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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
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Under Rule 14a-12
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)(4) and
0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 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:
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COMMUNITY BANCSHARES, INC.
68149 Highway 231 South
P.O. Box 1000
Blountsville, Alabama 35031
May 15, 2001
To the Stockholders of
Community Bancshares, Inc.:
In connection with the Annual Meeting of stockholders of Community
Bancshares, Inc. to be held at 10:00 a.m., Central Time, on Thursday, June 7,
2001, in the Orchestra Rehearsal-North Hall at the Von Braun Civic Center, 700
Monroe Street, Huntsville, Alabama, enclosed are a Notice of Annual Meeting of
Stockholders, proxy card and Proxy Statement containing information about your
company and matters to be considered at the Annual Meeting. We encourage you to
read them.
You are cordially invited to attend the Annual Meeting in person.
Please sign, date and mark the enclosed proxy card and return it in the enclosed
postage-prepaid envelope to ensure that your shares are voted at the Annual
Meeting. This will not limit your rights to vote your shares in person or attend
the Annual Meeting.
We are enthusiastic about the future and appreciate your continued
support. We look forward to seeing you on June 7.
Sincerely yours,
/s/ Kennon R. Patterson, Sr.
-------------------------------------
Kennon R. Patterson, Sr.
Chairman, Chief Executive Officer and
President
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD AND PROMPTLY MAIL IT IN
THE POSTAGE-PAID RETURN ENVELOPE FURNISHED FOR THAT PURPOSE, WHETHER OR NOT YOU
PLAN TO ATTEND THE ANNUAL MEETING.
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COMMUNITY BANCSHARES, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
----------------------------
The Annual Meeting of the stockholders of Community Bancshares, Inc.
(the "Company") will be held in the Orchestra Rehearsal-North Hall at the Von
Braun Civic Center, 700 Monroe Street, Huntsville, Alabama, on Thursday, June 7,
2001 at 10:00 a.m., Central Time, for the following purposes:
1. To elect Glynn Debter, John J. Lewis, Jr., Loy McGruder and
Bishop K. Walker, Jr. as Class II directors; and
2. To transact such other business as may properly come before
the Annual Meeting or any adjournment thereof.
The Board of Directors has fixed the close of business on April 26,
2001 as the record date for determining stockholders of the Company entitled to
notice of and to vote at the Annual Meeting and any adjournment of the Annual
Meeting.
Your attention is directed to the attached Proxy Statement for further
information with respect to the matters to be acted upon at the Annual Meeting.
You are cordially invited to attend the Annual Meeting. WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING IN PERSON, PLEASE COMPLETE, DATE AND SIGN
THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE POSTAGE-PAID RETURN
ENVELOPE ENCLOSED FOR THAT PURPOSE. The person giving the enclosed proxy may
revoke it at any time before it is voted by voting in person at the Annual
Meeting or by delivering a later written proxy or a written revocation to the
Corporate Secretary of the Company, provided such later written proxy or
revocation is actually received by the Corporate Secretary of the Company before
the vote of stockholders at the Annual Meeting.
If you need assistance in completing your proxy card, please call me at
(205) 429-1000.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR"
APPROVAL OF ITEM 1 ABOVE.
By Order of the Board of Directors,
/s/ Bishop K. Walker, Jr.
------------------------------------
Bishop K. Walker, Jr.
Secretary
Blountsville, Alabama
May 15, 2001
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COMMUNITY BANCSHARES, INC.
68149 Highway 231 South
P.O. Box 1000
Blountsville, Alabama 35031
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PROXY STATEMENT
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD JUNE 7, 2001
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INTRODUCTION
This Proxy Statement is furnished to stockholders 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 stockholders to be held June 7, 2001, and at any adjournments
thereof (the "Annual Meeting"), for the purposes set forth in the accompanying
Notice of Annual Meeting of Stockholders.
The executive offices of the Company are located at 68149 Highway 231
South, P.O. Box 1000, Blountsville, Alabama 35031. This Proxy Statement is being
mailed to stockholders of the Company on or about May 15, 2001.
STOCKHOLDERS ENTITLED TO VOTE
Each holder of record of the Company's common stock, $.10 par value per
share ("Common Stock"), as of the close of business on April 26, 2001, will be
entitled to vote at the Annual Meeting. Each stockholder will be entitled to one
vote on each proposal for each share of Common Stock held as of such date. At
the close of business on April 26, 2001, there were 4,808,331 shares of Common
Stock issued and outstanding, which were held by approximately 2,340
stockholders of record. The Company's stock transfer books will not be closed
and shares of Common Stock may be transferred subsequent to the record date,
although all votes must be cast in the names of stockholders of record as of the
record date.
PROXIES
If the enclosed proxy card is properly executed and received by the
Company before or at the Annual Meeting, the shares of Common Stock represented
thereby will be voted as specified in the proxy by the persons designated in
such proxy. If no specification is made in the proxy, shares of Common Stock
represented by the proxy will be voted (1) "FOR" the election of the nominees
for directors listed in the accompanying Notice of Annual Meeting of
Stockholders, and (2) in accordance with the recommendation of the Board of
Directors as to any other matters which may come before the Annual Meeting. The
person giving the enclosed proxy may revoke it at any time before it is voted by
voting in person at the Annual Meeting or by delivering a later written proxy or
a written revocation to the Corporate Secretary of the Company, provided such
later written proxy or revocation is actually received by the Corporate
Secretary of the Company before the vote of stockholders at the Annual Meeting.
SOLICITATION OF PROXIES
THIS SOLICITATION IS MADE BY THE BOARD OF DIRECTORS OF THE COMPANY. THE
BOARD OF DIRECTORS URGES THAT YOU EXECUTE AND RETURN THE ENCLOSED PROXY CARD AS
SOON AS POSSIBLE AND RECOMMENDS THAT THE SHARES OF COMMON STOCK REPRESENTED BY
THE PROXY BE VOTED "FOR" APPROVAL OF PROPOSAL 1.
The Company will bear the costs associated with this solicitation of
proxies.
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OTHER MATTERS
The Board of Directors is not aware of any business to be presented at
the Annual Meeting except as described in the accompanying Notice of Annual
Meeting. If other matters do properly come before the Annual Meeting, it is
intended that the persons named on the enclosed proxy card will vote on such
matters in accordance with the recommendation of the Board of Directors. The
Board of Directors has recommended that such persons vote "AGAINST" any proposal
or other business that is presented at the Annual Meeting unless the Board of
Directors has previously approved such proposal or other business.
ANNUAL REPORTS
COPIES OF THE COMPANY'S 2000 ANNUAL REPORT TO STOCKHOLDERS AND ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2000 ACCOMPANY THIS PROXY
STATEMENT. ADDITIONAL COPIES OF THESE DOCUMENTS WILL BE FURNISHED WITHOUT CHARGE
TO ANY STOCKHOLDER WHO REQUESTS SUCH REPORTS IN WRITING FROM KENNON R.
PATTERSON, SR., COMMUNITY BANCSHARES, INC., P.O. BOX 1000, BLOUNTSVILLE, ALABAMA
35031.
PROPOSAL 1 -- ELECTION OF DIRECTORS
The Bylaws of the Company provide for a classified Board of Directors
consisting of three classes, with the three-year term of office of each class
expiring in successive years, and 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 13. The terms of the Class II directors expire at the Annual
Meeting. The terms of the Class III and Class I directors will expire in 2002
and 2003, respectively. The Board of Directors is recommending the re-election
of those persons currently serving as Class II directors. Each of the Class II
directors elected at the Annual Meeting will serve three-year terms expiring at
the 2004 annual meeting of stockholders and until his respective successor is
elected and qualified. A director of the Company is elected by the affirmative
vote of the holders of a plurality of the shares of Common Stock present or
represented at the Annual Meeting and entitled to vote.
The Board of Directors has nominated Glynn Debter, John J. Lewis, Jr.,
Loy McGruder and Bishop K. Walker, Jr. for election as Class II directors to
hold office until expiration of their term and until their successors have been
elected and qualified. It is intended that the persons named in the enclosed
proxy card will vote for the election of these nominees. Each nominee has
consented to serve as director if elected, but if for any reason any of these
persons should not be available or able to serve, the persons named in the
enclosed proxy card may exercise discretionary authority to vote for substitutes
proposed by the Company's Board of Directors. The names of the nominees and the
directors who will continue to serve unexpired terms and certain information
relating to them, including the business experience of each during the past five
years, follow.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
"FOR" THE ELECTION OF THE NOMINEES LISTED BELOW AS DIRECTORS OF THE COMPANY.
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NOMINEES FOR TERMS EXPIRING IN 2004 (CLASS II)
DIRECTOR OF
NAME, AGE AND POSITIONS HELD WITH THE COMPANY PRINCIPAL OCCUPATION
COMPANY AND ITS SUBSIDIARIES SINCE DURING PAST FIVE YEARS
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GLYNN DEBTER (66) 1996 Owner-operator of Debter Farms
Director of the Company, Community Bank, 1st (cattle breeding), Horton,
Community Credit Corporation, Community Insurance Alabama
Corp. and Southern Select Insurance, Inc.
JOHN J. LEWIS, JR. (53) 1997 Production Planning Manager for
Director of the Company, Community Bank and 1st Tyson Foods, Inc. (food
Community Credit Corporation processing), Blountsville,
Alabama
LOY MCGRUDER (60) 1996 Executive Vice President of
Director of the Company; Director and Executive Vice Community Bank (1994-Present);
President of Community Bank City President of Community
Bank-Blountsville (1994-1997);
Senior Vice President of
Community Bank (1993-1994)
BISHOP K. WALKER, JR. (69) 1984 Vice Chairman, Senior Executive
Director, Vice Chairman, Secretary, Senior Executive Vice Vice President and General
President and General Counsel of the Company; Director, Counsel of the Company (1987-
Senior Executive Vice President and Secretary of Present); President and Director
Community Bank; Chairman of Community Insurance of Community Insurance Corp.
Corp. and Southern Select Insurance, Inc. (1987-1997)
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DIRECTORS WITH TERMS EXPIRING IN 2002 (CLASS III)
DIRECTOR OF
NAME, AGE AND POSITIONS HELD WITH THE COMPANY PRINCIPAL OCCUPATION
COMPANY AND ITS SUBSIDIARIES SINCE DURING PAST FIVE YEARS
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DENNY G. KELLY (61) 1986 President of Community Bank
Director and Executive Vice President of the Company; (1993-Present)
Vice Chairman and President of Community Bank; Vice
Chairman and President of 1st Community Credit
Corporation; Director of Community Appraisals, Inc.,
Community Insurance Corp. and Southern Select
Insurance, Inc.
KENNON R. PATTERSON, SR. (58) 1983 Chairman, President and Chief
Chairman, President and Chief Executive Officer of the Executive Officer of the
Company; Chairman and Chief Executive Officer of Company (1985-Present);
Community Bank; Chairman of 1st Community Credit Chairman and Chief Executive
Corporation; Vice Chairman of Community Appraisals, Officer of Community Bank
Inc.; Director of Community Insurance Corp. and Southern (1993-Present)
Select Insurance, Inc.
MERRITT M. ROBBINS (63) 1996 Piggly Wiggly grocery store
Director of the Company, Community Bank, Community operator and property developer,
Insurance Corp. and Southern Select Insurance, Inc. New Hope, Alabama
R. WAYNE WASHAM (64) 1996 (Retired) Assistant
Director of the Company, Community Bank and Superintendent of Arab,
Community Appraisals, Inc. Alabama City Schools (1992-
1996)
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DIRECTORS WITH TERMS EXPIRING IN 2003 (CLASS I)
DIRECTOR OF
NAME, AGE AND POSITIONS HELD WITH THE COMPANY PRINCIPAL OCCUPATION
COMPANY AND ITS SUBSIDIARIES SINCE DURING PAST FIVE YEARS
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ROY B. JACKSON (66) 1999 (Retired) Owner of Jackson
Director of the Company, Community Bank, Community Farm & Garden Center, Minor
Insurance Corp. and Southern Select Insurance, Inc. Hill, Tennessee
HODGE PATTERSON, III (45) 1993 Executive Vice President of
Director of the Company; Director and Executive Vice Community Bank (1997-
President of Community Bank Present); Vice-Chairman, Chief
Executive Officer and President
of Community Bank, a
Tennessee bank (1993-1997)
KENNON R. PATTERSON, JR. (35) 2000 Ranch Manager of
Director of the Company and Community Bank Heritage Valley Ranch (2000-
Present); Executive Vice
President of Community Bank
(1997-2000); Senior Vice
President of Community Bank
(1996-1997).
ROBERT O. SUMMERFORD (70) 1996 Owner-operator of Summerford
Director of the Company, Community Bank, Community Nursing Home and
Insurance Corp. and Southern Select Insurance, Inc. Summerford Drug Store,
Falkville, Alabama
JIMMIE TROTTER (62) 2000 (Retired) Principal of Mortimer
Director of the Company, Community Bank and Jordan High School, Morris,
Community Appraisals, Inc. Alabama
Kennon R. Patterson, Sr. is the father of Kennon R. Patterson, Jr. and
the brother of Hodge Patterson, III.
Directors of the Company hold office for three-year terms unless they
sooner resign, become disqualified or are removed. 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.
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BOARD MEETINGS AND COMMITTEES
The Board of Directors of the Company held 20 meetings during 2000. To
assist it in its work, the Board of Directors has the following standing
committees: Executive Committee, Nominating Committee, Executive Compensation
Committee, ESOP and Pension Plan Administrative Committee, and Audit Committee.
The membership of the Executive Committee currently consists of Kennon
R. Patterson, Sr. (Chairman), Denny G. Kelly (Vice Chairman), Glynn Debter, Roy
B. Jackson and Bishop K. Walker, Jr. This committee has the authority, to the
extent permitted by law and the Company's governing documents, to exercise all
the powers of the Board of Directors in the management of the business and
affairs of the Company. This committee met one time during 2000.
The Nominating Committee is currently composed of Robert O. Summerford
(Chairman), Roy B. Jackson (Vice Chairman) and Merritt M. Robbins. The purpose
of this committee is to recommend to the Board of Directors nominations for
directors of the Company. This committee met one time in 2000.
The Executive Compensation Committee reviews the compensation of all
officers of the Company and its subsidiaries. Membership of this committee,
which met one time in 2000, currently consists of Merritt M. Robbins (Chairman),
R. Wayne Washam (Vice Chairman), Glynn Debter, Roy B. Jackson, John J. Lewis,
Jr., Robert O. Summerford and Bishop K. Walker, Jr.
The ESOP and Pension Plan Administrative Committee administers the
Company's pension plan and employee stock ownership plan ("ESOP"). This
committee is currently composed of Denny G. Kelly (Chairman), Hodge Patterson,
III and Loy McGruder. This committee held four meetings in 2000.
The Audit Committee reviews the financial and internal operations of
the Company. Members of the Audit Committee are R. Wayne Washam (Chairman),
Merritt M. Robbins (Vice Chairman), John J. Lewis, Jr., Glynn Debter, Roy B.
Jackson, Robert O. Summerford and Jimmie Trotter. This committee did not meet
during 2000, but relied upon the Audit Committee of Community Bank, which met 12
times during 2000. Members of the Community Bank's Audit Committee are R. Wayne
Washam (Chairman), Robert O. Summerford (Vice Chairman), John J. Lewis and Roy
B. Jackson.
AUDIT COMMITTEE REPORT
The Audit Committee of the Board of Directors of the Company consists
of six directors, each of whom is "independent" as defined by the listing
standards of the Nasdaq Stock Market, Inc. The Board of Directors of the Company
has not adopted a written charter for the Audit Committee. In fulfilling its
responsibilities, the Audit Committee:
- Reviewed and discussed with management the Company's audited
financial statements for the year ended December 31, 2000;
- Discussed with the Company's independent auditors the matters
required to be discussed under Statement on Auditing Standards
No. 61: and
- Received the written disclosures and the letter from the
Company's independent auditors
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regarding the auditors' independence as required by
Independence Standards Board Standard No. 1, and discussed
with the Company's independent auditors their independence.
Based on the Audit Committee's review of the Company's audited
financial statements for the year ended December 31, 2000 and its discussions
with management and the Company's independent auditors as described above and in
reliance thereon, the Audit Committee recommended to the Company's Board of
Directors that the Company's audited financial statements for the year ended
December 31, 2000 be included in the Company's Annual Report on Form 10-K for
the year ended December 31, 2000 for filing with the Securities and Exchange
Commission.
By the Audit Committee:
R. Wayne Washam (Chairman) Roy B. Jackson Robert O. Summerford
Merritt M. Robbins (Vice Chairman) John J. Lewis, Jr. Jimmie Trotter
Glynn Debter
DIRECTOR ATTENDANCE
During 2000, all incumbent directors of the Company attended at least
75% of the total number of meetings of the Board of Directors and meetings of
the committees of which they were members except Kennon R. Patterson, Jr.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's directors, executive officers and persons
who beneficially own more than 10% of the Common Stock to file with the
Securities and Exchange Commission ("SEC") initial reports of ownership and
reports of changes in ownership of Common Stock. These officers, directors and
stockholders are also required by SEC rules to furnish the Company with copies
of all Section 16(a) reports they file. There are specific dates by which these
reports are to be filed and the Company is required to report in this Proxy
Statement any failure to file reports as required for 2000.
During 2000, William E. Blackmon failed to file a Form 3 upon assuming
the duties of Acting Chief Financial Officer of the Company, but subsequently
made the required disclosure in a Form 5 which was timely filed. The Company has
relied on written representations of its directors and executive officers and
copies of the reports that have been filed in making required disclosures
concerning beneficial ownership reporting.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Community Bank has from time to time made loans to certain of its
directors and executive officers, and members of their immediate families, in
the ordinary course of business on substantially the same terms, including
interest rates and collateral, as those prevailing at the time of the loans for
comparable transactions with other persons. These loans did not involve more
than the normal risk of collectibility or present other unfavorable features.
Community Bank maintains a program whereby each of its full-time employees is
eligible for a 1% discount in the rate of interest charged on a loan from
Community Bank. Federal banking regulations permit executive officers of
Community Bank to participate in this program. In addition, Community Bank
maintains a program for executive officers and other of its employees who are
required by Community Bank to relocate within its market area in connection with
their employment with Community Bank. Under this program, each of these
employees is eligible for a
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5% annual interest rate on first mortgage, real estate loans from Community
Bank. The largest aggregate amount of loans to directors and executive officers
of the Company and members of their immediate families outstanding at any time
during 2000 under these two programs was approximately $6.3 million. As of April
19, 2001, the total outstanding balance of loans by Community Bank to directors
and executive officers of the Company and members of their immediate families
under these two programs was approximately $2.4 million.
In June 2000, Community Bank entered into a lease agreement, as the
tenant, with Debter Properties LLC, an Alabama limited liability company,
pursuant to which Community Bank leased the real property in which Community
Bank's Boaz, Alabama office is located. Mr. Glynn Debter, a director of the
Company is a member of Debter Properties, LLC. In connection with the lease
agreement, Community Bank loaned funds to Debter Properties, LLC to finance its
purchase of the real property from Community Bank at a price of approximately
$1.7 million. The term of the lease is 20 years; however, in no event may the
term of the lease expire prior to payment in full of the loan obtained by the
lessor to purchase the leased property. The monthly rent under this lease is an
amount equal to the monthly debt amortization of funds which the lessor borrowed
to purchase the leased property. Because the interest rate on the loan used to
purchase the property adjusts with fluctuation in the prime rate, the monthly
lease payments are subject to change. At December 31, 2000, the amount of the
monthly rental payment was $15,821. Lease payments to Debter Properties, LLC
during 2000 totaled approximately $110,746. In addition, Community Bank agreed
to pay the lessor an additional sum to be adjusted periodically to coincide with
the cost to the lessor of the real estate taxes and other items and insurance
for the leased property. Community Bank is responsible for maintenance, repairs
and utilities for the real property. The Company has the option to purchase the
leased premises from the lessor at any time during the term of the lease for an
amount equal to the lessor's cost in acquiring and/or constructing such leased
premises. In an Addendum to the Lease Agreement and Loan Agreement, dated June
1, 2000, Community Bank agreed to maintain and continue in force fire and
extended coverage insurance and general liability insurance upon the leased
premises. In return, the lessor agreed to reimburse Community Bank on a
quarterly basis the amount of the insurance premium which is included in
payments made by Community Bank under the lease.
The Company and Community Bank, including the Bank's subsidiaries, have
used the services of 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, furniture, appliances, fixtures, hardware,
carpets, wall coverings, paint, drapes and accessories for new facilities and
similar work associated with the renovation of existing locations. At the
request of Mrs. Patterson in January 2000, the Company's contract with Heritage
Interiors was canceled, but at the Board of Directors' request, Mrs. Patterson
agreed to complete projects then pending. During 2000, Heritage Interiors was
paid $145,038 in connection with the completion of Community Bank's Boaz and
Hamilton, Alabama locations. In addition, Community Bank paid Heritage Interiors
$41,827 in connection with the completion of the renovation of Community Bank's
first floor of the headquarters building and the furnishings and decorating of
three departments at the headquarters complex in Blountsville, Alabama.
Additional payments totaling $25,064 were made to Heritage Interiors during 2000
in connection with 21 other Community Bank locations and the Company's
headquarters. 1st Community Credit Corporation paid Heritage Interiors $22,003
for furnishings and decorating in connection with the relocation of its
Hartselle, Alabama office and $4,845 in connection with the remodeling of its
Albertville, Alabama office. Additional payments totaling $7,317 were made to
Heritage Interiors during 2000 in connection with nine other 1st Community
Credit Corporation locations. Community Insurance Corp. paid Heritage Interiors
$156,158 during 2000 for furnishings and decorating in connection with the
renovation of its Huntsville, Alabama offices. In addition, payments totaling
$4,848 were made to Heritage Interiors during 2000 for furnishings at Community
Insurance Corporation's Oneonta, Alabama office. Total payments to Heritage
Interiors by the Company and Community Bank and its subsidiaries in 2000 were
$407,100. All of the Heritage Interiors' projects that were pending in January
2000 were completed prior to year-end 2000.
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The Company has engaged the accounting firm of Schauer, Taylor, Cox,
Vise and Morgan, P.C. to perform certain accounting services. Douglas B.
Schauer, a member of the firm, is Kennon R. Patterson. Sr.'s son-in-law. Other
than preparing work papers during the first quarter of 2000 for the Company's
independent auditors in connection with the audit of the Company's financial
statements for 1999 , services performed by Schauer, Taylor, Cox, Vise and
Morgan, P.C. for the Company in 2000 have been limited to preparation of the
Company's quarterly tax accruals, preparation and filing of the Company's
federal and state tax returns and consultation regarding interpretation and
application of accounting standards. In the future, management anticipates using
Schauer, Taylor, Cox, Vise and Morgan, P.C. primarily for tax- related matters.
The Company and its subsidiaries paid Schauer, Taylor, Cox, Vise and Morgan,
P.C. $117,898 for services rendered during 2000.
At December 31, 2000, the total outstanding balance of indebtedness
incurred by the ESOP to purchase shares of Common Stock was approximately
$2,606,224. This indebtedness, which is owed to a third party and is secured by
a pledge of 221,321 shares of Common Stock that have not been allocated by the
ESOP, is guaranteed by the Company.
LEGAL PROCEEDINGS
At a meeting of Community Bank's Board of Directors on June 20, 2000, a
director brought to the attention of the Board the total amount of money
Community Bank had paid subcontractors in connection with the construction of a
new Community Bank office. Management of the Company commenced an investigation
of the expenditures. At the request of management, the architects and
subcontractors involved in the construction project made presentations to the
Boards of Directors of the Company and Community Bank on July 15 and July 18,
2000, respectively. At the July 18, 2000 meeting of the Board of Directors of
Community Bank, another director made a presentation alleging that Community
Bank had been overcharged by subcontractors on that construction project and
another current construction project. On July 18, 2000, the Boards of Directors
of the Company and Community Bank appointed a joint committee comprised of
independent directors of the Company and of Community Bank to investigate the
alleged overcharges. Upon completion of its investigation, the joint committee
is to inform the Boards of Directors of the Company and Community Bank of its
findings and recommendations. The joint committee retained legal counsel and an
independent accounting firm to assist the committee in its investigation.
Management has also been informed that the directors of Community Bank who
alleged the construction overcharges have contacted the bank regulatory agencies
and law enforcement authorities. Management believes that these agencies and
authorities either have conducted or are currently conducting investigations
regarding this matter.
On July 21, 2000, three shareholders of the Company, M. Lewis Benson,
Doris E. Benson and John M. Packard, Jr., filed a lawsuit in the state Circuit
Court of Marshall County, Alabama against the Company, Community Bank, certain
directors and officers of the Company and Community Bank, an employee of
Community Bank and two construction subcontractors. The plaintiffs purported to
file the lawsuit as a shareholder derivative action, which relates to the
alleged construction overcharges being investigated by the joint committee of
the Boards of Directors of the Company and Community Bank. The complaint alleges
that the directors, officers and employee named as defendants in the complaint
breached their fiduciary duties, failed to properly supervise officers and
agents of the Company and Community Bank, and permitted waste of corporate
assets by allegedly permitting the subcontractor defendants to overcharge
Community Bank in connection with the construction of two new Community Bank
offices, and to perform the construction work without written contracts,
budgets, performance guarantees and assurances of indemnification. In addition,
the complaint alleges that Kennon R. Patterson, Sr., the Chairman, President and
Chief Executive Officer of the Company, breached his fiduciary duties by
allegedly permitting the two named subcontractors to overcharge for work
performed on the two construction projects in exchange for allegedly discounted
charges for work these subcontractors performed in connection with the
construction of Mr. Patterson's residence. The complaint further alleges that
the director defendants knew or should have known of this alleged arrangement
between Mr. Patterson and the subcontractors. The complaint also alleges that
Mr. Patterson, the Community Bank employee and the two subcontractor defendants
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made false representations and suppressed information about the alleged
overcharges and arrangement between Mr. Patterson and the subcontractors. On
August 15, 2000, the plaintiffs filed an amended complaint adding Andy C. Mann,
a shareholder of the Company, as a plaintiff and adding a former director of the
Company and Community Bank as a defendant. The amended complaint generally
reiterates the allegations of the original complaint. In addition, the amended
complaint alleges that Community Bank was overcharged on all construction
projects from January 1997 to the present. The amended complaint also alleges
that the defendants breached their fiduciary duties and are guilty of gross
financial mismanagement, including allegations concerning the making or approval
of certain loans and taking allegedly improper actions to conceal the fact that
certain loans were uncollectible. On September 18, 2000 the plaintiffs filed a
second amended complaint, which generally reiterates the allegations of the
original and first amended complaints. In addition, the second amended complaint
alleges that the plaintiffs were improperly denied their rights to inspect and
copy certain records of the Company and Community Bank. The second amended
complaint also alleges that the directors of the Company abdicated their roles
as directors either by express agreement or as a result of wantonness and gross
negligence. The second amended complaint asserts that the counts involving
inspection of corporate records and director abdication are individual,
non-derivative claims. The second amended complaint seeks, on behalf of the
Company, an unspecified amount of compensatory damages in excess of $1 million,
punitive damages, disgorgement of allegedly improperly paid profits and
appropriate equitable relief. Upon motion of the defendants, the case was
transferred to the state Circuit Court in Blount County, Alabama by order dated
September 21, 2000, as amended on October 12, 2000. On August 24, 2000, the
Board of Directors of the Company designated the directors of the Company who
serve on the joint investigative committee as a special litigation committee to
investigate and evaluate the allegations and issues raised in this lawsuit and
to arrive at such decisions and take such action as the special litigation
committee deems appropriate. At a hearing on February 23, 2001 the court stayed
discovery with respect to the Company, Community Bank and the directors,
officers and employees of each until May 24, 2001, at which time the court
expects to receive a report from the special litigation committee. Because the
special litigation committee has not yet completed its investigation, and as a
result of the inherent uncertainties of the litigation process, the Company is
unable at this time to predict the outcome of this lawsuit and its effect on the
Company's financial condition and results of operations. Regardless of the
outcome, however, this lawsuit could be costly, time-consuming and a diversion
of management's attention.
On November 19, 1998, Mr. William Towns, a shareholder of the Company,
filed a shareholder derivative action against the directors of the Company in
the state Circuit Court of Blount County, Alabama. Mr. Towns amended his
complaint on January 14, 1999 to add the Company and Community Bank as
defendants in the action. On February 11, 1999, the complaint was again amended
to add Mr. Pat Bellew and Mrs. Mary Bellew, who are also shareholders of the
Company, as additional plaintiffs. The complaint alleged that the directors of
the Company breached their fiduciary duty to the Company and its shareholders,
engaged in fraud, fraudulent concealment, suppression of material fact and
suppression of the plaintiff shareholders, failed to supervise management, and
conspired to conceal wrongful acts from the Company's shareholders and paid
themselves excessive director fees. The complaint also alleged that the Board of
Directors acquiesced in mismanagement and misconduct by Kennon R. Patterson,
Sr., the Chairman of the Board, Chief Executive Officer and President of the
Company, including alleged self dealing, payment of excessive compensation,
misappropriation of corporate opportunities and misappropriation of funds. The
complaint sought an unspecified amount of compensatory and punitive damages,
removal of the current directors, appointment of a new Board of Directors, and
attorneys fees and costs. On December 21, 1998, the Company and its directors
filed a motion with the court seeking to have the complaint dismissed. On March
1, 1999, the Company's Board of Directors appointed a special Board committee
comprised of non-employee directors of the Company, to review the plaintiffs'
allegations in accordance with Delaware law. On April 6, 1999, each of the
parties to the action requested that the court stay the litigation and related
discovery, motions and hearings, pending completion of the special committee's
review. On April 30, 1999, the court entered an order staying the litigation and
related discovery, motions and hearing in accordance with the parties' request.
On October 15, 1999, the special committee filed its final report with the
court. On October 21, 1999, the parties forwarded to the court an
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agreed-upon order governing the confidentiality of the special committee's
report, which the court entered on January 2, 2000. On August 3, 2000, the
Company, Community Bank and the Company's directors filed a motion to stay the
proceedings until the Company's and Community Bank's joint investigative
committee had completed its investigation of the alleged construction
overcharges discussed above. At the request of the Company and the other
defendants in the action, the court continued a hearing on the motion to
dismiss. On February 23, 2001, the court indicated that there was no reason to
continue the stay of this action. The parties are awaiting a hearing on the
defendants' motion to dismiss the case. Management of the Company believes that
the plaintiffs' allegations are false and that the action lacks merit. The
Company and its directors intend to defend the action vigorously, and management
of the Company believes that the action will not have a material adverse effect
on the Company's financial condition or results of operations. Regardless of the
outcome, however, this lawsuit could be costly, time consuming and a diversion
of management's attention.
On September 14, 2000, another action was filed in the state Circuit
Court of Blount County, Alabama, against the Company, Community Bank and certain
directors and officers of the Company and Community Bank by R. C. Corr, Jr.;
Doris J. Corr; Bryan A. Corr, Sr.; Tina M. Corr; Joan M. Currier; John David
Currier; and Corr, Inc. f/k/a Oneonta Telephone Company alleging that the
directors actively participated in or ratified the misappropriation of corporate
income. The action was not styled as a shareholder derivative action. On January
3, 2001, the defendants filed a motion for summary judgment on the basis that
these claims are derivative in nature and cannot be brought on behalf of
individual stockholders. The court has not ruled on the motion. The Company and
its directors believe that this lawsuit is without merit and intend to defend
the action vigorously. Although management currently believes that this action
will not have a material adverse effect on the Company's financial condition or
results of operations, regardless of the outcome, the action could be costly,
time consuming and a diversion of management's attention.
The Company's Certificate of Incorporation provides that, in certain
circumstances, the Company will indemnify and advance expenses to its directors
and officers for judgments, settlements and legal expenses incurred as a result
of their service as officers and directors of the Company. Community Bank's
Bylaws contain a similar provision for indemnification of directors and officers
of Community Bank.
On November 15, 2000, Michael W. Alred and Michael A. Bean, two former
directors and executive officers of Community Bank, filed suit against Community
Bank in the United States District Court for the Northern District of Alabama
alleging that their employment was wrongfully terminated for allegedly providing
information to bank regulatory and law enforcement authorities concerning
possible violations of laws and regulations, gross mismanagement, gross waste of
funds and abuse of authority by Community Bank, its directors, officers and
employees. According to the complaint, the information which these two
individuals provided to authorities concerned certain bank construction
projects, specific loans, charge-offs, expenses and past due accounts. The
complaint seeks reinstatement of the plaintiffs to their former positions as
officers and directors of Community Bank as well as compensatory and punitive
damages. Community Bank and its directors believe this lawsuit is without merit
and intend to defend the action vigorously. Management of the Company believes
that this action will not have a material adverse effect on the Company's
financial condition or results of operations.
EXECUTIVE COMPENSATION
For additional information about compensation of the Company's
executive officers, please see the section below captioned "Executive
Compensation Committee Report on Executive Compensation."
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides summary information concerning
compensation paid by the Company and its subsidiaries during 2000 to the Chief
Executive Officer and each of the four other most highly compensated executive
officers of the Company at December 31, 2000 (collectively, the "named executive
officers") for the fiscal years ended December 31, 2000, 1999 and 1998.
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SUMMARY COMPENSATION TABLE
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------------- ------------
AWARDS
OTHER SECURITIES
ANNUAL UNDERLYING ALL OTHER
SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#) ($)(1)(2)
---------------------------------- ---- ---------- -------- ------------ ------------ -------------
Kennon R. Patterson, Sr.
Chairman, President
and Chief Executive Officer ... 2000 $1,017,000 -- -- -- $ 8,003
1999 588,950 $309,650 -- 40,000 75,808
1998 544,500 281,500 -- 16,667 53,928
Bishop K. Walker, Jr.
Vice Chairman and
General Counsel ............... 2000 $ 476,000 -- -- -- $11,780
1999 421,923 -- -- 15,000 29,087
1998 248,730 -- -- 13,333 41,657
Denny G. Kelly
President -
Community Bank ................ 2000 $ 375,000 -- -- -- $ 9,803
1999 323,654 -- -- 20,000 30,048
1998 190,288 -- -- 10,000 41,128
Hodge Patterson, III
Executive Vice President -
Community Bank ................ 2000 $ 260,000 -- $29,679(3) -- $ 9,803
1999 250,000 -- 29,050(3) 5,000 8,048
1998 170,019 -- 17,740(3) 6,667 35,378
Loy McGruder
Executive Vice President -
Community Bank ................ 2000 $ 245,000 -- -- -- $ 9,803
1999 230,000 -- -- 5,000 8,048
1998 152,231 -- -- 6,667 33,628
--------------------
(1) Includes director fees paid for service as a director of the Company and of
its subsidiaries during 2000, 1999 and 1998, respectively, as follows: Kennon R.
Patterson, Sr., $0, $56,250 and $37,000; Bishop K. Walker, Jr.,$0, $19,000 and
$33,000; Denny G. Kelly,$0, $22,000 and $34,500; Hodge Patterson, III, $0, $0
and $28,750; and Loy McGruder, $0, $0 and $27,000.
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(2) Also includes life insurance premiums paid by the Company and contributions
by the Company to the ESOP during 2000, 1999 and 1998, respectively, as follows:
Kennon R. Patterson, Sr., $8,003, $19,558 and $16,928; Bishop K. Walker, Jr.,
$11,780, $10,087 and $8,667; Denny G. Kelly, $9,803, $8,048 and $6,628; Hodge
Patterson, III, $9,803, $8,048 and $6,628; and Loy McGruder, $9,803, $8,048 and
$6,628. ESOP contributions for 2000 are estimated because the allocations for
the 2000 plan year have not been completed by the plan recordkeeper.
(3) Includes for 2000, 1999 and 1998, respectively, $2,550, $2,265 and $4,805
with respect to social club dues, $12,146, $9,703 and $5,675 with respect to
usage of a Company-owned automobile, and $14,983, $17,082 and $7,260 with
respect to discounted interest rates through participation in the Company's
employee loan programs.
STOCK OPTIONS
The Company did not grant any stock options or stock appreciation
rights during 2000 to the named executive officers.
OPTION EXERCISES AND HOLDINGS
The following table provides information concerning the exercise of
stock options during 2000 by the named executed officers and the unexercised
stock options held by them at December 31, 2000.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of Securities
Underlying Unexercised Value of Unexercised
Options/SARs In-the-money Options/SARs
Shares at FY-End (#) at FY-End ($) (1)
---------------------------- ------------------------------
Acquired on Value
Name Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
------------------------- ------------ ------------ ----------- ------------- ----------- -------------
Kennon R. Patterson, Sr. -- -- 112,667 -- $408,001 --
Bishop K. Walker, Jr. -- -- 67,333 -- 314,499 --
Denny G. Kelly -- -- 54,000 -- 177,000 --
Hodge Patterson, III -- -- 33,667 -- 181,001 --
Loy McGruder -- -- 31,667 -- 165,001 --
-------------------------
(1) Represents market value of underlying shares of Common Stock of $18.00 per
share at December 31, 2000, as determined by the Board of Directors, net of the
exercise price of the options.
RETIREMENT PLAN
The following table shows the estimated annual benefits payable at
normal retirement age (age 65) under a qualified defined benefit retirement plan
(Community Bancshares, Inc. Revised Pension Plan) as well as under a
non-qualified supplemental retirement plan (Community Bancshares Inc. Benefit
Restoration Plan). This supplemental plan provides benefits that would otherwise
be denied participants because of Internal Revenue Code limitations on qualified
plan benefits. All of the named executive officers are participants in this
supplemental plan.
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PENSION PLAN TABLE
Years of Credited Service
---------------------------------------------------------------
Average Annual
Compensation 10 20 30 40
------------ -- -- -- --
$ 25,000 $ 3,750 $ 7,500 $ 11,250 $ 15,000
50,000 7,500 15,000 22,500 30,000
75,000 11,250 22,500 33,750 45,000
100,000 15,000 30,000 45,000 60,000
250,000 37,500 75,000 112,500 150,000
500,000 75,000 150,000 225,000 300,000
750,000 112,500 225,000 337,500 450,000
1,000,000 150,000 300,000 450,000 600,000
1,250,000 187,500 375,000 562,500 750,000
The benefits shown are not subject to any deduction for Social Security
benefits or other offset amounts. Benefits shown above are computed as a
straight-life annuity beginning at age 65.
The amount of compensation covered by the combination of plans covering
the named executive officers is total compensation, including bonuses, overtime
or other forms of extraordinary compensation. The amount of the retirement
benefit is determined by the length of the retiree's credited service under the
plans and his average monthly earnings for the five highest compensated,
consecutive calendar years of the retiree's final ten consecutive calendar years
of employment with the Company and its subsidiaries. The full years of credited
service under the plans for the named executive officers as of December 31, 2000
are as follows: Kennon R. Patterson, Sr.: 18 years; Bishop K. Walker, Jr.: 14
years; Denny G. Kelly: 15 years; Hodge Patterson, III: 14 years; and Loy
McGruder: 14 years.
COMPENSATION OF DIRECTORS
Non-employee directors of the Company are paid an annual retainer of
$15,000 and a fee of $1,500 for each month during which the director serves.
Non-employee members of the Company's Executive Committee, Nominating Committee,
Executive Compensation Committee and Audit Committee receive a fee of $500 per
meeting. Non-employee directors of the Company who are also directors of
Community Bank or its subsidiaries receive the following monthly fees: Community
Bank - $500; Community Appraisal, Inc. - $250; 1st Community Credit Corporation
- $250; and Community Insurance Corp. - $250. Non-employee members of Community
Bank's Executive Committee, Compensation Committee and Personnel Grievance
Committee receive $500 per meeting. Non-employee members of Community Bank's
Audit Committee, Asset Quality Committee and Electronic Data Processing
Committee receive a monthly fee of $500.
EMPLOYMENT AGREEMENTS AND CHANGE IN CONTROL ARRANGEMENTS
EMPLOYMENT AGREEMENTS
Effective April 1, 1996, the Company entered into an Employment
Agreement with Kennon R. Patterson, Sr., which was amended on October 14, 1999
and expires on March 31, 2008. The Employment Agreement, as amended, provides
that Mr. Patterson will serve as the Chairman of the Board of Directors,
President and Chief Executive Officer of the Company and receive an annual cash
compensation of at least $898,600, the amount of Mr. Pattersons total cash
compensation for 1999, with increases in his compensation as determined
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by the Board of Directors based on the recommendation of the Company's Executive
Compensation Committee. Mr. Patterson's Employment Agreement also provides that
he will receive four weeks of paid vacation annually, use of an automobile for
business and personal purposes, reimbursement of reasonable business and
professional expenses, memberships in civic and social clubs, and an annual
allowance of $10,000 for the purchase of life insurance. In the event that Mr.
Patterson is disabled to the extent that he is incapable of performing his
duties, he is entitled to a continuation of his compensation during the period
of disability, but not to exceed one year. If Mr. Patterson's employment with
the Company is terminated, he may not engage in the business of banking within a
25 mile radius of any office of the Company or its subsidiaries for a period of
two years following the termination of his employment.
Effective April 1, 1996, the Company also entered into an Employment
Agreement with Bishop K. Walker, Jr. This Employment Agreement expired on March
31, 2001 and has not been renewed or replaced.
CHANGE IN CONTROL AGREEMENTS
The Company entered into Change in Control Agreements with each of the
named executive officers on December 4, 1999. These agreements have terms of
three years and are automatically renewed unless terminated at the end of their
terms by the Company's Executive Compensation Committee. In the event of a
change in control (as defined in the agreements) of the Company, the named
executive officer is entitled to receive certain severance benefits if his
employment is terminated by the Company within 30 months following the change in
control, unless the termination is for cause or by reason of the officer's
death, disability or retirement on or after age 65. The officer is also entitled
to these severance benefits if the officer terminates employment with the
Company within 30 months following a change in control because, among other
reasons, the officer's authority, duties, compensation or benefits have been
reduced or the officer is forced to relocate more than 50 miles from his place
of employment immediately prior to the change in control. If, during the term of
the agreement, a transaction is proposed which, if consummated, would constitute
a change in control and, the officer's employment is thereafter terminated by
the Company other than for cause or by reason of the officer's death, disability
or retirement on or after age 65, and the proposed transaction is consummated
within one year following the officer's termination of employment, the change in
control will be deemed to have occurred during the term of the agreement and the
officer will be entitled to severance benefits. The officer is also entitled to
receive severance benefits if the officer terminates employment for any reason
during a 30-day period beginning 12 months after the occurrence of a change in
control.
The severance benefits payable under the Change in Control Agreements
are as follows: (i) a lump sum payment equal to the present value of the
officer's monthly salary which would have been payable for 30 months following
the officer's termination of employment but for such termination; (ii) a lump
sum payment equal to the present value of a monthly payment payable for 30
months, which monthly payment is calculated by taking one-twelfth of the average
of the bonuses earned by the officer for the two calendar years immediately
preceding the year in which the officer's termination of employment occurs;
(iii) continuation of the officer's health and life insurance benefits for 30
months following the officer's termination of employment at the same level and
on the same terms as provided to the officer immediately prior to his
termination of employment; (iv) full vesting and continued participation for a
period of 30 months following the officer's termination of employment in certain
retirement plans or, if such full vesting and continued participation is not
allowed, payment by the Company of a lump sum supplemental benefit in lieu of
full vesting and continued participation in such plans; and (v) individual
career counseling and outplacement services for a reasonable period of time
following the officer's termination of employment, up to a maximum cost to the
Company of $5,000 per officer.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The following directors currently serve as members of the Executive
Compensation Committee of the Company's Board of Directors and also served on
such committee during 2000:
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Merritt M. Robbins (Chairman) Glynn Debter John J. Lewis, Jr.
R. Wayne Washam (Vice Chairman) Roy B. Jackson Robert O. Summerford
Bishop K. Walker, Jr.
Bishop K. Walker, Jr. is a named executive officer of the Company.
In June 2000, Community Bank sold to, and leased back from, Debter
Properties, LLC, an Alabama limited liability company of which Glynn Debter is a
member, real property in which Community Bank's Boaz, Alabama, office is
located. See "Certain Relationships and Related Transactions" above.
EXECUTIVE COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION
OVERVIEW
The Company's Executive Compensation Committee (the "Compensation
Committee") is responsible for establishing and administering the Company's
executive compensation program. The Compensation Committee also makes
recommendations regarding executive compensation to the Board of Directors,
which has final approval of the compensation of each executive officer,
including the named executive officers identified in the Summary Compensation
Table above. The named executive officers do not participate in the Board of
Directors' review and determination of their compensation or in the Compensation
Committee's review and recommendation of their compensation.
The Company's executive compensation program is designed to attract,
reward, retain and motivate executive officers who will provide strong
leadership necessary for the Company to achieve superior financial performance
and stockholder return, and who will be an integral part of the communities that
the Company serves. During 2000, the Company's executive compensation program
consisted only of base compensation. Executive officers also receive various
perquisites comparable to those made available to executive officers of other
financial institutions, as well as retirement and other employee benefits that
are generally available to employees of the Company and its subsidiaries.
EXECUTIVE COMPENSATION PROGRAM
BASE COMPENSATION
Base compensation provides the foundation for the Company's executive
compensation. Its purpose is to compensate the executive for performing the
basic duties that he or she is expected to perform. Salaries are typically
reviewed and adjusted each year. The base compensation paid to Kennon R.
Patterson, Sr. is subject to the terms of his employment agreement with the
Company. Mr. Patterson's employment agreement provides for a minimum base
salary, which is subject to annual review in the discretion of the Board of
Directors based upon the recommendation of the Compensation Committee. The base
compensation of Bishop K. Walker, Jr. was formerly subject to the terms of an
employment agreement which expired on March 31, 2001.
In determining the base compensation for a particular executive
officer, the Compensation Committee performs a subjective evaluation with three
primary factors in mind: (i) the officer's individual performance, (ii)
performance of the Company and business unit or units of the Company for which
the officer is responsible, and (iii) published compensation data for comparable
positions at other financial institutions. The Compensation Committee does not
assign any relative or specific weights to these factors, and individual members
of the Compensation Committee may give differing weights to different factors.
Accordingly, during
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a particular year, the base compensation of an executive officer of the Company
may not necessarily be related to the Company's performance during that year or
the prior year.
Individual Performance. In determining its recommended compensation for
each executive officer of the Company, the Compensation Committee considers the
officer's individual performance during the prior year. Individual performance
is generally evaluated by reference to the executive officer's annual
performance review, in which the officer is subjectively graded by his or her
superiors on various specified criteria, such as leadership skill and management
ability.
Company Performance. The Compensation Committee also considers the
performance during the prior year of the Company and the bank, branch, branches
or other business unit or units of the Company for which the executive officer
is responsible. For example, in determining the compensation for Kennon R.
Patterson, Sr., the Chairman, Chief Executive Officer and President of the
Company, the Compensation Committee reviews the performance of the entire
Company, and in determining the compensation for Denny G. Kelly, the President
of Community Bank, the Compensation Committee reviews the performance of
Community Bank as a whole. The Compensation Committee subjectively evaluates the
performance by the business units with respect to criteria that the Compensation
Committee believes to be relevant in assessing the units' performance. The
Compensation Committee has not established any target amounts for these
criteria, which may differ from unit to unit, depending on the nature of the
unit's business (such as banking, consumer finance or insurance) and how long
the unit has been in operation, among other factors. The Compensation Committee
generally focuses on the following five criteria, to the extent applicable, in
assessing each unit's performance: (i) growth in loan portfolio; (ii) growth in
deposits; (iii) amount of employee turnover; (iv) net profit; and (v)
charge-offs and loan losses.
Compensation Survey. During 1999, the Company commissioned a
compensation survey to determine the competitiveness of the compensation of 36
of its employees in 15 benchmark positions. The results of this survey were
utilized by the Compensation Committee in determining its recommendations for
the compensation of the particular positions covered by the survey, including
all of the named executive officers.
Published Compensation Data. The Company subscribes to several industry
publications that report compensation of the executive officers of other
financial institutions. The Compensation Committee reviews information regarding
the compensation of similarly-situated executives at comparable institutions in
determining its recommended compensation for a particular executive officer.
Based on these and other factors that the Compensation Committee and
its members may deem to be relevant, the Compensation Committee determines the
base compensation of each executive officer and makes its recommendations to the
Board of Directors. The Board of Directors then considers the Compensation
Committee's recommendations, and may elect to decrease, increase or approve the
compensation recommended by the Compensation Committee. During 2000, the annual
base compensation for each of the named executive officers was increased as
follows: Kennon R. Patterson, Sr. to $1,017,000, Bishop K. Walker, Jr. to
$476,000, Denny G. Kelly to $375,000, Hodge Patterson, III to $260,000 and Loy
McGruder to $245,000. The Board of Directors approved, without material change,
the base compensation recommended by the Compensation Committee for 2000.
Due to the net loss reported by the Company for 2000, each of the named
executive officers agreed to a 10% reduction in his base compensation for 2001
as part of a program to decrease non-interest expenses at the Company.
ANNUAL BONUSES
The Company has, to a limited extent, provided short-term incentives to
executive officers in the form of annual cash bonuses in recognition of
outstanding individual performance and/or business unit performance.
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The Board of Directors did not award bonuses to any executive officer of the
Company for 2000, based on the Board's determination that the officers' base
compensation provided adequate compensation based on individual performance, the
Company's performance and published compensation data for comparable positions
at other financial institutions during 2000.
LONG-TERM INCENTIVES
The purpose of long-term incentives is to provide incentives and
rewards recognizing the performance of the Company over time and to motivate
long-term, strategic thinking among executives. During 2000, the Company did not
grant stock options to any of the named executive officers based on the Board's
determination to reevaluate its long-term incentive compensation strategy.
CHIEF EXECUTIVE OFFICER COMPENSATION
Effective April 1, 1996, the Company entered into an employment
agreement with Kennon R. Patterson, Sr., the Chief Executive Officer of the
Company, which was amended on October 14, 1999 and expires on March 31, 2008.
The Board of Directors approved this employment agreement because of Mr.
Patterson's length of service with the Company, the growth and success that the
Company had achieved under his leadership, and the Board's view that Mr.
Patterson's efforts, strategic vision and leadership were a key component in
achieving such growth and success. In addition, the Board desired to ensure that
the Company continued to retain Mr. Patterson's services as Chief Executive
Officer of the Company.
Compensation for Mr. Patterson during 2000 was determined in accordance
with the terms of his employment agreement and the Board of Directors'
subjective evaluation of Mr. Patterson's performance and that of the Company, as
well as the other factors and criteria described above for other executive
officers of the Company. For 2000, Mr. Patterson's total cash compensation was
increased from $898,600 to $1,017,000. Consistent with the October 14, 1999
amendment to Mr. Patterson's employment agreement, his total cash compensation
for 2000 was categorized as base salary rather than being divided between salary
and bonus as it had been in previous years. Mr. Patterson was not granted a cash
bonus or stock options during 2000.
In determining the amount of Mr. Patterson's compensation, the
Compensation Committee considered various qualitative and quantitative criteria
regarding Mr. Patterson's individual performance and that of the Company, as
well as the results of the 1999 compensation survey and published data regarding
compensation paid to the chief executive officers of other financial
institutions. The Compensation Committee did not establish any target amounts
with respect to these criteria, or assign any particular weights to the criteria
considered. In particular, the Compensation Committee considered the increases
during 2000 in the Company's total assets to $713.8 million from $674.9 million,
in the Company's deposits to $600.9 million from $573.3 million, and in the
Company's net loans to $528.3 million from $498.7 million. The Compensation
Committee determined that these accomplishments were key factors in the
continued growth in the size of the Company, and that they resulted in large
part from Mr. Patterson's management, leadership, strategic vision and
dedication to the Company and the communities it serves.
Due to the net loss reported by the Company at December 31, 2000,
Kennon R. Patterson, Sr. agreed to a 10% reduction in his cash compensation for
2001, as part of a program to decrease non-interest expenses at the Company.
By the Executive Compensation Committee:
Merritt M. Robbins (Chairman) Glynn Debter John J. Lewis, Jr.
R. Wayne Washam (Vice Chairman) Roy B. Jackson Robert O. Summerford
Bishop K. Walker, Jr.
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PERFORMANCE GRAPH
Set forth below is a graph comparing the yearly percentage change in
the cumulative total return of the Company's Common Stock against the cumulative
total return of the NASDAQ Stock Market Bank Index and the American Stock
Exchange Major Market Index for the last five years. It assumes that the value
of the investment in the Company's Common Stock and in each index was $100.00
and that all dividends were reinvested. There is no established trading market
for the Company's Common Stock and, therefore, no reliable information is
available as to the prices at which such Common Stock has traded. To the extent
that cumulative total return data provided in the graph below is based in part
on the price of the Common Stock at the dates indicated, such information should
not be viewed as indicative of the actual or market value of the Common Stock.
Community Bancshares, Inc. AMEX Major Market Index NASDAQ Bank Index*
-------------------------- ----------------------- ------------------
12/31/95 100.00 100.00 100.00
12/31/96 116.92 124.68 132.04
12/31/97 157.47 156.24 221.06
12/31/98 216.96 184.86 219.64
12/31/99 268.17 217.69 211.15
12/31/00 230.45 222.85 241.10
The information provided under the headings "Audit Committee Report,"
"Executive Compensation Committee Report on Executive Compensation" and
"Performance Graph" above shall not be deemed to be "soliciting material" or to
be "filed" with the SEC, or subject to Regulation 14A or 14C, other than as
provided in Item 402 of Regulation S-K, or to liabilities of Section 18 of the
Exchange Act and, unless specific reference is made therein to such headings,
shall not be incorporated by reference into any filings under the Securities Act
of 1933 or the Exchange Act.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information, as of April 26,
2001, with respect to ownership of shares of Common Stock by each of the
Company's directors, nominees for directors and named executive officers, all
directors and executive officers of the Company as a group, and each other
person or group that is known by the Company, based solely upon a review of
filings made with the SEC, to be the beneficial owner of more than 5% of the
outstanding shares of Common Stock.
SHARES OF COMMON STOCK BENEFICIALLY OWNED (1) PERCENTAGE OF
--------------------------------------------- TOTAL SHARES
PERSON, GROUP OR ENTITY SOLE POWER (2) SHARED POWER (3) AGGREGATE OUTSTANDING
----------------------- -------------- ---------------- --------- --------------
I. DIRECTORS, NOMINEES
AND EXECUTIVE OFFICERS
Glynn Debter 11,867 (4) 21,811 33,678 *
Roy B. Jackson 6,400 (5) 6,600 13,000 *
Denny G. Kelly 44,835 (6) 324,257 369,092 7.68 %
John J. Lewis, Jr. 35,189 (7) 1,200 36,389 *
Loy McGruder 20,994 (8) 293,660 314,654 6.54
Hodge Patterson, III 66,231 (9) 263,999 330,230 6.87
Kennon R. Patterson, Sr. 76,111 (10) 573,865 649,976 13.52
Kennon R. Patterson, Jr. 10,769 (11) 102,522 113,291 2.36
Merritt M. Robbins 169,260 (12) 5,070 174,330 3.63
Robert O. Summerford 35,667 (13) 76,200 (14) 111,867 2.33
Jimmie Trotter 5,014 (15) 4,000 9,014 *
Bishop K. Walker, Jr. 228,168 (16) 94,115 322,283 6.70
R. Wayne Washam 20,069 (17) 7,000 27,069 *
All Company directors,
nominees for directors and
executive officers as a group
(15 persons) 746,538 1,062,097 1,808,635 37.61
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II. OTHERS
U.S. Trust Company, N.A. as
Trustee of the Community
Bancshares, Inc. Employee
Stock Ownership Plan (18) -- 540,616 (19) 540,616 (19) 11.24
R.C. Corr, Jr., Doris J. Corr,
Bryan A. Corr, Tina M. Corr,
Joan M. Currier, John David
Currier, Christina M.
Currier, Corr, Inc., as a
group, 600 Third Avenue
East, Oneonta, AL 35121 (20) 10,468 370,881 381,349 7.93
-------------------------
* Less than 1%.
(1) The number of shares reflected are shares which, under applicable SEC
regulations, are deemed to be beneficially owned, including shares as to which,
directly or indirectly, through any contract, arrangement, understanding,
relationship or otherwise, either voting power or investment power is held or
shared. In addition, in computing the number of shares beneficially owned by a
person and the percentage ownership of that person, shares of Common Stock
subject to options held by that person which are currently exercisable, or which
will become exercisable within 60 days following April 26, 2001, are deemed to
be outstanding. Such shares, however, are not deemed outstanding for the
purposes of computing the percentage ownership of any other person. The total
number of shares beneficially owned is divided, where applicable, into two
categories: (i) shares as to which voting/investment power is held solely, and
(ii) shares as to which voting/investment power is shared.
(2) Unless otherwise specified in the following footnotes, if a beneficial owner
is shown as having sole power, the owner has sole voting as well as sole
investment power, and if a beneficial owner is shown as having shared power, the
owner has shared voting power as well as shared investment power. Some
individuals are shown as beneficial owners of shares held by the Company's ESOP.
The individual has sole power to direct the ESOP trustee as to the manner in
which shares allocated to the individual's account under the ESOP are to be
voted. The individual has no direct power of disposition with respect to shares
allocated to the individual's account, except to request a distribution under
the terms of the ESOP. The ESOP recordkeeper has not completed the allocation as
of December 31, 2000, so the number of shares shown as allocated to an
individual's account are as of December 31, 1999.
(3) This column may include shares held in the name of, among others, a spouse,
minor children or certain other relatives sharing the same home as the director,
nominee, executive officer or 5% stockholder. In the cases of Messrs. Denny G.
Kelly, Hodge Patterson, III and Loy McGruder this column includes 221,321 shares
which are held by the ESOP and which have not been allocated to any participant
account. These individuals serve as members of the Administrative Committee of
the ESOP and have investment authority over the unallocated shares, but each
individual disclaims any beneficial ownership with respect to such unallocated
shares. In the case of Messrs. Kennon R. Patterson, Sr., Bishop K. Walker, Jr.,
Denny G. Kelly, Loy McGruder, Hodge Patterson, III and Kennon R. Patterson, Jr.
this column includes 42,578 shares held by Community Investments, a partnership
composed of eight individuals, of which each such individual is a partner.
(4) Includes 11,667 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(5) Includes 5,000 shares which could be acquired within 60 days following April
26, 2001 pursuant to stock options.
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(6) Includes 30,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options and 14,835 shares allocated to Mr.
Kelly's ESOP account as of December 31, 1999.
(7) Includes 11,667 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(8) Includes 11,667 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options and 9,327 shares allocated to Mr.
McGruder's ESOP account as of December 31, 1999.
(9) Includes 5,000 shares which could be acquired within 60 days following April
26, 2001 pursuant to stock options and 10,920 shares allocated to Mr. Hodge
Patterson's ESOP account as of December 31, 1999.
(10) Includes 40,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options and 36,111 shares allocated to Mr.
Kennon R. Patterson, Sr.'s ESOP account as of December 31, 1999.
(11) Includes 5,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options and 5,669 shares allocated to Mr.
Kennon R. Patterson, Jr.'s ESOP account as of December 31, 1999.
(12) Includes 5,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(13) Includes 13,667 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(14) Includes 62,200 shares held by Summerford Nursing Home and 14,000 shares
held by Summerford Drug. Mr. Summerford is a controlling shareholder of both
companies.
(15) Includes 5,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(16) Includes 15,000 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options and 13,324 shares allocated to Mr.
Walker's ESOP account as of December 31, 1999.
(17) Includes 13,667 shares which could be acquired within 60 days following
April 26, 2001 pursuant to stock options.
(18) The address of U.S. Trust Company, N.A. is 515 S. Flower Street, Suite
2700, Los Angeles, CA 90071-2291.
(19) Participants in the ESOP have the power to direct the ESOP trustee how to
vote shares allocated to their individual accounts. Any unallocated shares, and
any allocated shares with respect to which voting instructions are not received
from a participant, will be voted by the appropriate ESOP fiduciary in its
discretion.
(20) Information about this group was obtained from a Schedule 13D, and
amendments thereto, filed by such group with the SEC.
INDEPENDENT PUBLIC ACCOUNTANTS
The Board of Directors of the Company has engaged the accounting firm
of Dudley, Hopton-Jones, Sims & Freeman PLLP (Dudley, Hopton-Jones") as the
independent accountant of the Company and its subsidiaries for 2001. This firm
served as the Company's independent accountant from 1989 until May 2000.
On May 11, 2000, the Company's Board of Directors determined not to
retain Dudley, Hopton-Jones for the year ended December 31, 2000. During the two
fiscal years and the subsequent interim period preceding the change in
accountants, there were no disagreements between the Company and Dudley,
Hopton-Jones on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which, if not resolved to
the Satisfaction of Dudley, Hopton-Jones, would have caused Dudley, Hopton-Jones
to make reference to the subject matter of the disagreement in connection with
its report, nor had Dudley, Hopton-Jones in either of the preceding two years
issued an adverse opinion or disclaimer of opinion with respect to the Company's
financial statements or qualified or modified its opinion as to uncertainty,
audit scope or
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accounting principles. Dudley, Hopton-Jones submitted letters dated May 16 and
May 30, 2000 addressed to the Securities and Exchange Commission regarding the
Company's change in independent accountants which were filed as exhibits to the
Company's current report on Form 8-K dated May 16, 2000 and an amendment to that
current report on Form 8-K/A dated May 30, 2000.
On May 11, 2000 the Company's Board of Directors engaged KPMG LLP
("KPMG") as the Company's independent accountant for the year ending December
31, 2000. KPMG had been consulted by the Company in August 1999 to determine the
proper accounting treatment of certain loans which were made at the Ft. Payne,
Alabama Wal-Mart office of Community Bank. KPMG issued a report on the
appropriate application of generally accepted accounting principles dated
October 14, 1999 to the Company in connection with the consultation, which was
filed as an exhibit to the Company's current reports on Forms 8-K and an
amendment to that current report on Form 8-K/A dated May 16 and 30, 2000,
respectively. KPMG's report addressed three issues identified by the Company:
(1) If the loans were individually evaluated for impairment would the loans be
considered impaired under Statement of Financial Accounting Standards No. 114,
Accounting by Creditors for Impairment of a Loan ("Statement 114")?; (2) If the
loans are impaired loans, should the expected insurance proceeds under the
Company's fidelity bond be included in the loans' expected future cash flows in
measuring impairment under Statement 114?; (3) If the insurance proceeds should
not be included in measuring impairment, how should the Company record the
effect of the expected reimbursement? KPMG's conclusions, all of which are based
on the facts of the transaction provided by management, were as follows: Issue
(1) - The loans should be considered impaired according to Statement 114; Issue
(2) - The expected insurance proceeds should not be included in the loans'
expected future cash flows in measuring impairment; and Issue (3) - If
management expects to receive a full recovery of the loss from its insurance
carrier, the Company should recognize an asset equal to the expected proceeds,
and the related income statement impact should be included as a component of
non-interest income. The Company had consulted Dudley, Hopton-Jones about these
loans earlier in 1999. Dudley, Hopton-Jones' conclusion at that time was that
the loans should be netted against the insurance proceeds and recorded as a net
transaction. After reviewing KPMG's report, Dudley, Hopton-Jones agreed with the
conclusions of KPMG, which were substantially the same as Dudley, Hopton-Jones'
earlier conclusions.
On September 21, 2000, KPMG informed an officer of the Company that it
was no longer willing to serve as the Registrant's independent accountant for
the year ending December 31, 2000. KPMG cited concerns about the existence of
certain litigation and ongoing investigations, which were previously disclosed
in the Company's periodic reports filed with the Securities and Exchange
Commission during 2000, and the reassignment of the Company's acting chief
financial officer which KPMG perceived as a break in the Company's continuity of
management. During the two fiscal years and the subsequent interim period
preceding the change in accountants there were no disagreements between the
Company and KPMG on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure, which, if not resolved to
the satisfaction of KPMG, would have caused KPMG to make a reference to the
subject matter of the disagreement in connection with its reports, nor had KPMG
in either of the preceding two years issued an adverse opinion or disclaimer of
opinion with respect to the Company's financial statements or qualified or
modified its opinion as to uncertainty, audit scope or accounting principles.
KPMG had not issued any written opinions in connection with the Company's
financial statements. The Company provided to KPMG a copy of the disclosures
contained in the Company's current report on Form 8-K dated September 28, 2000
and requested a letter from KPMG addressed to the Securities and Exchange
Commission stating whether it agreed with the disclosures contained within the
report, and, if not, stating the respects in which it did not agree. The letter
from KPMG dated October 4, 2000 was filed as an exhibit to the Company's current
report on Form 8-K filed October 10, 2000.
In November 2000, the Company engaged Dudley, Hopton-Jones to review
the Company's interim financial statements included in the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 2000. On November 20,
2000, Dudley, Hopton-Jones provided the Company with a written report on such
review, which stated that, based on its review, Dudley, Hopton-Jones was not
aware of any material modifications that should be made to such interim
financial statements for them to be in conformity with generally accepted
accounting principles. A copy of such written report was filed as an exhibit to
the Company's current report on Form 8-K filed February 15, 2001. The Company
did not consult with KPMG regarding such review.
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27
On February 8, 2001, the Company engaged Dudley, Hopton-Jones as the
Registrant's independent accountant for the year ended December 31, 2000. As
stated above, Dudley, Hopton-Jones was also engaged to serve as the Company's
independent accountant for 2001.
A representative from Dudley, Hopton-Jones is expected to attend the
Annual Meeting, have an opportunity to make a statement and be available to
respond to appropriate questions.
AUDIT FEES
Dudley, Hopton-Jones has billed the Company a total of $165,550 for
professional services rendered for the audit of the Company's financial
statements as of December 31, 2000 and for the reviews of the financial
statements included in the Company's Quarterly Reports on Form 10-Q filed with
the Securities and Exchange Commission during 2000. Dudley, Hopton-Jones
estimates that it will bill the Company an additional $47,000 in connection
with the audit of the Company's financial statements as of December 31, 2000.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES
For the fiscal year ended December 31, 2000, there were no fees billed
by Dudley, Hopton-Jones for professional services rendered for information
technology services relating to financial information systems design and
implementation.
ALL OTHER FEES
Dudley, Hopton-Jones has billed the Company a total of $14,200 for
services rendered other than the services described above under "Audit Fees" and
"Financial Information Systems Design and Implementation Fees" for the fiscal
year ended December 31, 2000. The Company's Audit Committee has determined that
Dudley, Hopton-Jones' provision of such services is compatible with maintaining
its independence.
VOTING PROCEDURES
Under the Delaware General Corporation Law ("DGCL") and the Company's
Bylaws, the presence in person or by proxy of a majority of the outstanding
shares of Common Stock is necessary to constitute a quorum of the stockholders
to take action at the Annual Meeting. For these purposes, shares which are
present or represented by a proxy at the Annual Meeting will be counted for
quorum purposes regardless of whether the holder of the shares or the proxy
abstains from voting on any particular matter or whether a broker with
discretionary authority fails to exercise its discretionary voting authority
with respect to any particular matter. Under the DGCL, once a quorum of the
stockholders is established, (i) the directors standing for election must be
elected by a plurality of the shares of Common Stock present, in person or by
proxy, at the Annual Meeting, and (ii) any other action to be taken must be
approved by the vote of the holders of a majority of the shares of Common Stock
present, in person or by proxy, at the Annual Meeting, unless otherwise provided
in the Company's Certificate of Incorporation or Bylaws. Abstentions will in
effect count as votes against approval of actions to be taken at the Annual
Meeting other than election of directors. Broker non-votes will not have an
effect on the outcome of the election of directors or approval of any other
action the Company is aware is to be taken at the Annual Meeting.
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MISCELLANEOUS INFORMATION
STOCKHOLDER PROPOSALS
Any proposals by stockholders intended to be presented at the Company's
2002 annual meeting of stockholders, if to be included in the Company's proxy
materials for that annual meeting, must be received in written form at the
Company's executive offices on or before January 15, 2002, and must otherwise be
in compliance with Rule 14a-8 under the Exchange Act and other applicable legal
requirements.
NOMINATIONS FOR DIRECTORS AND OTHER BUSINESS
The Company's Bylaws require stockholders to follow certain procedures
in order to submit nominations of persons for election to the Board of Directors
or to propose other business to be acted upon at the Company's 2002 annual
meeting of stockholders. The Company's Nominating Committee will consider
nominations of persons for election to the Board of Directors that are timely
and otherwise submitted in accordance with the following. The stockholder must
give notice in writing of the nomination or other business to the Corporate
Secretary of the Company at its office at 68149 Highway 231 South, P.O. Box
1000, Blountsville, Alabama 35031, not later than the close of business on March
9, 2002, nor earlier than February 7, 2002. If the date of the annual meeting is
more than 30 days before or more than 60 days after June 7, 2002, however,
notice to be timely must be delivered not earlier than the close of business on
the 120th day prior to such annual meeting and not later than the close of
business on the later of the 90th day prior to the annual meeting or the 10th
day following the day on which public announcement of the date of such meeting
is first made by the Company. The stockholder must be a stockholder of record at
the time the notice is given and must be entitled to vote at such meeting. The
stockholder's notice must set forth (a) as to each nominee, all information
relating to that person that is required to be disclosed in solicitations of
proxies for election of directors in an election contest, or is otherwise
required, in each case pursuant to Regulation 14A under the Exchange Act and
Rule 14a-4 thereunder (including the nominee's written consent to being named in
the proxy statement as a nominee and to serving as a director if elected), (b)
as to any other business that the stockholder proposes to bring before the
annual meeting, a brief description of the business desired to be brought before
the annual meeting, the reasons for conducting such business at the annual
meeting and any material interest in such business of such stockholder and the
beneficial owner, if any, on whose behalf the nomination or proposal is made,
and (c) as to the stockholder giving the notice and the beneficial owner, if
any, on whose behalf the nomination is made, the name and address of the
stockholder, as they appear on the Company's books, and of such beneficial
owner, and the number and class of shares of the Company owned of record and
beneficially by such stockholder and such beneficial owner.
The individuals named as proxies on the proxy card for the Company's
2002 annual meeting of stockholders will be entitled to exercise their
discretionary authority in voting proxies on any stockholder proposal that is
not included in the Company's proxy statement for the 2002 annual meeting of
stockholders, unless the Company receives notice of the matter(s) to be proposed
no later than March 9 2002. Even if proper notice is received within such time
period, the individuals named as proxies on the proxy card for the meeting may
nevertheless exercise their discretionary authority with respect to such
matter(s) by advising stockholders of the proposal(s) and how the proxies intend
to exercise their discretion to vote on the matter(s), unless the stockholder
making the proposal(s) complies with Rule 14a-4(c)(2) under the Exchange Act.
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PROXY CARD
COMMUNITY BANCSHARES, INC.
PROXY FOR 2000 ANNUAL MEETING OF STOCKHOLDERS
SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints Bishop K. Walker, Jr. and William H.
Caughran, Jr., and either of them, as proxies, with full power of substitution
and re-substitution, to vote all of the shares of Common Stock which the
undersigned is entitled to vote at the Annual Meeting of Stockholders of
Community Bancshares, Inc. (the "Company") to be held at 10:00 a.m., Central
Time, on Thursday, June 7, 2001, in the Orchestra Rehearsal - North Hall at the
Von Braun Civic Center, 700 Monroe Street, Huntsville, Alabama, and at any
adjournment thereof (the "Annual Meeting").
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE IN ACCORDANCE
WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS UPON SUCH OTHER MATTERS AS
MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
THIS PROXY IS BEING SOLICITED BY THE BOARD OF DIRECTORS AND WILL BE
VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, THE ABOVE NAMED PROXIES WILL
VOTE (1) FOR THE ELECTION AS CLASS II DIRECTORS OF THE NOMINEES NAMED ON THIS
CARD, AND (2) IN ACCORDANCE WITH THE RECOMMENDATIONS OF THE BOARD OF DIRECTORS
ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING.
1. Election of Class II Directors Nominees: Glynn Debter, John J. Lewis,
Jr., Loy McGruder and
Bishop K. Walker, Jr.
[ ] FOR all nominees listed (except as marked to the contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed
[ ] INSTRUCTION: To withhold authority to vote for any individual nominee,
write his name or their names in the following
space:___________________________________________________________
NOTICE: IF THIS PROXY IS EXECUTED IN SUCH MANNER AS NOT TO WITHHOLD AUTHORITY TO
VOTE FOR THE ELECTION OF ANY NOMINEE, IT SHALL BE DEEMED TO GRANT SUCH
AUTHORITY.
Dated: , 2001
-------------------------------
Signature:
----------------------------
Signature:
----------------------------
(if held jointly)
IMPORTANT: Please sign exactly as your name or names appear on this proxy card
and mail promptly in the enclosed envelope. If you sign as an agent or in any
other capacity, please state the capacity in which you sign.