SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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FORM 8-K
Current Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
March 3, 1999
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Community Bancshares, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-16461 63-0868361
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(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
Main Street, P.O. Box 1000, Blountsville, Alabama 35031
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (205) 429-1000
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Not applicable
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(Former Name)
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Item 5. Other Events.
Community Bancshares, Inc., reported the information contained in
the following Letter to Shareholders, dated February 26, 1999:
February 26, 1999
Dear Community Bancshares Shareholder:
As we announced on January 21, 1999, your Board of Directors adopted a
Share Purchase Rights Plan and declared a dividend distribution of Preferred
Share Purchase Rights to shareholders of record on January 7, 1999. Enclosed for
your reference is a Summary of Rights to Purchase Preferred Shares describing
the Plan.
Share purchase rights are designed to assure that all of Community
Bancshares shareholders receive fair and equal treatment in any proposed
takeover of the Company. They guard against abusive tactics to gain control of
the Company without paying all shareholders a premium for that control.
I want to emphasize that the Rights will not prevent a takeover. They are,
however, intended to enable all of the Company's shareholders to realize the
long-term value of their investment in the Company, and should encourage anyone
seeking to acquire the Company to negotiate with the Board prior to attempting a
takeover.
Many companies have done the same. Over 2,000 companies, including over
55% of the S&P 500 companies and over 45% of the Business Week 1000 companies,
have issued rights to protect their shareholders against abusive acquisition
tactics.
We are aware that some people claim that a Share Purchase Rights Plan of
the sort we have adopted deters legitimate acquisition proposals. The Board
carefully considered these views and found those arguments unpersuasive. Recent
studies have demonstrated that companies with rights plans have received higher
takeover premiums than companies without rights plans. Moreover, such arguments
do not justify leaving shareholders without any protection against unfair
treatment by an acquiror -- who, after all is seeking the acquiror's own
advantage, not yours.
The Rights issued under the Plan may be redeemed by the Board of Directors
for one cent per Right prior to the accumulation -- through open-market
purchases, a tender offer or otherwise -- of 15% or more of the Company's shares
by a single acquiror or group. The Rights will not interfere with any merger or
business combination approved by the Board of Directors.
Adoption of the Plan does not weaken the financial strength of the Company
or affect its business plans. Issuance of the Rights:
- has no dilutive effect on the value of the Company's stock,
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- will not affect reported earnings per share,
- is not taxable to the Company or to you, and
- will not change the way in which you can trade the Company's stock.
The Rights will be exercisable only if and when a situation arises which
the Rights were intended to address.
If any person or group acquires 15% or more of the Company's outstanding
common stock, the "flip-in" provision of the Rights will be triggered and the
Rights will entitle a holder (other than such person or any member of such
group) to buy a number of additional shares of common stock of the Company
having a market value of twice the exercise price of the Rights. In addition, if
the Company is involved in a merger or other business combination at any time
after a person or group has acquired 15% or more of the Company's shares, the
Rights will entitle the holder to buy a number of shares of common stock of the
acquiring company having a market value of twice the exercise price of each
Right. The person or group that becomes a 15% or greater shareholder is not
entitled to exercise the Rights. The Board has the ability to lower the
threshold to 10% for all shareholders or for a single shareholder (or group of
shareholders) whom the Board has determined to be an adverse person.
The Board of Directors has determined that the group of individuals
composed of A. Lee Hanson, Jimmy C. Smith, J.R. Whitlock, William S. Wittmeier,
R.C. Corr, Jr., Bryan A. Corr and other members of the Corr family is an adverse
person and lowered the threshold for triggering the Rights to 10.5% for this
group. This step was taken by the Board because the Board believes this group is
attempting to pressure the Board to take action which would not be in the
Company's best long-term interests.
In declaring the Rights dividend we have expressed our confidence in the
future and our determination that, you, our shareholders, be given every
opportunity to participate fully in that future.
On behalf of the Board of Directors.
/s/ Kennon R. Patterson, Sr.
Kennon R. Patterson, Sr.
Chairman, President and
Chief Executive Officer
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SUMMARY OF RIGHT TO PURCHASE
PREFERRED SHARES
Introduction
On January 7, 1999, the Board of Directors of Community Bancshares, Inc.
(the "Company") declared a dividend of one preferred share purchase right (a
"Right") for each outstanding share of common stock, par value $.10 per share,
of the Company (the "Common Shares"). The dividend is payable on January 7, 1999
(the "Record Date") to the stockholders of record on that date. The description
and terms of the Rights are set forth in an Agreement (the "Agreement") between
the Company and The Bank of New York, as Rights Agent (the "Rights Agent").
Purchase Price
Each Right entitles the registered holder to purchase from the Company one
one-hundredth of a share of Series A Junior Participating Preferred Stock of the
Company, par value $.10 per share (the "Preferred Shares"), at a price of $84
per one one-hundredth of a Preferred Share (the "Purchase Price"), subject to
adjustment.
Flip-In
In the event that any person or group or affiliated or associated persons
acquires beneficial ownership of 15% or more of outstanding Common Shares (an
"Acquiring Person"), each holder of a Right, other than Rights beneficially
owned by the Acquiring Person (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of Common Shares having a
market value of two times the exercise price of the Right.
Flip-Over
If the Company is acquired in a merger or other business combination
transaction or 50% or more of its consolidated assets or earning power are sold
after a person or group has become an Acquiring Person, each holder of a Right
(other than Rights beneficially owned by Acquiring Person, which will be void)
will thereafter have the right to receive that number of shares of common stock
of the acquiring company which at the time of such transaction will have a
market value of two times the exercise price of the Right.
Distribution Date
The distribution date is the earlier of
(i) 10 days following a public announcement that a person or group of
affiliated or associated persons have acquired beneficial ownership of 15% or
more of the outstanding Common Shares or have otherwise become an Acquiring
Person; or
(ii) 10 business days (or such later date as may be determined by action of the
Board of Directors of the Company prior to such time as any person or group of
affiliated persons
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becomes an Acquiring Person) following the commencement of, or announcement of
an intention to make, a tender offer or exchange offer the consummation of which
would result in the beneficial ownership by a person or group of 15% or more of
the outstanding Common Shares.
Transfer and Detachment
Until the Distribution Date, the Rights will be evidenced, with respect to
any of the Common Shares certificates outstanding as of the Record Date, by such
Common Share certificate with a copy of this Summary of Rights attached thereto.
Until the Distribution Date (or earlier redemption or expiration of the Rights),
the Rights will be transferred with and only with the Common Shares, and
transfer of those certificates will also constitute transfer of these Rights.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Rights Certificates") will be mailed to
holders of record of the Common Shares as of the close of business on the
Distribution Date and such separate Rights Certificate alone will thereafter
evidence the Rights.
Exercisability
The Rights are not exercisable until the Distribution Date. The Rights
will expire on January 13, 2009 (the "Final Expiration Date"), unless the Final
Expiration Date is extended or unless the Rights are earlier redeemed or
exchanged by the Company, in each case, as described below.
Adjustments
The Purchase Price payable, and the number of Preferred Shares or other
Securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of stock
dividends, stock splits, reclassifications, or certain distributions with
respect to the Preferred Shares. The number of outstanding Rights and the number
of one one-hundredths of a Preferred Share issuable upon the exercise of each
Right are also subject to adjustment if, prior to the Distribution Date, there
is a stock split of the Common Shares or a stock dividend on the Common Shares
payable in Common Shares or subdivisions, consolidations or combinations of the
Common Shares. With certain exceptions, no adjustment in the Purchase Price will
be required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractional Preferred Shares will be issued (other than
fractions which are integral multiples of one one-hundredth of a Preferred
Share, which may, at the election of the Company, be evidenced by depositary
receipts) and, in lieu thereof, an adjustment in cash will be made based on the
market price of the Preferred Shares on the last trading day prior to the day of
exercise.
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Preferred Shares
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1 per share but will be entitled to an aggregate
dividend of 100 times the dividend declared per Common Share. In the event of
liquidation, the holders of the Preferred Shares will be entitled to a minimum
preferential liquidation payment of $100 per share but will be entitled to an
aggregate payment of 100 times the payment made per Common Share. Each Preferred
Share will have 100 votes, voting together with the Common Shares. Finally, in
the event of any merger, consolidation or other transaction in which Common
Shares are exchanged, each Preferred Share will be entitled to receive 100 times
the amount received per Common Share. These rights are protected by customary
antidilution provisions.
The value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should, because of the nature of the
Preferred Shares' dividend, liquidation and voting rights, approximate the value
of one Common Share.
Exchange
At any time after any person or group becomes an Acquiring Person, and
prior to the acquisition by such person or group of 50% or more of the
outstanding Common Shares, the Board of Directors of the Company may exchange
the Rights (other than the Rights owned by the Acquiring Person, which will have
become void), in whole or in part, at an exchange ratio of one Common Share, or
one one-hundredth of a Preferred Share (subject to adjustment).
Redemption
At any time prior to any person or group becoming an Acquiring Person, the
Board of Directors of the Company may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (the "Redemption Price"). The redemption of
the Rights may be made effective at such time on such basis with such conditions
as the Board of Directors in its sole discretion may establish. Immediately upon
any redemption of the Rights, the right to exercise the Rights will terminate
and the only right of the holders of Rights will be to receive the Redemption
Price.
Amendments
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above for all holders of the Rights, or
only for a holder or group of holders that the Board of Directors of the Company
has determined to be an Adverse Person, not less than the greater of (i) the sum
of .001% and the largest percentage of the outstanding Common Shares then known
to the Company to be beneficially owned by any person or group of affiliated or
associated persons (or in the case of an Adverse Person determination, the
percentage of Common Shares then known to the Company to be beneficially owned
by such Adverse Person) and (ii) 10%, except that from and after such time as
any person or group of
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affiliated or associated persons becomes an Acquiring Person no such amendment
may adversely affect the interests of the holders of the Rights.
Rights and Holders
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive dividends.
Further Information
A copy of the Agreement has been filed with the Securities and Exchange
Commission as an Exhibit to a Registration Statement on Form 8-A dated January
21, 1999. A copy of the Agreement is available free of charge from the Company.
This summary description of the Rights does not purport to be complete and is
qualified in its entirety by reference to the Agreement, which is hereby
incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed by the undersigned,
thereunto duly authorized.
COMMUNITY BANCSHARES, INC.
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(Registrant)
By /s/ Kennon R. Patterson, Sr.
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Name: Kennon R. Patterson, Sr.
Title: Chairman, President and Chief
Executive Officer
Dated: March 3, 1999
