
the meetings of the Board and the committees on which they served.
DIRECTOR ATTENDANCE AND FILINGS
The Company's Board of Directors has five committees. The Executive
Committee consists of R.C. Corr, Jr., Denny Kelly, Kennon R. Patterson, Sr.,
Merritt Robbins, Bishop K. Walker, Jr., and Wayne Washam of the Board of
Directors. The Executive Committee reviews the personnel and policies of the
Company. This Committee held no meetings in 1996.
The ESOP Administrative Committee is comprised of Messrs. Patterson and
Walker and Mrs. Dicey Childers. The committee is scheduled to meet annually, and
manages the Company's Employee Stock Ownership Plan. This committee held six
meetings in 1996. See "Executive Compensation - ESOP".
The Pension Plan Committee consists of Messrs. Patterson and Walker and
Ms. Dicey Childers. The Pension Plan Committee reviews the Company's pension
benefits, and met two times in 1996. See "Executive Compensation - Pension
Plan".
The Nominating Committee consists of C.K. Copeland, Glynn Debter, Loy
McGruder, Hodge Patterson, III, and Robert O. Summerford. The Nominating
Committee recommends for Board approval persons to fill any vacancies on the
Board of Directors and Directors for nomination and election at the Annual
Meeting of Shareholders. This Committee held one meeting in 1996.
During 1996, it was determined that certain directors may have failed
to timely file reports regarding initial ownership as required by Section 16(a)
of the Securities Exchange Act of 1934. Reports were submitted for all
directors. The Company has relied on the representations of its directors and
executive officers for this disclosure.
The Executive Compensation Committee annually reviews all officer
salaries and makes recommendations to the Board for salary adjustments of all
officers of the Company and its two bank subsidiaries. This Committee held one
meeting in 1996. See "Board Compensation Committee".
8
<PAGE> 10
EXECUTIVE COMPENSATION
The table shows the cash compensation paid by the Company and its
Subsidiaries during 1996 to the Chief Executive Officer and the other most
highly compensated executive officers receiving $100,000 or more in cash
compensation.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-------------------
NAME AND OTHER ANNUAL
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1)
- ------------------ ---- ------ ----- ---------------
<S> <C> <C> <C> <C>
Kennon R. Patterson, Sr. 1996 $450,000 $150,000 $32,400
Chief Executive Officer 1995 450,000 100,000 20,400
1994 450,000 150,000 20,400
Bishop K. Walker, Jr. 1996 150,000 60,000 26,000
General Counsel 1995 150,000 50,000 18,000
1994 150,000 50,000 18,000
Denny Kelly 1996 130,000 50,000 26,000
President Community Bank 1995 100,000 50,000 18,000
(Alabama) 1994 100,000 50,000 18,000
Hodge Patterson, III 1996 120,000 50,000 28,400
President Community Bank 1995 82,000 25,000 9,150
(Tennessee) 1994 82,000 25,000 2,400
Loy McGruder 1996 95,000 35,000 26,000
Executive Vice President 1995 85,000 25,000 - 0 -
Community Bank (Alabama) 1994 76,967 7,697 - 0 -
</TABLE>
- -----------------------------------------
(1) Director's fees of $1000 per month paid as director of the Company and
$1000 per month paid as director of Community Bank, an Alabama subsidiary of the
Company. Messrs. Patterson each received director's fees of $200 per month paid
as director of Community Bank, a Tennessee subsidiary of the Company. Each named
person also receives $250 per month for service as a director of either
Community Appraisals, Inc., Community Insurance Corp., or 1st Community Credit
Corporation, all of which are subsidiaries of Community Bank (Alabama). Mr.
Kennon R. Patterson, Sr., serves as a director of all of these companies.
Directors of the Company received monthly fees of $1000 from the
Company and monthly fees of $1000 from its Alabama subsidiary, Community Bank,
and monthly fees of $200 from its Tennessee bank subsidiary, Community Bank, for
such service as directors. Directors C.K. Copeland, R.C. Corr, Jr., Glynn
Debter, Jon Owings, Merritt Robbins, Robert O. Summerford and R. Wayne Washam
each received additional director fees of $5,000.00. Directors receive no fees
for attending committee meetings. Directors receive monthly fees regardless of
their attendance at meetings, provided that they attend at least 75% of the
meetings of the boards and of all committees on which they serve during the
year. Total fees of $325,400 were paid to all Company directors for service in
1996, including fees received by such persons from Subsidiaries.
On December 7, 1993, Community Bancshares' Board of Directors
authorized and entered into a ten-year employment contract with Kennon R.
Patterson, Sr. and a five year employment contract with Bishop K. Walker, Jr.
These contracts provide each employee with three weeks of paid vacation
annually, a suitable automobile, reimbursement of reasonable business and
professional expenses, including normal and customary professional and
educational meetings, and memberships in such civic and social clubs determined
to be in the best interest of the employer and such employees. The Board of
Directors authorized and entered into a new ten-year employment contract with
Kennon R. Patterson, Sr. and a five year employment contract with Bishop K.
Walker, Jr. on December 9, 1995, effective January 1, 1996. On March 28, 1996,
the Board of Directors entered into a twelve year employment contract with
Kennon R. Patterson, Sr., with the same provisions as previously stated.
9
<PAGE> 11
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------
INDIVIDUAL GRANTS POTENTIAL
REALIZABLE VALUE
AT ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION FOR
OPTION TERM
- --------------------------------------------------------------------------------------------------------------------
NAME OPTIONS/SARS PERCENT OF TOTAL EXERCISE OR EXPIRATION 5% 10%
GRANTED (#) OPTIONS/SARS BASE PRICE DATE
GRANTED TO ($/SH)
EMPLOYEES IN
FISCAL YEAR
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Kennon R. Patterson, Sr. 26,000 28.73% $20.00 3/27/01 $25.53 $32.21
Chief Executive Officer
Bishop K. Walker, Jr. 13,500 14.92 20.00 3/27/01 25.53 32.21
General Counsel
Denny Kelly 11,000 12.15 20.00 3/27/01 25.53 32.21
President
Community Bank (Alabama)
Hodge Patterson, III 9,000 9.94 20.00 3/27/01 25.53 32.21
President
Community Bank (Tennessee)
Loy McGruder 9,000 9.94 20.00 3/27/01 25.53 32.21
Executive Vice President
Community Bank (Alabama)
</TABLE>
10
<PAGE> 12
<TABLE>
<CAPTION>
LONG TERM COMPENSATION ALL OTHER
---------------------- COMPENSATION(1)
NAME AND ---------------
PRINCIPAL POSITION YEAR OPTIONS
- ------------------ ---- -------
<S> <C> <C> <C>
Kennon R. Patterson, Sr. 1996 26,000 $ 50,000
Chief Executive Officer 1995 7,500
1994 7,500
Bishop K. Walker, Jr. 1996 13,500 3,839
General Counsel 1995 1,839
1994 1,293
Denny Kelly 1996 11,000 1,800
President Community Bank 1995 1,800
(Alabama) 1994 1,800
Hodge Patterson, III 1996 9,000 1,800
President Community Bank 1995 1,800
(Tennessee) 1994 1,800
Loy McGruder 1996 9,000 1,800
Executive Vice President 1995 1,800
Community Bank (Alabama) 1994 1,800
</TABLE>
(1) The amounts in this column represent premiums paid by the Company or its
subsidiaries for a life insurance policy or payments to the director in lieu
thereof. Mr. Kennon R. Patterson,Sr., and Mr. Bishop K. Walker, Jr., received
cash payments for the purpose of a policy in lieu of payment of premiums by the
Company. Additionally, the amount in Mr. Patterson's column includes a $40,000
payment by the Company for a country club membership for Mr. Patterson.
11
<PAGE> 13
BOARD COMPENSATION COMMITTEE
The Company has an Executive Compensation Committee consisting of Hodge
Patterson, III, Wayne Washam, Denny Kelly, Merritt Robbins, Wayne Washam and
R.C. Corr, Jr., which sets executive compensation including bonuses. The
Executive Compensation Committee's policies are to evaluate the Company's
performance as to growth, asset composition, rate of return, and profitability
on a peer group basis and on an internal year-to-year basis comparing the
Company's current year performance to prior years' performance.
In reviewing Chairman Patterson's compensation for 1996, the Board
Compensation Committee considered the factors set forth in its policies. During
1996, the Company expanded its geographical market through acquisitions and new
locations. In addition to the expansion of the area served, Mr. Patterson's
management leadership in the development of new business products and service
were a key factor in the continued growth in assets and profitability of the
Company.
By The Executive Compensation Committee
Hodge Patterson, III Denny Kelly Merritt Robbins
Wayne Washam R.C. Corr, Jr.
COMPARATIVE STOCK PERFORMANCE
<TABLE>
<CAPTION>
Com.
Bancs NASDAQ AMEX
(Dollars in thousands)
- --------------------------------------
<S> <C> <C> <C>
1991 $ 100 $ 100 $ 100
1992 145.71 152.02 101.06
1993 257.13 196.67 120.78
1994 428.55 198.84 109.78
1995 345.12 278.94 138.77
1996 400.20 363.26 147.65
</TABLE>
The graph compares the cumulative shareholder return on the Common
Stock of the Company for the previous five fiscal years with the cumulative
total return of the NASDAQ Bank Index and the American Stock Exchange Index as
published in "The Wall Street Journal".
12
<PAGE> 14
STOCK OPTION AND OTHER EMPLOYEE BENEFIT PLANS
At present, the Company has no employee benefit plans except its
pension plan, the informal bonus policy plan, its employee stock ownership plan
("ESOP"), the Benefit Restoration Plan and stock options. The ESOP was
established in 1985 for purposes of providing an additional benefit to
employees, increasing their ownership interest in the Company and raising
capital to provide for the Company's future growth and debt service. The Company
contributed $257,051 to the ESOP in 1996, which was used to apply to the
indebtedness incurred by the ESOP and to make payment to certain participants in
the ESOP who received cash payments under the provisions of the ESOP.
PENSION PLAN
Summary of Plan Coverage
The Revised Pension Plan (the "Pension Plan") is a noncontributory
defined benefit pension plan that may provide retirement, disability and death
benefits for eligible employees of Community Bank and other employees of a
participating employer. Employees who are expected to work 1,000 hours in the
calendar year for a participating employer become participants in the Pension
Plan on January 1 following their date of employment. As described below,
benefits under the Pension Plan depend upon a participant's years of credited
service with the employer and his highest average monthly earnings for the five
consecutive year period out the 10-year period prior to his retirement or
termination of employment. An employee who completes 10 years of service and
attains age 55 is eligible for early retirement benefits. During 1995, the Plan
was amended to provide that participants in the Pension Plan prior to November
1, 1995, would receive a 20 percent vested right after two years of service, 40
percent after three years, 60 percent after four years, and 100 percent after
five years. Participants entering the Plan on or after November 1, 1995, receive
no vested benefit prior to five years of credited service but are 100 percent
vested after five years of credited service.
Community Bancshares, Inc., and other participating employers provide
all funds necessary to pay the costs of the Pension Plan, which are determined
by independent actuaries for the Pension Plan. The benefits have been funded
through a trust which was established with Central Bank of the South, as
trustee, to accept and administer pension trusts. On July 9, 1996, the board of
directors appointed First National Bank of Commerce as successor trustee.
Criteria for Determining Amounts Payable
The monthly retirement income available to a participant who lives to
the normal retirement date (the first day of the month coincident with or
following a participant's 65th birthday) is one and one half percent (1.5%) of
the participant's average monthly earnings multiplied by his years of credited
service. Monthly earnings are based upon a participant's pay including bonuses,
overtime or other forms of extraordinary compensation. A participant's average
monthly earnings is based on the highest average of his or her earnings in the
five consecutive calendar years out of the last 10 years preceding his
retirement or termination of employment. A participant receives one year of
credited service for each plan year (i.e., a calendar year) during which he
performs 1,000 hours or more with Community Bank or its participating
affiliates.
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<PAGE> 15
There is a minimum benefit available to a participant equal to the
lesser of (a) 2% of Top Heavy Compensation multiplied by the participant's
number of years of Top Heavy Service or (b) 20% of Top Heavy Compensation.
A participant may elect early retirement if he or she is age 55 or more
and is credited with 10 or more years of service. In such event, the monthly
retirement income benefit is reduced 1/180 for each of the first 60 months and
1/360 for each of the next 60 months by which his early retirement precedes his
normal retirement date.
A participant electing late retirement continues to receive credit for
his or her additional years of service and monthly earnings up to his or her
actual retirement.The participant will receive the greater of the amount just
described or the actuarial value of the benefit earned at normal retirement
date.
Death benefits are payable to a surviving spouse in the event a
participant (or former participant) with 2 or more years of credited service
dies prior to the commencement of benefits. Generally, the benefit is based on
the participant's earned vested benefit at death and equals the amount the
spouse would have received (under the joint and 50% survivor option) on the
earliest retirement date upon which the participant could have received benefits
and is payable at the time the participant would have commenced such benefits.
Form of Benefits
The normal form of benefit for a married participant is a joint and 50%
survivor annuity, and for an unmarried participant is a life annuity. The
consent of the spouse of a married participant is needed to elect an alternative
form of payment. Alternative forms of benefit include a life annuity with a
guarantee of 240 monthly payments, a guaranteed number of payments up to 240
with no lifetime guarantee, and a joint and survivor annuity with the survivor
annuity payable to a designated beneficiary in a fractionally smaller amount.
<TABLE>
<CAPTION>
Estimated Payment Schedules
ESTIMATED ANNUAL PENSION FOR REPRESENTATIVE
AVERAGE AMOUNT OF YEARS OF CREDITED SERVICE (2)
COMPENSATION FOR -----------------------------
LAST 5 YEARS 10 20 30 40
BEFORE RETIREMENT (1) YEARS YEARS YEARS YEARS
--------------------- ----- ----- ----- -----
<S> <C> <C> <C> <C>
$ 25,000 $ 5,000 $ 7,500 $ 11,250 $ 15,000
50,000 10,000 15,000 22,500 30,000
75,000 15,000 22,500 33,750 45,000
100,000 20,000 30,000 45,000 60,000
250,000 50,000 75,000 112,500 150,000
500,000 100,000 150,000 225,000 300,000
1,000,000 200,000 300,000 450,000 600,000
</TABLE>
- ------------------------------------------
(1) It has been assumed that compensation is equal to Top Heavy
Compensation (i.e., base pay equal to W-2 earnings). These calculations
do not reflect any maximum benefits imposed by the Internal Revenue
Service under IRS Section 415.
(2) Total Credited Service as of January 1, 1997 was 14 years for Kennon R.
Patterson, Sr., 10 years for B. K. Walker, Jr., 11 years for Denny
Kelly, 10 years for Hodge Patterson, III, and 10 years for Loy
McGruder.
The Pension Plan has been amended effective January 1, 1989, and in order to
comply with the Tax Reform Act of 1986.
ESOP
The ESOP was established on December 20, 1985, effective as of January
1, 1985, and is qualified as an "employee stock ownership plan" within the
meaning of Section 407(d)(6) of the Employee Retirement Income Security Act of
1974 ("ERISA"). The purposes of the ESOP include providing an additional benefit
to employees, giving participants an ownership interest in the Company, and
supporting the Company's growth and debt service. The principal investment of
the Trust established under the ESOP is Company common stock. The ESOP consists
of both an employee stock ownership plan within the meaning of Section 4975(e)
of the Internal Revenue Code of 1986, as amended ( the"Code") and, prior to
1987, a tax credit (employee stock ownership plan ("PAYSOP") under Section 409
of the Code.
Each employee of the Company and its Subsidiaries is eligible to
participate in the ESOP on December 31 following the completion of one year of
service. A year of service is a Plan Year (i.e., the calendar year) in which the
employee is credited with 1,000 hours of service. An hour of service is
generally an hour for which an employee is paid or entitled to payment. An
employee who fails to meet this requirement by December 31 shall be eligible to
participate in the ESOP on the first day after he completes a year of service in
either the 12-month period following his employment commencement date, or
thereafter the Plan Year following his employment commencement date. The amount
to
14
<PAGE> 16
be contributed to the ESOP each year is determined by the Company's Board of
Directors from profits. Contributions can be made in either cash or stock.
Participants are not required to contribute to the ESOP nor are they permitted
to make voluntary contributions.
The ESOP is managed by an ESOP Administrative Committee appointed by
the Company's Board of Directors. Messrs. Kennon R. Patterson, Sr., and J. K.
Cornelius served as trustees of the ESOP but resigned in July 1986 and were
succeeded by Central Bank of the South. On July 6, 1996, First National Bank of
Commerce was elected as successor Trustee to Compass Bank formerly known as
Central Bank of the South (the "Trustee"). The Trustee is directed to invest
contributions in Company stock or temporarily in cash. The Trustee is also
authorized to incur loans to finance purchases of Company Shares and to use such
stock as collateral for such financing. At the direction of the ESOP
Administrative Committee, the Trustee entered into an ESOP loan from an
unrelated bank on November 3, 1993 and borrowed $1,200,000 to purchase 80,000
Shares from the Company at $15.00 per Share. ESOP contributions by the Company
during 1996 were applied to the service of this debt and to make payment to
certain plan participants entitled to distributions from the ESOP. At the end of
1996, the amount of the indebtedness was $2,119,891, repayment of which was
secured by the pledge of 112,121 Company Shares. ESOP shares pledged as
collateral are released by the unrelated bank monthly as the debt is serviced by
the Company.
Accounts are maintained for each ESOP participant. Contributions by the
Company are allocated to the accounts of the participants based on their
relative amounts of compensation for the year. Forfeitures under the ESOP are
allocated in the same manner as contributions. Participants must be credited
with 1,000 hours of service and be employed on the last day of the Plan Year to
share in contributions and forfeitures, except in the event of retirement, death
or disability.
As to Shares allocated to each ESOP participant's account, the
participant is entitled to direct the Trustee as to voting such Shares.
Otherwise, all Shares held by the ESOP shall be voted in the manner determined
by the ESOP Administrative Committee to be in the best interests of participants
and beneficiaries.
A participant becomes entitled to the full amount in his ESOP account
if he attains the normal retirement age of 65, dies or becomes disabled. If
termination is due to other reasons, a participant is entitled to the vested
portion of his account in the ESOP determined in accordance with a vesting
schedule. During 1995, the ESOP was amended to provide that participants prior
to November 1, 1995, would receive a 20 percent vested right after two years of
service, 40 percent after three years, 60 percent after four years, and 100
percent after five years. Participants entering the ESOP on or after November 1,
1995, receive no vested benefit prior to five years of credited service but are
100 percent vested after five years of credited service. A participant receives
a year of credited service for each Plan Year in which he has at least 1,000
hours of service. Years of service before the effective date of the ESOP are
recognized for vesting service. A participant is always 100% vested as to
amounts contributed previously under the PAYSOP.
After a participant's retirement, disability or death, distribution of
his account normally will be made in a lump sum. Distribution will be in stock
or cash or both, but if it is cash, the participant will be informed of his
right to demand stock. In the event of termination for reasons other than
retirement, death or disability, distribution occurs after a break in service
and will be a lump sum. A break in service is a Plan Year in which the
participant is credited with less than 500 hours of service. The Company Shares
to be distributed are subject to a right of first refusal. Before the stock can
be sold, it must first be offered to the Trustee at its fair market value. The
Trustee must also offer put options to participants who receive distributions of
shares from the ESOP Trust.
BENEFIT RESTORATION PLAN
On April 12, 1995, the Board of Directors authorized the establishment
of the Community Bancshares, Inc. Benefit Restoration Plan (the "Benefit
Restoration Plan"). Section 401 of the Internal Revenue Code of 1987 imposes
maximum limitations on the amount of employee compensation that can be taken
into account for determining qualified retirement plan benefits. Section 415 of
the Internal Revenue Code of 1987 imposes maximum benefits that can be paid from
a qualified retirement plan. The Company's Pension Plan is a qualified
retirement plan under the Internal Revenue Code.
The Benefit Restoration Plan provides retirement benefits to
participants whose compensation or benefit payment exceeds the maximum amounts
allowed for qualified retirement plans. Payments under the Benefit Restoration
Plan are payable to the recipient in the same manner as they would be paid under
the Pension plan disregarding the applicable limitations of the Internal Revenue
Code of 1987. If any lump sum actuarial equivalent of any benefits payable to a
recipient is $10,000 or less, the plan administrative committee may direct
payment to the appropriate recipient in a lump sum. Vesting is in accordance
with the vesting schedule under the provisions of the Pension Plan.
The Benefit Restoration Plan is effective January 1, 1995, and
presently has four named participants although not all participants have reached
either the compensation limit or benefit limit imposed by the Internal Revenue
Code of 1987 for qualified retirement plans. The named participants are Kennon
R. Patterson, Sr., Bishop K. Walker, Jr., Denny Kelly and Hodge Patterson, III.
The Company accrued $128,305 to fund the Benefit Restoration Plan during 1996.
15
<PAGE> 17
CHANGE IN CONTROL COMPENSATION AGREEMENTS
During 1996 the Company entered into Change in Control Agreements with
Kennon R. Patterson, Sr., Bishop K. Walker, Jr., Denny Kelly, Hodge Patterson,
III, and Loy McGruder. Each of the agreements provide that if employment is
terminated within thirty months following a "Change in Control" (as defined) for
reasons other than for "cause" (as defined), each person is entitled to receive
a cash payment in an amount equal to thirty months of his base salary plus an
amount equal to the amount of bonuses that would have been payable to the
employee for the next thirty months computed on the basis of the prior two years
bonuses to such employee. The agreements further provide for continued credited
service in the Company's retirement plans and for continuing health insurance
coverage. Each employee is also entitled to such payments and benefits if he
terminates his employment within thirty months after a Change in Control due to
a reduction in salary or responsibilities, assignment of duties inconsistent
with his position, or a mandatory transfer of residence more than fifty miles
from his then current residence.
STOCK OPTIONS
The Company granted Stock Options as a form of long-term compensation
for Directors and to further establish incentive for the directors to increase
the value of the Company to shareholders since the exercise of the options will
be of greater reward to the Directors with a greater increase in the stock
trading price. The grant of Stock Options is a common compensation method by
financial institutions and other business entities and allows the Company to be
competitive in obtaining and retaining Directors.
The options to purchase the Company's stock that were granted in 1996
were issued at 100 percent of the fair market value of the Company's stock on
the date of the grant. The options are exercisable immediately and expire five
years after the date of the grant with special provisions in the event of the
grantee's death.
16
<PAGE> 18
CERTAIN TRANSACTIONS
Some Company and Subsidiary directors, officers and principal
shareholders and their associates were customers of, or had transactions with,
the Company or its Subsidiaries in the ordinary course of business during 1996.
Some of the directors of the Company or its Subsidiaries are directors,
officers, trustees or principal securities holders of corporations or other
organizations which also were customers of, or had transactions with, the
Company or its Subsidiaries in the ordinary course of business during 1996.
Except as noted below, all outstanding loans and other transactions
with Company or Subsidiary directors, officers and principal shareholders,
including, without limit, those discussed herein, 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
other persons and, when made, did not involve more than the normal risk of
collectability or present other unfavorable features. In addition to banking and
financial transactions, the Company or its Subsidiaries may have had additional
transactions with, or used products or services of, various organizations of
which directors of the Company or its Subsidiaries are associated. Except as
noted in the following paragraphs, the amounts involved in such noncredit
transactions have in no case been material in relation to the business of the
Company, it Subsidiaries or such other organizations. It is expected that the
Company and its Subsidiaries will continue to have similar transactions in the
ordinary course of its business with such individuals and their associates in
the future.
The aggregate amount of credit outstanding to all Company and
Subsidiary directors, nominees for directors, executive officers and principal
shareholders who were indebted to the Company or any if its Subsidiaries in an
amount in excess of $60,000 totalled approximately $5,597,198 at December 31,
1996. This amount represented approximately 17.19 percent of the Company's total
shareholders' equity on that date.
On October 2, 1994, the Company purchased 115,978.384 shares held by
Jeffrey K. Cornelius, a former director of the Company. The Company purchased
the Shares to maintain the Company's current successful policies and to preserve
goodwill and harmonious relations in the communities, and among the customers,
served by the Company. These Shares represented approximately 6.43% of the
Company's outstanding Common Stock. Payment to Mr. Cornelius was made from cash
on hand with the balance of $2,000,000 to be paid over a period of 20 years
pursuant to a subordinated capital note from the Company to Mr. Cornelius. Such
note bears interest on the outstanding principal amount at a rate of 7.0% per
annum, is payable in 240 equal monthly installments of principal and interest,
and may be prepaid in whole or in part at any time without penalty. As of
December 31, 1996, the principal indebtedness to Mr. Cornelius was $1,982,548.
The Company had previously issued 11,692 shares of its Series 1984-1 8%
Cumulative Preferred Stock. The Company redeemed all the Preferred Shares
effective December 31, 1993, by establishment of an escrow account. Preferred
shareholders receive payment of the stated value of $69.44 upon surrender of
their stock certificate to the Company. All certificates have been surrendered
to the Company.
During 1996, the company and its subsidiaries, Community Bank (Alabama)
entered into a service contract with Heritage Valley Farms, owned by Kennon R.
Patterson, Sr., a director and officer of the Company, for the upkeep and
maintenance of the external grounds of the Company and its subsidiaries.
Maintenance expense under this contract for twenty-one locations amounted to
$64,875 for the year ended December 31, 1996, which is an average cost of
$257.44 per month per location.
During 1996, the company, Community Bank (Alabama), Community Bank
(Tennessee) and 1st Community Credit Corporation paid Heritage Interiors, a
decorating and design firm owned and operated by the wife of Kennon R.
Patterson, Sr., a director and officer of the Company, for the interior design,
equipment, furniture, appliances, fixtures, carpets, wallcoverings, drapes, and
accessories for various Company and subsidiaries' facilities consisting of
$33,510 at the headquarters in Blountsville; $4,084 at the Blountsville bank
office; $9,491 at Cleveland; $1,898 at Arab; $100 at Gurley; $13,128 at
Meridianville; $1,478 at Falkville; $1,492 at Hartselle; $2,161 at Elkmont;
$122,346 at Rainsville; $129,033 at Rogersville; $7,079 at Haleyville; $549 at
Double Springs; $1,439 at Hamilton; $27,871 at Uniontown; and $1,483 at Pulaski.
1st Community Credit Corporation had transactions of $301 for the Cullman
office; $407 for the Albertville office; and $3,165 for the Decatur office .
Transactions with the Company were $3,361. Total purchases were $377,897 for the
Company and all related organizations.
Com-Pac, a partnership composed of Kennon R. Patterson, Sr., Birl
Bryson and Bishop K. Walker, Jr., all of whom are shareholders, directors and
officers of Community Bancshares, Inc. and its banking subsidiary, Community
Bank (Alabama) and as a group control more than 5% of the common stock, entered
into a lease agreement with Community Bank (Alabama) to lease 1.2 acres of land
and a building of approximately 3,300 square feet located in Meridianville,
Madison County, Alabama. The building consists of an approved vault, security
equipment, a drive-in window, two remote drive-in facilities, lobby, three
private offices, six teller stations storage room and restroom facilities with
appropriate exterior paving, landscaping and parking. Community Bank (Alabama)
commenced paying monthly rental payments of $5,373 per month on September 1,
1990. The lease to Community Bank (Alabama) provided an option to purchase the
facility at any time during the five-year lease at cost. In addition to lease
payments, Community Bank (Alabama) provides insurance coverage and is
responsible for payments of ad valorem taxes and maintenance. In accordance with
the lease agreement, Community Bank (Alabama) purchased the property from
Com-Pac during 1995 for $500,630.
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<PAGE> 19
The Company during 1990 conveyed a lot and assigned leases on two
additional lots in the City of Hartselle, Morgan County, Alabama, to Com-Pac.
The sales price of the lot was $75,000.00 (the cost of the lot) and the two
leases which Com-Pac assumed presently call for monthly rentals of $400.00 and
$600.00. Com-Pac subsequently constructed a building and entered into a lease
agreement with Community Bank (Alabama) to lease the three lots and the
building. The building is approximately 3,300 square feet and consists of an
approved vault, security equipment, a drive-in window, two remote drive-in
facilities, lobby, three private offices, six teller stations, storage room and
restroom facilities with appropriate paving, landscaping and parking. Community
Bank (Alabama) commenced paying monthly rentals of $6,573 per month on September
1, 1990. The lease to Community Bank (Alabama) provides an option to purchase
the facility at any time during the five year lease plus the assumption of the
two leases on the leased lots, or, in the event of purchase of said lots, plus
their cost (which is fixed under an agreement to purchase and/or option to
purchase at $75,000 for each lot upon certain happenings). In addition to the
lease payments, Community Bank (Alabama) provides insurance coverage and is
responsible for payment of ad valorem taxes and maintenance. In accordance with
the lease agreement, Community Bank (Alabama) purchased the property from
Com-Pac during 1995 for $592,476 and assumed the two leases on the leased lots.
Both the Meridianville and Hartselle leases, with options to purchase
between Community Bank (Alabama) and Com-Pac were approved by the Board of
Directors with the abstention of Birl Bryson, Jeffrey K. Cornelius, Kennon R.
Patterson, Sr., and B. K. Walker, Jr. The leases by Com-Pac to Community Bank
(Alabama) were considerably more favorable to Community Bank (Alabama) than
proposals received by Community Bank (Alabama) from outside sources. The
purchases of the Meridianville and Hartselle properties were approved by the
Board of Directors with the abstention of Kennon R. Patterson, Sr. and B.K.
Walker, Jr.
The Company has entered into agreements with substantially all
directors, advisory directors and officers of the Company and its Subsidiaries
granting the Company a right of first refusal on any proposed sale of Company
Shares by such persons. See "Principal Shareholders."
APPROVAL OF APPOINTMENT OF AUDITORS
At the annual shareholder meeting held on March 28, 1996, the
shareholders elected Dudley, Hopton-Jones, Sims & Freeman, PLLP, ("Dudley") to
be the independent public accountants to audit the financial statements of the
Company and its subsidiaries for 1996.
A representative of Dudley is expected to be present at the annual
meeting and will have an opportunity to make a statement if he desires and to
respond to appropriate questions.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
APPOINTMENT OF DUDLEY AS INDEPENDENT PUBLIC ACCOUNTANTS FOR 1997.
SHAREHOLDER PROPOSALS
Any proposal which a shareholder of the Company intends to be presented
at the annual meeting of shareholders to be held in 1998 must be received by the
Company on or before November 25, 1997. Only proper proposals which are timely
received will be included in the proxy statement and form of proxy.
OTHER MATTERS
Management does not know of any matters to be brought before the
Meeting other than as described in this proxy statement. Should other matters
properly come before the Meeting, the persons designated as proxies will vote in
accordance with their best judgment on such matters.
EXPENSES OF SOLICITATION
The cost of soliciting proxies in the accompanying form will be borne
by the Company. In addition to the use of the mails, proxies may be solicited by
directors, officers or other employees of the Company or its subsidiaries
personally, by telephone or by telegraph. The Company does not expect to pay any
compensation for the solicitation of proxies, but may reimburse brokers,
custodians or other persons holding stock in their names or in the names of
nominees for their expenses in sending proxy materials to principals and
obtaining their instructions.
AVAILABILITY OF ANNUAL REPORT
A copy of the Annual Report and Form 10-K for the year ended December
31, 1996 will be mailed to each shareholder on March 7, 1997 and will be
provided with no charge to each Shareholder upon request at the annual
Stockholder's Meeting on March 27, 1997. Requests for such copies should be
directed to: Mr. Kennon R. Patterson, Sr., Chairman, Community Bancshares, Inc.,
P.O. Box 1000, Blountsville, Alabama, 35031.
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<PAGE> 20
APPENDIX A
____________________________________________
PROXY
COMMUNITY BANCSHARES, INC.
BLOUNTSVILLE, ALABAMA
ANNUAL MEETING OF SHAREHOLDERS
_____________________________________________
The undersigned shareholder of Community Bancshares, Inc. (the "Company"),
Blountsville, Alabama, hereby constitutes and appoints Dicey Childers or Mark
O. South with full power of substitution to vote the number of shares of
Company common stock which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Shareholders to be held at The
Heritage Club, Huntsville, Alabama on March 27, 1997 at 10:00 A.M., local time,
or at any adjournments thereof (the "Meeting") upon the proposals described
in the Proxy Statement and Notice of Annual Meeting of Shareholders, the
receipt of which is acknowledged, in the manner specified below.
1. To elect C.K. Summerford, Stacey W. Mann, Jon M. Owings, Hodge
Patterson, III, and Robert O. Summerford to serve as Class I
directors of the Company for three year terms until their
successors are elected and qualified.
For_______
TO WITHHOLD AUTHORITY FOR ANY NOMINEE(S)
FOR DIRECTOR, WRITE THEIR NAME(S) IN THE
SPACE PROVIDED BELOW
_____________________________________________________
_____________________________________________________
2. To ratify the selection of Dudley, Hopton-Jones, Sims &
Freeman, PLLP, as independent auditors of the Company for
the year ending December 31, 1997.
For_______ Abstain_______ Against _______
3. In their sole discretion, the Proxies are authorized to vote
upon such other business as may properly come before the
meeting or any adjournment thereof.
Authorized__________ Withhold Authority__________
This Proxy, when properly executed, will be voted in the manner directed by
the undersigned shareholder. If no direction is made, this Proxy will be voted
for Proposals 1, and 2 with discretionary authority on all other matters that
may properly come before the Meeting or any adjournment thereof.
Please sign exactly as your name appears on your stock certificate
and date. Where shares are held jointly, each shareholder should sign. When
signing as executor, administrator, trustee or guardian, please give full title
as such. If a corporation, please sign in full corporate name by president or
other authorized officer. If a partnership, please sign in partnership name by
authorized person.
_______________________________________________
Signature of Shareholder
______________________________________________
Signature of Other Shareholder (if held jointly)
Dated:_____________________________________1997
Month Day
THIS PROXY IS SOLICITED ON BEHALF OF COMMUNITY BANCSHARES, INC.'S BOARD OF
DIRECTORS AND MAY BE REVOKED BY THE SHAREHOLDER PRIOR TO ITS EXERCISE.
