EXHIBIT 10.36

 

COMMUNITY BANCSHARES, INC.

 

TO

 

COMMUNITY BANCSHARES,

INC. EMPLOYEE STOCK

OWNERSHIP TRUST

 

and

 

COMMUNITY BANCSHARES,

INC. EMPLOYEE STOCK

OWNERSHIP PLAN

 

February 11, 2004

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$1,735,476.04

 

February 11, 2004

   

Blountsville, Alabama

 

PROMISSORY NOTE

 

(Non Recourse)

 

THIS PROMISSORY NOTE IS A

 

REFINANCING OF THE OBLIGATIONS OF BORROWER UNDER A

 

$2,963,841.91 PROMISSORY NOTE DATED DECEMBER 1, 1998.

 

FOR VALUE RECEIVED, the undersigned (herein, along with any other maker,
endorser, surety or guarantor hereof, shall be called “Borrower”), promises to
pay, without recourse, to the order of COMMUNITY BANCSHARES, INC. (hereinafter
along with its successors and assigns called ‘Lender’), at Lender’s office or at
such other place as Lender may from time to time designate, without grace and in
lawful money of the United States of America, the principal sum of One Million
Seven Hundred and Thirty-Five Thousand Four Hundred Seventy-Six Dollars and Four
Cents ($1,735,476.04), together with interest and charges thereon (hereinafter
‘Obligation’), all as evidenced by the records of Lender.

 

I. INTEREST:

 

Borrower agrees to pay interest on the unpaid principal Obligation, in
accordance with the terms hereof.

 

Interest on the unpaid principal Obligation shall be computed from the date
hereof at a rate equal to the New York Prime Rate (the “Prime Rate”) as
published in The Wall Street Journal, but in no event shall the interest rate
exceed the maximum amount permitted by law. As of this date, the Prime Rate is
4.0%, making the interest rate accruing on the unpaid principal Obligation as of
this date, 4.0%

 

The Prime Rate may change as often as daily. Any change in the interest rate
resulting from a change in the Prime Rate shall take effect upon the change in
the Prime Rate.

 

Interest from date on the outstanding unpaid principal balance shall be computed
on the basis of a 365 day year by multiplying the product of the principal
amount outstanding and the applicable rate by the actual amount of days elapsed
and dividing by 365.

 

II. PRINCIPAL AND INTEREST PAYMENTS

 

The Borrower promises and agrees to pay principal and interest as follows:

 

A. Eighty (80) consecutive monthly principal and interest installments of
$24,496.85 followed by

 

B. One (1) final installment equal to all of the principal of and interest on
the Obligation then remaining unpaid.

 

If principal and interest are payable in installments, then the first
installment will be due and payable on March 16, 2004 and the remaining
installments will be due and payable on the same day of every month thereafter
until both the principal and interest on this Obligation has been paid in full,
or this note matures.

 

Maturity Date: Any provisions of this Note to the contrary notwithstanding, all
outstanding and unpaid principal indebtedness evidenced hereby, plus accrued
interest, shall be due and payable on November 16, 2010, which shall be the
maturity date of this Note.

 

Effect of Variable Rate on Monthly Payments: The monthly payment on this
Obligation will increase or decrease, at the Lender’s discretion, pursuant to a
change in the Prime Rate. The fixed monthly installment

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has been calculated based upon a, eighty-one (81) month amortization at a 4%
annual rate. In the event of a change in the Prime Rate, the Lender will review
the amount of the monthly payment, and may, at Lender’s discretion recalculate
the amount of the monthly payment and so notify Borrower, who shall thenceforth
make monthly payments in the amount so indicated. The ability of Lender to make
changes in the amount of the monthly payment can occur upon each change of the
Prime Rate. In the event Lender does not change the amount of the monthly
payment when the Prime Rate changes or any time thereafter, then the final
payment due on this Obligation will increase.

 

Application of Payments: Unless otherwise elected by Lender, all payments shall
be applied as billed by Lender, and if not billed, then first to interest and
then to principal.

 

Prepayment: The Borrower reserves the right, privilege, and option to prepay the
principal indebtedness evidenced by this Note, or any part thereof, at any time
without penalty, and interest shall cease to accrue on the amount or amounts of
principal so prepaid. Any such prepayment shall be applied to unpaid principal
installments hereunder in the inverse order of the maturities thereof. No
partial principal prepayment shall defer the due date of any installment of
principal and interest due hereunder.

 

SECURITY:

 

This Note and the Obligation is secured (in accordance with the terms of a
Pledge Agreement from Borrower to Lender dated this date) solely by the grant of
a first lien security interest in 123,111 shares of the common stock of
COMMUNITY BANCSHARES, INC. owned by North Star Trust Company as Trustee (the
“Trustee”) of the COMMUNITY BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN (the
“Plan”) and held by the COMMUNITY BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP
TRUST (the “Trust”). Lender agrees to release and deliver to the Trustee for the
Borrower that number of common stock shares pledged hereunder as required by 26
CFR § 54.4975-7(b)(8)(i) taking into account both principal and interest.

 

IV. EVENTS OF DEFAULT AND DEFAULT:

 

Borrower’s failure to pay Any installment of principal and interest when due
shall constitute an Event of Default hereunder, but only with respect to the
principal and interest actually in arrears.

 

V. PURPOSE OF LOAN:

 

This Note evidences refinancing of existing indebtedness incurred by Borrower
for acquisition of COMMUNITY BANCSHARES, INC.’s stock in order to continue to be
able to fund the COMMUNITY BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN, and
Borrower agrees to use the proceeds of this loan for only those purposes.
Notwithstanding the foregoing, the Borrower hereby represents and warrants to
Lender that the money which is the subject of the credit transaction is not for
personal, family, household, or agricultural purposes within the meaning of the
Federal Truth-in- Lending Act or Regulation Z of the Federal Reserve Board
issued pursuant thereto, and that said extension of credit is for business or
commercial purposes (other than agricultural purposes).

 

VI. NON RECOURSE OBLIGATION:

 

Notwithstanding any provision to the contrary contained herein or in the Pledge
Agreement, it is hereby expressly understood and agreed that, in the event
Lender shall at any time take action to enforce the collection of the
Obligation, Lender shall not seek a money judgment against the Trust or the Plan
or the Trustee for any sum promised to be paid herein or in the Pledge
Agreement, and Lender shall never institute suit, action, claim, at law or in
equity against the Plan, the Trust or the Trustee, or collect from them
personally any such sums; and if, as a result of sale of collateral described in
the Pledge Agreement, a lesser sum is realized therefrom than the amount then
due and owing under this Note, the Lender shall never institute any action,
suit, claim or demand at law or in equity against the Trust, the Plan, or the
Trustee. This Note shall be without recourse to the Plan, the Trust and the
Trustee for any deficiency and

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the Lender’s rights are limited solely to the stock pledged herein and any
earning attributable to such collateral. Furthermore, notwithstanding anything
herein to the contrary, all pledges, liability and collateral of the Plan for
the indebtedness represented by this Note, are subject to and limited by, 26 CFR
§ 54.4975-7(b) and in the event of a default upon indebtedness represented
thereby, the value of the trust assets transferred in satisfaction of the loan
shall not exceed the amount of Obligation.

 

VII. COMPLIANCE WITH ESOP PROVISIONS:

 

It is expressly acknowledged and agreed that this Note and the Pledge Agreement
and each provision hereof is intended strictly to comply in all respects and to
be construed in accordance with and be subject to the provisions of the United
States Code and the regulations and regulatory interpretations thereunder
relating to employee stock ownership plans and loans thereto (the “ESOP
Provisions”), including without limitation Sections 401 & 4975 of the Internal
Revenue Code of 1986, as amended, and 26 C.F.R. § 54.4975-7 and 29 C.F.R. §
2550-408b-3 and that the Obligation evidenced hereby qualifies as an ‘exempt
loan” and a “stock acquisition loan’ under the ESOP Provisions, and this Note
shall be construed and be deemed to have been amended to the extent necessary to
comply with the ESOP Provisions. Without limiting the generality of the
foregoing, it is expressly acknowledged and agreed that the Lender shall release
collateral pledged hereunder at least as rapidly as required by 26 C.F.R. §
54.4975-7(b)(8)(i) as the Obligation is paid.

 

VIII. WAIVERS, COST OF COLLECTION. MISCELLANEOUS:

 

The Borrower hereby agrees to pay all costs of collecting or attempting to
collect this Note and the Obligation, including court cost, expenses of
collection, and including a reasonable attorney’s fee, if the same be collected
by an attorney consulted with reference to suit or otherwise.

 

The Borrower and all sureties, endorser and guarantors of this Note, to the
extent not prohibited by applicable law or regulation, hereby jointly and
severally, (a) waive as to this debt or any renewal, modification, extension or
refinancing thereof all rights of exemption under the Constitution or laws of
Alabama or any other state as to real or personal property; (b) waive demand,
presentment, notice of non-payment, protest, notice of protest, notice of
dishonor, all other notice, suit against any party, diligence in collection of
this note, the release of any party primarily or secondarily liable thereon or
any collateral pledged as security, and all other requirements necessary to hold
Borrower liable hereunder; and (c) agree and consent to any one of more
extensions or postponements of time of payment of this Note or any other
indulgences with respect hereto, without notice thereof to any of them, and
without release of liability as to any Borrower or any of them.

 

Borrower agrees to provide Lender, upon request, any financial statements or
information Lender may deem necessary; and Borrower warrants that all financial
statements and information so provided shall be accurate, correct, and complete.

 

Lender’s books and records showing the account between us shall be admissible in
evidence in any action or proceeding, shall be binding upon us for the purposes
of establishing the items therein set forth and shall constitute prima fade
proof thereof.

 

The Lender shall not by any act, delay, omission or otherwise be deemed to have
waived any of its rights or remedies, and no waiver of any kind shall be valid
against the Lender; unless in writing and signed by the Lender. All rights and
remedies hereunder and under any statute or rule of law shall be cumulative and
may be exercised successively or concurrently. This note shall be governed by
and construed in accordance with the laws of the State of Alabama. BORROWER
CONSENTS TO THIE JURISDICTION OF ANY LOCAL, STATE OR FEDERAL COURT LOCATED IN B
ALABAMA AND WAIVES ANY OBJECTION WE MAY HAVE BASED UPON IMPROPER VENUE OR FORUM
NON CONVENIENS OR TO THE CONDUCT OF ANY PROCEEDINGS IN ANY SUCH COURT. IN ANY
JUDICIAL PROCEEDING BROUGHT WITH RESPECT TO, RELATING TO, OR PERTAINING TO THIS
NOTE, THE LOAN DOCUMENTS, THE OBLIGATION, THE ADMINISTRATION, HANDLING OR
COLLECTION OF THE OBLIGATION, OR THE ACTIONS OF LENDER, THE BORROWER WAIVES ANY
RIGHT TO TRIAL BY JURY. Borrower covenants and agrees that Borrower will furnish

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Lender a prompt written notice of any action or inaction by Lender or any of
Lender’s agents or attorneys in connection with this Note, the Loan Documents,
or the advances or obligations thereunder, that may be actionable against
Lender, Lender’s agents, Lender’s attorneys, or a defense to payment of the
Borrower’s obligations to Lender for any reason, including, but not limited to,
commission of a tort or violation of any contractual duty or duty implied by
law. Borrower further agrees that, unless this notice is duly given as promptly
as possible (and in any event within ten (10) days) after Borrower has knowledge
or with the exercise of reasonable diligence should have had knowledge of any
such action or inaction, Borrower will not assert and shall be deemed to have
waived, any claim or defense arising therefrom.

 

The Borrower understands that the Lender may from time to time enter into a
participation agreement or agreements with one or more participants pursuant to
which such participant or participants shall be given participation in advances
made under this note and that such participants may from time to time similarly
grant to other participants subparticipations in such advances.

 

Singular or plural words used herein shall be taken to refer to the undersigned,
whether one or more than one, and this Note shall bind each of the undersigned,
jointly and severally.

 

If any provision of this Note is or becomes invalid or unenforceable, the
remaining provisions shall not be affected thereby.

 

Any change or modification to this Note must be in writing and signed by both
Lender and Borrower.

 

IX. EXECUTION:

 

This note has been executed by the Borrower without condition that anyone else
should sign or become bound hereunder and without any other conditions whatever
being made. The provisions hereof are binding on the successors and assigns of
the Borrower and shall inure to the benefit of the Lender and its successors and
assigns, and every subsequent holder of this Note. Borrower acknowledges receipt
of a completed copy hereof, and of any other instrument executed by Borrower
before this transaction is consummated.

 

IN WITNESS WTHEREOF, we have caused this note to be executed, sealed and
delivered in Blountsville, Alabama on the 11th day of February, 2004.

 

CAUTION — IT IS IMPORTANT THAT YOU THOROUGHLY

 

READ THIS CONTRACT BEFORE YOU SIGN IT.

 

COMMUNITY BANCSHARES, INC. EMPLOYEE

STOCK OWNERSHIP PLAN

By: North Star Trust Company, As Trustee

By:

 

/s/ John G. Hommel

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Its

 

Senior Vice President

By:

 

Its Administrative Committee

By:

 

/s/ Patrick M. Frawley

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Patrick M. Frawley, on behalf of the

Administrative Committee

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PLEDGE AGREEMENT

 

THIS PLEDGE AGREEMENT REPRESENTS A TRANSFER

 

OF COLLATERAL PLEDGED PURSUANT TO A PLEDGE

 

AGREEMENT DATED DECEMBER 1, 1998.

 

To induce COMMUNITY BANCSHARES, INC. (hereinafter referred to as Lender) to make
a loan to COMMUNITY BANCSHARES, INC.. EMPLOYEE STOCK OWNERSHIP TRUST and
COMMUNITY BANCSHARES, INC. EMPLOYEE STOCK OWNERSHIP PLAN (hereinafter jointly,
severally and collectively referred to as Borrower) the undersigned does
herewith deposit, transfer, assign, convey and pledge to Lender as collateral
security to the Obligation cited herein the following Stock Certificates and
Securities belonging to the undersigned, free of any claim, encumbrances, lien,
or prior assignments, to secure the obligations evidenced by that certain
Promissory Note dated this day, in the amount of $1,735,476.04, executed by
Borrower (hereinafter “Loan” or ‘Obligation’), and all renewals and
modifications thereof, to wit:

 

One Hundred and Twenty-Three Thousand One Hundred Eleven (123,111) shares of the
common stock of COMMUNITY BANCSHARES, INC., along with all stock dividends,
stock splits, and proceeds (whether in cash or in kind) of any of the foregoing
or pertaining to the foregoing.

 

(all of the above, along with all stock dividends, stock splits and proceeds,
hereinafter referred to as “Securities”)

 

It is understood that these Securities hereby pledged to Lender as Collateral
for the Loan shall not be sold or liquidated, without the consent of Lender,
until said Loan, principal and interest, and all other obligations of the
Borrower to Lender have been paid in full, provided however, it is expressly
acknowledged and agreed that this agreement and each provision hereof is
intended strictly to comply in all respects and to be construed in accordance
with and be subject to the provisions of the United States Code and the
regulations and regulatory interpretations thereunder relating to employee stock
ownership plans and loans thereto (the “ESOP Provisions”), including without
limitation Sections 401 & 4975 of the Internal Revenue Code of 1986, as amended,
and 26 C.F.R. 54.4975-7 and 29 C.F.R. § 2550-408b and that the Loan secured
hereby qualifies as an “exempt loan” and a “stock acquisition loan” under the
ESOP Provisions. This agreement shall be construed and be deemed to have been
amended to the extent necessary to comply with the ESOP Provisions. Without
limiting the generality of the foregoing, it is expressly acknowledged and
agreed that the Lender shall release collateral pledged hereunder as required by
26 C.F.R. § 54.4975-7(b)(8)(i) as the Loan is paid.

 

Upon the failure of the Borrower to pay the Loan according to the terms of the
Note, Loan, or other document evidencing the Loan, or upon a default in said
obligation as defined in the Note, Loan documents, or other documents evidencing
the Loan, then the Lender may immediately without advertisement, and without
notice to the undersigned, sell Securities in an amount not to exceed the amount
of principal and interest in arrears at private sale or broker’s board, or
otherwise, or may, without notice, discount, collect compound, compromise,
settle, manage, and turn the same into cash according to opportunity, at the
discretion of Lender and apply the proceeds thereof as far as needed toward the
payment of said amounts, together with interest and all expenses (legal or
otherwise) for sale or collection. If any such sale be at broker’s board or at
public auction, Lender may itself be a purchaser at such sale free from any
right of equity of redemption of the undersigned, such right and equity being
hereby waived and released.

 

The undersigned consents to and hereby waives any and all notice of the making
of any modification, amendment, renewal or extension of any note or agreement
evidencing the Obligation, or any supplement thereto; the making of any other
agreement; the incurring of any other debts or obligations by the Borrower to
Lender or others and/or of the pledge, sale, transfer, and/or assignment
thereof; the granting of security interests therein to Lender; the granting to
the Borrower or to any obligor or debtor of any obligation or debts assigned to
Lender, of any extensions of time to make any payments to perform or discharge
any Obligation (or waive such performances and/or discharge); the compounding,
compromising, and/or adjusting of any claim against the Borrower or any such
obligor or debtor; the accepting or releasing of any security either of Borrower
or of any third party; and all other notices which the undersigned is entitled.

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No act on Lender’s part and nothing other than the full payment, performances,
and discharge of all Obligations shall operate to discharge or satisfy the
liability of the undersigned hereunder. The liability of the undersigned
hereunder is primary, direct and unconditional and may be enforced without first
resorting to any rights or remedies Bank may have against the Borrower, any
other person, any other entity, or against any security.

 

The undersigned agrees that this Pledge Agreement, and all Obligations secured
hereby, shall remain in full force and effect and in its original tenor at all
times hereinafter during the term hereof, notwithstanding i) the
unenforceability, non-existence invalidity, or non-perfection of the Obligation,
or any instrument or agreement guaranteeing or securing the Obligation, or of
any lien, pledge, assignment, security interest or conveyance given as security
for the Obligation; ii) the failure of Lender to pursue any collateral securing
the Obligation or the failure to file a claim against the Borrower or any other
guarantor of the Obligation in any proceeding pertaining to the death,
insolvency, or bankruptcy of such person or entity; or iii) any action or
undertakings by, or against, Lender or Borrower or concerning any collateral
which is secured, pledged or assigned to the Lender in connection with the
obligation in any proceeding in the United States Bankruptcy Court; including
without limitation, matters relating to valuation of collateral, election or
imposition of secured or unsecured claim status upon claims by the Lender
pursuant to any Chapter of the Bankruptcy Code, as may be applicable from time
to time.

 

This pledge shall be binding upon the undersigned and the heirs, executors, and
administrators of the undersigned and shall inure to the benefit of Lender, its
successors, and assigns

 

This instrument shall be construed and given effect according to the laws of the
State of Alabama, the applicable provisions of ERISA, the Internal Revenue Code,
and other applicable federal laws.

 

EXECUTED at Blountsville, Alabama, this 11th day of February, 2004.

 

COMMUNITY BANCSHARES, INC. EMPLOYEE STOCK

OWNERSHIP PLAN and COMMUNITY BANCSHARES,

INC. EMPLOYEE STOCK OWNERSHIP TRUST

By:

 

North Star Trust Company, As Trustee

By:

 

/s/ John G. Hommel

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Its

 

Senior Vice President

By:

 

Its Administrative Committee

By:

 

/s/ Patrick M. Frawley

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Patrick M. Frawley, on behalf of the

Administrative Committee