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                                                                    EXHIBIT 10.2

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                                  EXHIBIT 10.2

                               GUARANTEE AGREEMENT

                           COMMUNITY BANCSHARES, INC.

                           DATED AS OF MARCH 23, 2000

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                                Table of Contents

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ARTICLE I
DEFINITIONS AND INTERPRETATION

   SECTION 1.1  Definitions and Interpretation................................................1

ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE

   SECTION 2.1  Powers and Duties of the Guarantee Trustee....................................4
   SECTION 2.2  Certain Rights of Guarantee Trustee...........................................5
   SECTION 2.3  Not Responsible for Recitals or Issuance of Guarantee.........................7
   SECTION 2.4  Events of Default; Waiver.....................................................7
   SECTION 2.5  Events of Default; Notice.....................................................8

ARTICLE III
GUARANTEE TRUSTEE

   SECTION 3.1  Guarantee Trustee; Eligibility................................................8
   SECTION 3.2  Appointment, Removal and Resignation of Guarantee Trustee.....................9

ARTICLE IV
GUARANTEE

   SECTION 4.1  Guarantee.....................................................................9
   SECTION 4.2  Waiver of Notice and Demand..................................................10
   SECTION 4.3  Obligations Not Affected.....................................................10
   SECTION 4.4  Rights of Holders............................................................11
   SECTION 4.5  Guarantee of Payment.........................................................11
   SECTION 4.6  Subrogation..................................................................11
   SECTION 4.7  Independent Obligations......................................................12
   SECTION 4.8  Enforcement by a Beneficiary.................................................12

ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION

   SECTION 5.1  Limitation of Transactions...................................................12
   SECTION 5.2  Ranking......................................................................13

ARTICLE VI
TERMINATION

   SECTION 6.1  Termination..................................................................13

ARTICLE VII
INDEMNIFICATION

   SECTION 7.1  Exculpation..................................................................13
   SECTION 7.2  Indemnification..............................................................14
   SECTION 7.3  Compensation; Reimbursement of Expenses......................................15
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ARTICLE VIII
MISCELLANEOUS

   SECTION 8.1  Successors and Assigns.......................................................15
   SECTION 8.2  Amendments...................................................................16
   SECTION 8.3  Notices......................................................................16
   SECTION 8.4  Benefit......................................................................16
   SECTION 8.5  Governing Law................................................................17
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GUARANTEE AGREEMENT

                  This GUARANTEE AGREEMENT (the "Guarantee"), dated as of March
23, 2000, is executed and delivered by Community Bancshares, Inc., a bank
holding company incorporated in Delaware (the "Guarantor"), and The Bank of New
York, as trustee (the "Guarantee Trustee"), for the benefit of the Holders (as
defined herein) from time to time of the Capital Securities (as defined herein)
of Community (AL) Capital Trust I, a Delaware statutory business trust (the
"Issuer").

                  WHEREAS, pursuant to an Amended and Restated Declaration of
Trust (the "Declaration"), dated as of March 23, 2000, among the trustees named
therein of the Issuer, Community Bancshares, Inc., as sponsor, and the holders
from time to time of undivided beneficial interests in the assets of the Issuer,
the Issuer is issuing on the date hereof securities, having an aggregate
liquidation amount of up to $10,000,000, designated the Fixed Rate Capital Trust
Pass-through Securities(R) (the "Capital Securities");

                  WHEREAS, as incentive for the Holders to purchase the Capital
Securities, the Guarantor desires irrevocably and unconditionally to agree, to
the extent set forth in this Guarantee, to pay to the Holders of Capital
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein; and

                  NOW, THEREFORE, in consideration of the purchase by each
Holder of the Capital Securities, which purchase the Guarantor hereby agrees
shall benefit the Guarantor, the Guarantor executes and delivers this Guarantee
for the benefit of the Holders.

ARTICLE I
DEFINITIONS AND INTERPRETATION

SECTION 1.1       Definitions and Interpretation

                  In this Guarantee, unless the context otherwise requires:

                  (a)      capitalized terms used in this Guarantee but not
         defined in the preamble above have the respective meanings assigned to
         them in this Section 1.1;

                  (b)      a term defined anywhere in this Guarantee has the
         same meaning throughout;

                  (c)      all references to "the Guarantee" or "this Guarantee"
         are to this Guarantee as modified, supplemented or amended from time to
         time;

                  (d)      all references in this Guarantee to Articles and
         Sections are to Articles and Sections of this Guarantee, unless
         otherwise specified;

                  (e)      terms defined in the Declaration as at the date of
         execution of this Guarantee have the same meanings when used in this
         Guarantee, unless otherwise defined in this Guarantee or unless the
         context otherwise requires; and

                  (f)      a reference to the singular includes the plural and
         vice versa.

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                  "Beneficiaries" means any Person to whom the Trust is or
hereafter becomes indebted or liable.

                  "Corporate Trust Office" means the office of the Guarantee
Trustee at which the corporate trust business of the Guarantee Trustee shall, at
any particular time, be principally administered, which office at the date of
execution of this Guarantee Agreement is located at 101 Barclay Street, Floor
21W, New York, NY 10286.

                  "Covered Person" means any Holder of Capital Securities.

                  "Debentures" means the junior subordinated debentures of
Community Bancshares, Inc., designated the 10 7/8% Junior Subordinated
Deferrable Interest Debentures due 2030, held by the Institutional Trustee (as
defined in the Declaration) of the Issuer.

                  "Declaration Event of Default" means an "Event of Default" as
defined in the Declaration.

                  "Event of Default" has the meaning set forth in Section
2.4.

                  "Guarantee Payments" means the following payments or
distributions, without duplication, with respect to the Capital Securities, to
the extent not paid or made by the Issuer: (i) any accrued and unpaid
Distributions (as defined in the Declaration) which are required to be paid on
such Capital Securities to the extent the Issuer shall have funds available
therefor, (ii) the Redemption Price (as defined in the Indenture) to the extent
the Issuer has funds available therefor, with respect to any Capital Securities
called for redemption by the Issuer, (iii) the Special Redemption Price (as
defined in the Indenture) to the extent the Issuer has funds available therefor,
with respect to Capital Securities redeemed upon the occurrence of a Special
Event (as defined in the Indenture), and (iv) upon a voluntary or involuntary
liquidation, dissolution, winding-up or termination of the Issuer (other than in
connection with the distribution of Debentures to the Holders of the Capital
Securities in exchange therefor as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Capital Securities to the date of payment, to the extent
the Issuer shall have funds available therefor, and (b) the amount of assets of
the Issuer remaining available for distribution to Holders in liquidation of the
Issuer (in either case, the "Liquidation Distribution").

                  "Guarantee Trustee" means The Bank of New York, until a
Successor Guarantee Trustee has been appointed and has accepted such appointment
pursuant to the terms of this Guarantee and thereafter means each such Successor
Guarantee Trustee.

                  "Holder" shall mean any holder, as registered on the books and
records of the Issuer, of any Capital Securities; provided, however, that, in
determining whether the holders of the requisite percentage of Capital
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any Affiliate of the Guarantor.

                  "Indemnified Person" means the Guarantee Trustee, any
Affiliate of the Guarantee Trustee, or any officers, directors, shareholders,
members, partners, employees, representatives, nominees, custodians or agents of
the Guarantee Trustee.

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                  "Indenture" means the Indenture dated as of March 23, 2000,
between the Guarantor and The Bank of New York, not in its individual capacity
but solely as trustee, and any indenture supplemental thereto pursuant to which
the Debentures are to be issued to the Institutional Trustee of the Issuer.

                  "Liquidation Distribution" has the meaning set forth in the
definition of "Guarantee Payments" herein.

                  "Majority in liquidation amount of the Capital Securities"
means Holder(s) of outstanding Capital Securities, voting together as a class,
but separately from the holders of Common Securities, of more than 50% of the
aggregate liquidation amount (including the stated amount that would be paid on
redemption, liquidation or otherwise, plus accrued and unpaid Distributions to
the date upon which the voting percentages are determined) of all Capital
Securities then outstanding.

                  "Obligations" means any costs, expenses or liabilities (but
not including liabilities related to taxes) of the Trust, other than obligations
of the Trust to pay to holders of any Trust Securities the amounts due such
holders pursuant to the terms of the Trust Securities.

                  "Officer's Certificate" means, with respect to any Person, a
certificate signed by one Authorized Officer of such Person. Any Officer's
Certificate delivered with respect to compliance with a condition or covenant
provided for in this Guarantee shall include:

                  (a)      a statement that each officer signing the Officer's
         Certificate has read the covenant or condition and the definitions
         relating thereto;

                  (b)      a brief statement of the nature and scope of the
         examination or investigation undertaken by each officer in rendering
         the Officer's Certificate;

                  (c)      a statement that each such officer has made such
         examination or investigation as, in such officer's opinion, is
         necessary to enable such officer to express an informed opinion as to
         whether or not such covenant or condition has been complied with; and

                  (d)      a statement as to whether, in the opinion of each
         such officer, such condition or covenant has been complied with.

                  "Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.

                  "Redemption Price" has the meaning set forth in the
definition of "Guarantee Payments" herein.

                  "Responsible Officer" means, with respect to the Guarantee
Trustee, any officer within the Corporate Trust Office of the Guarantee Trustee,
including any Vice President, Assistant Vice President, Secretary, Assistant
Secretary or any other officer of the Guarantee Trustee customarily performing
functions similar to those performed by any of the above

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designated officers and also, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of that
officer's knowledge of and familiarity with the particular subject.

                  "Successor Guarantee Trustee" means a successor Guarantee
Trustee possessing the qualifications to act as Guarantee Trustee under Section
3.1.

                  "Trust Securities" means the Common Securities and the Capital
Securities.

ARTICLE II
POWERS, DUTIES AND RIGHTS OF
GUARANTEE TRUSTEE

SECTION  2.1      Powers and Duties of the Guarantee Trustee

                  (a)      This Guarantee shall be held by the Guarantee Trustee
         for the benefit of the Holders of the Capital Securities, and the
         Guarantee Trustee shall not transfer this Guarantee to any Person
         except a Holder of Capital Securities exercising his or her rights
         pursuant to Section 4.4(b) or to a Successor Guarantee Trustee on
         acceptance by such Successor Guarantee Trustee of its appointment to
         act as Successor Guarantee Trustee. The right, title and interest of
         the Guarantee Trustee shall automatically vest in any Successor
         Guarantee Trustee, and such vesting and cessation of title shall be
         effective whether or not conveyancing documents have been executed and
         delivered pursuant to the appointment of such Successor Guarantee
         Trustee.

                  (b)      If an Event of Default actually known to a
         Responsible Officer of the Guarantee Trustee has occurred and is
         continuing, the Guarantee Trustee shall enforce this Guarantee for the
         benefit of the Holders of the Capital Securities.

                  (c)      The Guarantee Trustee, before the occurrence of any
         Event of Default and after curing all Events of Default that may have
         occurred, shall undertake to perform only such duties as are
         specifically set forth in this Guarantee, and no implied covenants
         shall be read into this Guarantee against the Guarantee Trustee. In
         case an Event of Default has occurred (that has not been cured or
         waived pursuant to Section 2.4) and is actually known to a Responsible
         Officer of the Guarantee Trustee, the Guarantee Trustee shall exercise
         such of the rights and powers vested in it by this Guarantee, and use
         the same degree of care and skill in its exercise thereof, as a prudent
         person would exercise or use under the circumstances in the conduct of
         his or her own affairs.

                  (d)      No provision of this Guarantee shall be construed to
         relieve the Guarantee Trustee from liability for its own negligent
         action, its own negligent failure to act, or its own willful
         misconduct, except that:

                           (i)      prior to the occurrence of any Event of
                  Default and after the curing or waiving of all such Events of
                  Default that may have occurred:

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                                    (A)      the duties and obligations of the
                           Guarantee Trustee shall be determined solely by the
                           express provisions of this Guarantee, and the
                           Guarantee Trustee shall not be liable except for the
                           performance of such duties and obligations as are
                           specifically set forth in this Guarantee, and no
                           implied covenants or obligations shall be read into
                           this Guarantee against the Guarantee Trustee; and

                                    (B)      in the absence of bad faith on the
                           part of the Guarantee Trustee, the Guarantee Trustee
                           may conclusively rely, as to the truth of the
                           statements and the correctness of the opinions
                           expressed therein, upon any certificates or opinions
                           furnished to the Guarantee Trustee and conforming to
                           the requirements of this Guarantee; but in the case
                           of any such certificates or opinions furnished to the
                           Guarantee Trustee, the Guarantee Trustee shall be
                           under a duty to examine the same to determine whether
                           or not they conform to the requirements of this
                           Guarantee;

                           (ii)     the Guarantee Trustee shall not be liable
                  for any error of judgment made in good faith by a Responsible
                  Officer of the Guarantee Trustee, unless it shall be proved
                  that such Responsible Officer of the Guarantee Trustee or the
                  Guarantee Trustee was negligent in ascertaining the pertinent
                  facts upon which such judgment was made;

                           (iii)    the Guarantee Trustee shall not be liable
                  with respect to any action taken or omitted to be taken by it
                  in good faith in accordance with the direction of the Holders
                  of not less than a Majority in liquidation amount of the
                  Capital Securities relating to the time, method and place of
                  conducting any proceeding for any remedy available to the
                  Guarantee Trustee, or exercising any trust or power conferred
                  upon the Guarantee Trustee under this Guarantee; and

                           (iv)     no provision of this Guarantee shall require
                  the Guarantee Trustee to expend or risk its own funds or
                  otherwise incur personal financial liability in the
                  performance of any of its duties or in the exercise of any of
                  its rights or powers, if the Guarantee Trustee shall have
                  reasonable grounds for believing that the repayment of such
                  funds is not reasonably assured to it under the terms of this
                  Guarantee, or security and indemnity, reasonably satisfactory
                  to the Guarantee Trustee, against such risk or liability is
                  not reasonably assured to it.

SECTION 2.2       Certain Rights of Guarantee Trustee

                  (a)      Subject to the provisions of Section 2.1:

                           (i)      The Guarantee Trustee may conclusively rely,
                  and shall be fully protected in acting or refraining from
                  acting upon, any resolution, certificate, statement,
                  instrument, opinion, report, notice, request, direction,
                  consent, order, bond, debenture, note, other evidence of
                  indebtedness or other paper or document believed by it to be
                  genuine and to have been signed, sent or presented by the
                  proper party or parties.

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                           (ii)     Any direction or act of the Guarantor
                  contemplated by this Guarantee shall be sufficiently evidenced
                  by an Officer's Certificate.

                           (iii)    Whenever, in the administration of this
                  Guarantee, the Guarantee Trustee shall deem it desirable that
                  a matter be proved or established before taking, suffering or
                  omitting any action hereunder, the Guarantee Trustee (unless
                  other evidence is herein specifically prescribed) may, in the
                  absence of bad faith on its part, request and conclusively
                  rely upon an Officer's Certificate of the Guarantor which,
                  upon receipt of such request, shall be promptly delivered by
                  the Guarantor.

                           (iv)     The Guarantee Trustee shall have no duty to
                  see to any recording, filing or registration of any instrument
                  (or any rerecording, refiling or registration thereof).

                           (v)      The Guarantee Trustee may consult with
                  counsel of its selection, and the advice or opinion of such
                  counsel with respect to legal matters shall be full and
                  complete authorization and protection in respect of any action
                  taken, suffered or omitted by it hereunder in good faith and
                  in accordance with such advice or opinion. Such counsel may be
                  counsel to the Guarantor or any of its Affiliates and may
                  include any of its employees. The Guarantee Trustee shall have
                  the right at any time to seek instructions concerning the
                  administration of this Guarantee from any court of competent
                  jurisdiction.

                           (vi)     The Guarantee Trustee shall be under no
                  obligation to exercise any of the rights or powers vested in
                  it by this Guarantee at the request or direction of any
                  Holder, unless such Holder shall have provided to the
                  Guarantee Trustee such security and indemnity, reasonably
                  satisfactory to the Guarantee Trustee, against the costs,
                  expenses (including attorneys' fees and expenses and the
                  expenses of the Guarantee Trustee's agents, nominees or
                  custodians) and liabilities that might be incurred by it in
                  complying with such request or direction, including such
                  reasonable advances as may be requested by the Guarantee
                  Trustee; provided, however, that nothing contained in this
                  Section 2.2(a)(vi) shall be taken to relieve the Guarantee
                  Trustee, upon the occurrence of an Event of Default, of its
                  obligation to exercise the rights and powers vested in it by
                  this Guarantee.

                           (vii)    The Guarantee Trustee shall not be bound to
                  make any investigation into the facts or matters stated in any
                  resolution, certificate, statement, instrument, opinion,
                  report, notice, request, direction, consent, order, bond,
                  debenture, note, other evidence of indebtedness or other paper
                  or document, but the Guarantee Trustee, in its discretion, may
                  make such further inquiry or investigation into such facts or
                  matters as it may see fit.

                           (viii)   The Guarantee Trustee may execute any of the
                  trusts or powers hereunder or perform any duties hereunder
                  either directly or by or through agents, nominees, custodians
                  or attorneys, and the Guarantee Trustee shall not be
                  responsible for any misconduct or negligence on the part of
                  any agent or attorney appointed with due care by it hereunder.

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                           (ix)     Any action taken by the Guarantee Trustee or
                  its agents hereunder shall bind the Holders of the Capital
                  Securities, and the signature of the Guarantee Trustee or its
                  agents alone shall be sufficient and effective to perform any
                  such action. No third party shall be required to inquire as to
                  the authority of the Guarantee Trustee to so act or as to its
                  compliance with any of the terms and provisions of this
                  Guarantee, both of which shall be conclusively evidenced by
                  the Guarantee Trustee's or its agent's taking such action.

                           (x)      Whenever in the administration of this
                  Guarantee the Guarantee Trustee shall deem it desirable to
                  receive instructions with respect to enforcing any remedy or
                  right or taking any other action hereunder, the Guarantee
                  Trustee (A) may request instructions from the Holders of a
                  Majority in liquidation amount of the Capital Securities, (B)
                  may refrain from enforcing such remedy or right or taking such
                  other action until such instructions are received, and (C)
                  shall be protected in conclusively relying on or acting in
                  accordance with such instructions.

                           (xi)     The Guarantee Trustee shall not be liable
                  for any action taken, suffered, or omitted to be taken by it
                  in good faith and reasonably believed by it to be authorized
                  or within the discretion or rights or powers conferred upon it
                  by this Guarantee.

                  (b)      No provision of this Guarantee shall be deemed to
         impose any duty or obligation on the Guarantee Trustee to perform any
         act or acts or exercise any right, power, duty or obligation conferred
         or imposed on it, in any jurisdiction in which it shall be illegal or
         in which the Guarantee Trustee shall be unqualified or incompetent in
         accordance with applicable law to perform any such act or acts or to
         exercise any such right, power, duty or obligation. No permissive power
         or authority available to the Guarantee Trustee shall be construed to
         be a duty.

SECTION 2.3       Not Responsible for Recitals or Issuance of Guarantee

                  The recitals contained in this Guarantee shall be taken as the
statements of the Guarantor, and the Guarantee Trustee does not assume any
responsibility for their correctness. The Guarantee Trustee makes no
representation as to the validity or sufficiency of this Guarantee.

SECTION 2.4       Events of Default; Waiver

                  (a)      An Event of Default under this Guarantee will occur
upon the failure of the Guarantor to perform any of its payment or other
obligations hereunder.

                  (b)      The Holders of a Majority in liquidation amount of
Capital Securities may, voting or consenting as a class, on behalf of the
Holders of all of the Capital Securities, waive any past Event of Default and
its consequences. Upon such waiver, any such Event of Default shall cease to
exist, and shall be deemed to have been cured, for every purpose of this
Guarantee, but no such waiver shall extend to any subsequent or other default or
Event of Default or impair any right consequent thereon.

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SECTION 2.5       Events of Default; Notice

                  (a)      The Guarantee Trustee shall, within 90 days after the
         occurrence of an Event of Default, transmit by mail, first class
         postage prepaid, to the Holders of the Capital Securities, notices of
         all Events of Default actually known to a Responsible Officer of the
         Guarantee Trustee, unless such defaults have been cured before the
         giving of such notice, provided, however, that the Guarantee Trustee
         shall be protected in withholding such notice if and so long as a
         Responsible Officer of the Guarantee Trustee in good faith determines
         that the withholding of such notice is in the interests of the Holders
         of the Capital Securities.

                  (b)      The Guarantee Trustee shall not be deemed to have
         knowledge of any Event of Default unless the Guarantee Trustee shall
         have received written notice from the Guarantor or a Holder of the
         Capital Securities (except in the case of a payment default), or a
         Responsible Officer of the Guarantee Trustee charged with the
         administration of this Guarantee shall have obtained actual knowledge,
         thereof.

ARTICLE III
GUARANTEE TRUSTEE

SECTION 3.1       Guarantee Trustee; Eligibility

                  (a)      There shall at all times be a Guarantee Trustee which
         shall:

                           (i)      not be an Affiliate of the Guarantor; and

                           (ii)     be a corporation organized and doing
                  business under the laws of the United States of America or any
                  State or Territory thereof or of the District of Columbia, or
                  Person authorized under such laws to exercise corporate trust
                  powers, having a combined capital and surplus of at least 50
                  million U.S. dollars ($50,000,000), and subject to supervision
                  or examination by Federal, State, Territorial or District of
                  Columbia authority. If such corporation publishes reports of
                  condition at least annually, pursuant to law or to the
                  requirements of the supervising or examining authority
                  referred to above, then, for the purposes of this Section
                  3.1(a) (ii), the combined capital and surplus of such
                  corporation shall be deemed to be its combined capital and
                  surplus as set forth in its most recent report of condition so
                  published.

                  (b)      If at any time the Guarantee Trustee shall cease to
         be eligible to so act under Section 3.1(a), the Guarantee Trustee shall
         immediately resign in the manner and with the effect set out in Section
         3.2(c).

                  (c)      If the Guarantee Trustee has or shall acquire any
         "conflicting interest" within the meaning of Section 310(b) of the
         Trust Indenture Act, the Guarantee Trustee shall either eliminate such
         interest or resign to the extent and in the manner provided by, and
         subject to this Guarantee.

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SECTION 3.2       Appointment, Removal and Resignation of Guarantee Trustee

                  (a)      Subject to Section 3.2(b), the Guarantee Trustee may
         be appointed or removed without cause at any time by the Guarantor
         except during an Event of Default.

                  (b)      The Guarantee Trustee shall not be removed in
         accordance with Section 3.2(a) until a Successor Guarantee Trustee has
         been appointed and has accepted such appointment by written instrument
         executed by such Successor Guarantee Trustee and delivered to the
         Guarantor.

                  (c)      The Guarantee Trustee appointed to office shall hold
         office until a Successor Guarantee Trustee shall have been appointed or
         until its removal or resignation. The Guarantee Trustee may resign from
         office (without need for prior or subsequent accounting) by an
         instrument in writing executed by the Guarantee Trustee and delivered
         to the Guarantor, which resignation shall not take effect until a
         Successor Guarantee Trustee has been appointed and has accepted such
         appointment by an instrument in writing executed by such Successor
         Guarantee Trustee and delivered to the Guarantor and the resigning
         Guarantee Trustee.

                  (d)      If no Successor Guarantee Trustee shall have been
         appointed and accepted appointment as provided in this Section 3.2
         within 60 days after delivery of an instrument of removal or
         resignation, the Guarantee Trustee resigning or being removed may
         petition any court of competent jurisdiction for appointment of a
         Successor Guarantee Trustee. Such court may thereupon, after
         prescribing such notice, if any, as it may deem proper, appoint a
         Successor Guarantee Trustee.

                  (e)      No Guarantee Trustee shall be liable for the acts or
         omissions to act of any Successor Guarantee Trustee.

                  (f)      Upon termination of this Guarantee or removal or
         resignation of the Guarantee Trustee pursuant to this Section 3.2, the
         Guarantor shall pay to the Guarantee Trustee all amounts owing to the
         Guarantee Trustee under Sections 7.2 and 7.3 accrued to the date of
         such termination, removal or resignation.

ARTICLE IV
GUARANTEE

SECTION 4.1       Guarantee

                  (a)      The Guarantor irrevocably and unconditionally agrees
to pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Issuer), as and when due, regardless of any
defense (except as defense of payment by the Issuer), right of set-off or
counterclaim that the Issuer may have or assert. The Guarantor's obligation to
make a Guarantee Payment may be satisfied by direct payment of the required
amounts by the Guarantor to the Holders or by causing the Issuer to pay such
amounts to the Holders.

                  (b)      The Guarantor hereby also agrees to assume any and
all Obligations of the Trust and in the event any such Obligation is not so
assumed, subject to the terms and conditions

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<PAGE>   13
hereof, the Guarantor hereby irrevocably and unconditionally guarantees to each
Beneficiary the full payment, when and as due, of any and all obligations to
such Beneficiaries. This Agreement is intended to be for the benefit of, and to
be enforceable by, all such Beneficiaries, whether or not such Beneficiaries
have received notice hereof.

SECTION 4.2       Waiver of Notice and Demand

                  The Guarantor hereby waives notice of acceptance of this
Guarantee and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the Issuer
or any other Person before proceeding against the Guarantor, protest, notice of
nonpayment, notice of dishonor, notice of redemption and all other notices and
demands.

SECTION 4.3       Obligations Not Affected

                  The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee shall in no way be affected or impaired by reason
of the happening from time to time of any of the following:

                  (a)      the release or waiver, by operation of law or
         otherwise, of the performance or observance by the Issuer of any
         express or implied agreement, covenant, term or condition relating to
         the Capital Securities to be performed or observed by the Issuer;

                  (b)      the extension of time for the payment by the Issuer
         of all or any portion of the Distributions, Redemption Price, Special
         Redemption Price, Liquidation Distribution or any other sums payable
         under the terms of the Capital Securities or the extension of time for
         the performance of any other obligation under, arising out of, or in
         connection with, the Capital Securities (other than an extension of
         time for payment of Distributions, Redemption Price, Special Redemption
         Price, Liquidation Distribution or other sum payable that results from
         the extension of any interest payment period on the Debentures or any
         extension of the maturity date of the Debentures permitted by the
         Indenture);

                  (c)      any failure, omission, delay or lack of diligence on
         the part of the Holders to enforce, assert or exercise any right,
         privilege, power or remedy conferred on the Holders pursuant to the
         terms of the Capital Securities, or any action on the part of the
         Issuer granting indulgence or extension of any kind;

                  (d)      the voluntary or involuntary liquidation,
         dissolution, sale of any collateral, receivership, insolvency,
         bankruptcy, assignment for the benefit of creditors, reorganization,
         arrangement, composition or readjustment of debt of, or other similar
         proceedings affecting, the Issuer or any of the assets of the Issuer;

                  (e)      any invalidity of, or defect or deficiency in, the
         Capital Securities;

                  (f)      the settlement or compromise of any obligation
         guaranteed hereby or hereby incurred; or

                  (g)      any other circumstance whatsoever that might
         otherwise constitute a legal or

                                       10

<PAGE>   14
         equitable discharge or defense of a guarantor, it being the intent of
         this Section 4.3 that the obligations of the Guarantor hereunder shall
         be absolute and unconditional under any and all circumstances.

                  There shall be no obligation of the Holders to give notice to,
or obtain consent of, the Guarantor with respect to the happening of any of the
foregoing.

SECTION 4.4       Rights of Holders

                  (a)      The Holders of a Majority in liquidation amount of
         the Capital Securities have the right to direct the time, method and
         place of conducting any proceeding for any remedy available to the
         Guarantee Trustee in respect of this Guarantee or to direct the
         exercise of any trust or power conferred upon the Guarantee Trustee
         under this Guarantee; provided, however, that (subject to Section 2.1)
         the Guarantee Trustee shall have the right to decline to follow any
         such direction if the Guarantee Trustee shall determine that the
         actions so directed would be unjustly prejudicial to the Holders not
         taking part in such direction or if the Guarantee Trustee being advised
         by counsel determines that the action or proceeding so directed may not
         lawfully be taken or if the Guarantor Trustee in good faith by its
         board of directors or trustees, executive committees or a trust
         committee of directors or trustees and/or Responsible Officers shall
         determine that the action or proceedings so directed would involve the
         Guarantee Trustee in personal liability.

                  (b)      Any Holder of Capital Securities may institute a
         legal proceeding directly against the Guarantor to enforce the
         Guarantee Trustee's rights under this Guarantee, without first
         instituting a legal proceeding against the Issuer, the Guarantee
         Trustee or any other Person. The Guarantor waives any right or remedy
         to require that any such action be brought first against the Issuer,
         the Guarantee Trustee or any other Person before so proceeding directly
         against the Guarantor.

SECTION 4.5       Guarantee of Payment

                  This Guarantee creates a guarantee of payment and not of
collection.

SECTION 4.6       Subrogation

                  The Guarantor shall be subrogated to all (if any) rights of
the Holders of Capital Securities against the Issuer in respect of any amounts
paid to such Holders by the Guarantor under this Guarantee; provided, however,
that the Guarantor shall not (except to the extent required by mandatory
provisions of law) be entitled to enforce or exercise any right that it may
acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee, if, after
giving effect to any such payment, any amounts are due and unpaid under this
Guarantee. If any amount shall be paid to the Guarantor in violation of the
preceding sentence, the Guarantor agrees to hold such amount in trust for the
Holders and to pay over such amount to the Holders.

                                       11

<PAGE>   15
SECTION 4.7       Independent Obligations

                  The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Capital
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
notwithstanding the occurrence of any event referred to in subsections (a)
through (g), inclusive, of Section 4.3 hereof.

SECTION 4.8       Enforcement by a Beneficiary

                  A Beneficiary may enforce the obligations of the Guarantor
contained in Section 4.1(b) directly against the Guarantor and the Guarantor
waives any right or remedy to require that any action be brought against the
Trust or any other person or entity before preceding against the Guarantor. The
Guarantor shall be subrogated to all rights (if any) of any Beneficiary against
the Trust in respect of any amounts paid to the Beneficiaries by the Guarantor
under this Agreement; provided, however, that the Guarantor shall not (except to
the extent required by mandatory provisions of law) be entitled to enforce or
exercise any rights that it may acquire by way of subrogation or any indemnity,
reimbursement or other agreement, in all cases as a result of payment under this
Agreement, if, after giving effect to such payment, any amounts are due and
unpaid under this Agreement.

ARTICLE V
LIMITATION OF TRANSACTIONS; SUBORDINATION

SECTION 5.1       Limitation of Transactions

                  So long as any Capital Securities remain outstanding, if (a)
there shall have occurred and be continuing an Event of Default or a Declaration
Event of Default or (b) the Guarantor shall have selected an Extension Period as
provided in the Declaration and such period, or any extension thereof, shall be
continuing, then the Guarantor may not (x) declare or pay any dividends or
distributions on, or redeem, purchase, acquire, or make a liquidation payment
with respect to, any of the Guarantor's capital stock or (y) make any payment of
principal of or interest or premium, if any, on or repay, repurchase or redeem
any debt securities of the Guarantor that rank pari passu in all respects with
or junior in interest to the Debentures (other than (i) repurchases, redemptions
or other acquisitions of shares of capital stock of the Guarantor in connection
with any employment contract, benefit plan or other similar arrangement with or
for the benefit of one or more employees, officers, directors or consultants, in
connection with a dividend reinvestment or stockholder stock purchase plan or in
connection with the issuance of capital stock of the Guarantor (or securities
convertible into or exercisable for such capital stock) as consideration in an
acquisition transaction entered into prior to occurrence of the Event of Default
or Declaration Event of Default or the applicable Extension Period, (ii) as a
result of any exchange or conversion of any class or series of the Guarantor's
capital stock (or any capital stock of a subsidiary of the Guarantor) for any
class or series of the Guarantor's capital stock or of any class or series of
the Guarantor's indebtedness for any class or series of the Guarantor's capital
stock, (iii) the purchase of fractional interests in shares of the Guarantor's
capital stock pursuant to the conversion or exchange provisions of such capital
stock or the security being converted or exchanged, (iv) any declaration of a
dividend in connection

                                       12

<PAGE>   16
with any stockholder's rights plan, or the issuance of rights, stock or other
property under any stockholder's rights plan, or the redemption or repurchase of
rights pursuant thereto, or (v) any dividend in the form of stock, warrants,
options or other rights where the dividend stock or the stock issuable upon
exercise of such warrants, options or other rights is the same stock as that on
which the dividend is being paid or ranks pari passu with or junior to such
stock).

SECTION 5.2       Ranking

                  This Guarantee will constitute an unsecured obligation of the
Guarantor and will rank subordinate and junior in right of payment to all
present and future Senior Indebtedness (as defined in the Indenture) of the
Guarantor. By their acceptance thereof, each Holder of Capital Securities agrees
to the foregoing provisions of this Guarantee and the other terms set forth
herein.

                  The right of the Guarantor to participate in any distribution
of assets of any of its subsidiaries upon any such subsidiary's liquidation or
reorganization or otherwise is subject to the prior claims of creditors of that
subsidiary, except to the extent the Guarantor may itself be recognized as a
creditor of that subsidiary. Accordingly, the Guarantor's obligations under this
Guarantee will be effectively subordinated to all existing and future
liabilities of the Guarantor's subsidiaries, and claimants should look only to
the assets of the Guarantor for payments thereunder. This Guarantee does not
limit the incurrence or issuance of other secured or unsecured debt of the
Guarantor, including Senior Indebtedness of the Guarantor, under any indenture
that the Guarantor may enter into in the future or otherwise.

ARTICLE VI
TERMINATION

SECTION 6.1       Termination

                  This Guarantee shall terminate as to the Capital Securities
(i) upon full payment of the Redemption Price of all Capital Securities, (ii)
upon the distribution of the Debentures to the Holders of all of the Capital
Securities or (iii) upon full payment of the amounts payable in accordance with
the Declaration upon dissolution of the Issuer. This Guarantee will continue to
be effective or will be reinstated, as the case may be, if at any time any
Holder of Capital Securities must restore payment of any sums paid under the
Capital Securities or under this Guarantee.

ARTICLE VII
INDEMNIFICATION

SECTION 7.1       Exculpation

                  (a)      No Indemnified Person shall be liable, responsible or
         accountable in damages or otherwise to the Guarantor or any Covered
         Person for any loss, damage or claim incurred by reason of any act or
         omission performed or omitted by such Indemnified Person in good faith
         in accordance with this Guarantee and in a manner that such Indemnified
         Person reasonably believed to be within the scope of the authority
         conferred on such Indemnified Person by this Guarantee or by law,
         except that an Indemnified

                                       13

<PAGE>   17
        Person shall be liable for any such loss, damage or claim incurred by
        reason of such Indemnified Person's negligence or willful misconduct
        with respect to such acts or omissions.

                  (b)      An Indemnified Person shall be fully protected in
         relying in good faith upon the records of the Issuer or the Guarantor
         and upon such information, opinions, reports or statements presented to
         the Issuer or the Guarantor by any Person as to matters the Indemnified
         Person reasonably believes are within such other Person's professional
         or expert competence and who, if selected by such Indemnified Person,
         has been selected with reasonable care by such Indemnified Person,
         including information, opinions, reports or statements as to the value
         and amount of the assets, liabilities, profits, losses, or any other
         facts pertinent to the existence and amount of assets from which
         Distributions to Holders of Capital Securities might properly be paid.

SECTION 7.2       Indemnification

                  (a)      The Guarantor agrees to indemnify each Indemnified
Person for, and to hold each Indemnified Person harmless against, any and all
loss, liability, damage, claim or expense incurred without negligence or willful
misconduct on the part of the Indemnified Person, arising out of or in
connection with the acceptance or administration of the trust or trusts
hereunder, including the costs and expenses (including reasonable legal fees and
expenses) of the Indemnified Person defending itself against, or investigating,
any claim or liability in connection with the exercise or performance of any of
the Indemnified Person's powers or duties hereunder. The obligation to indemnify
as set forth in this Section 7.2 shall survive the resignation or removal of the
Guarantee Trustee and the termination of this Guarantee.

                  (b)      Promptly after receipt by an Indemnified Person under
this Section 7.2 of notice of the commencement of any action, such Indemnified
Person will, if a claim in respect thereof is to be made against the Guarantor
under this Section 7.2, notify the Guarantor in writing of the commencement
thereof; but the failure so to notify the Guarantor (i) will not relieve the
Guarantor from liability under paragraph (a) above unless and to the extent that
the Guarantor did not otherwise learn of such action and such failure results in
the forfeiture by the Guarantor of substantial rights and defenses and (ii) will
not, in any event, relieve the Guarantor from any obligations to any Guarantor
other than the indemnification obligation provided in paragraph (a) above. The
Guarantor shall be entitled to appoint counsel of the Guarantor's choice at the
Guarantor's expense to represent the Indemnified Person in any action for which
indemnification is sought (in which case the Guarantor shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by the
Indemnified Person or Persons except as set forth below); provided, however,
that such counsel shall be satisfactory to the Indemnified Person.
Notwithstanding the Guarantor's election to appoint counsel to represent the
Guarantor in an action, the Indemnified Person shall have the right to employ
separate counsel (including local counsel), and the Guarantor shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use of
counsel chosen by the Guarantor to represent the Indemnified Person would
present such counsel with a conflict of interest, (ii) the actual or potential
defendants in, or targets of, any such action include both the Indemnified
Person and the Guarantor and the Indemnified Person shall have reasonably
concluded that there may be legal defenses available to it and/or other
Indemnified Person which are different from or additional to

                                       14

<PAGE>   18
those available to the Guarantor, (iii) the Guarantor shall not have employed
counsel satisfactory to the Indemnified Person to represent the Indemnified
Person within a reasonable time after notice of the institution of such action
or (iv) the Guarantor shall authorize the Indemnified Person to employ separate
counsel at the expense of the Guarantor. The Guarantor will not, without the
prior written consent of the Indemnified Persons, settle or compromise or
consent to the entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which indemnification or
contribution may be sought hereunder (whether or not the Indemnified Persons are
actual or potential parties to such claim or action) unless such settlement,
compromise or consent includes an unconditional release of each Indemnified
Person from all liability arising out of such claim, action, suit or proceeding.

SECTION 7.3       Compensation; Reimbursement of Expenses

                  The Guarantor agrees:

                  (a)      to pay to the Guarantee Trustee from time to time
such compensation for all services rendered by it hereunder as the parties shall
agree to from time to time (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust); and

                  (b)      except as otherwise expressly provided herein, to
reimburse the Guarantee Trustee upon request for all reasonable expenses,
disbursements and advances incurred or made by it in accordance with any
provision of this Guarantee (including the reasonable compensation and the
expenses and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or willful
misconduct.

                  The provisions of this Section 7.3 shall survive the
resignation or removal of the Guarantee Trustee and the termination of this
Guarantee.

ARTICLE VIII
MISCELLANEOUS

SECTION 8.1       Successors and Assigns

                  All guarantees and agreements contained in this Guarantee
shall bind the successors, assigns, receivers, trustees and representatives of
the Guarantor and shall inure to the benefit of the Holders of the Capital
Securities then outstanding. Except in connection with any merger or
consolidation of the Guarantor with or into another entity or any sale, transfer
or lease of the Guarantor's assets to another entity, in each case, to the
extent permitted under the Indenture, the Guarantor may not assign its rights or
delegate its obligations under this Guarantee without the prior approval of the
Holders of at least a Majority in liquidation amount of the Capital Securities.

                                       15

<PAGE>   19
SECTION 8.2       Amendments

                  Except with respect to any changes that do not adversely
affect the rights of Holders of the Capital Securities in any material respect
(in which case no consent of Holders will be required), this Guarantee may be
amended only with the prior approval of the Holders of not less than a Majority
in liquidation amount of the Capital Securities. The provisions of the
Declaration with respect to amendments thereof apply to the giving of such
approval.

SECTION 8.3       Notices

                  All notices provided for in this Guarantee shall be in
writing, duly signed by the party giving such notice, and shall be delivered,
telecopied or mailed by first class mail, as follows:

                  (a)      If given to the Guarantee Trustee, at the Guarantee
         Trustee's mailing address set forth below (or such other address as the
         Guarantee Trustee may give notice of to the Holders of the Capital
         Securities):

                              The Bank of New York

                              101 Barclay Street, Floor 21W

                              New York, NY 10286
                              Attention: Corporate Trust Administration
                              Telecopy: 212-815-5915

                  (b)      If given to the Guarantor, at the Guarantor's mailing
         address set forth below (or such other address as the Guarantor may
         give notice of to the Holders of the Capital Securities and to the
         Guarantee Trustee):

                              68149 Main Street
                              Blountsville, AL 35031
                              Attention: Kennon R. Patterson, Sr.

                  (c)      If given to any Holder of the Capital Securities, at
         the address set forth on the books and records of the Issuer.

                  All such notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

SECTION 8.4       Benefit

                  This Guarantee is solely for the benefit of the Holders of the
Capital Securities

                                       16

<PAGE>   20
and, subject to Section 2.1(a), is not separately transferable from the Capital
Securities.

SECTION 8.5       Governing Law

                  THIS GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD
TO CONFLICT OF LAWS PRINCIPLES THEREOF.

                                       17

<PAGE>   21
                  THIS GUARANTEE is executed as of the day and year first above
written.

                                  COMMUNITY BANCSHARES, INC.,
                                  as Guarantor

                                  By:/s/ Kennon R. Patterson, Sr.
                                     ------------------------------------------
                                     Name: Kennon R. Patterson, Sr.
                                     Title:   Chairman, President and Chief
                                     Executive Officer

                                  THE BANK OF NEW YORK,
                                     as Guarantee Trustee

                                  By:/s/ Annette L. Kos
                                     ------------------------------------------
                                     Name: Annette L. Kos
                                     Title:   Assistant Vice President

                                       18<PAGE>   1
                                                                    EXHIBIT 10.3

              ----------------------------------------------------

                                      10.3

                               PLACEMENT AGREEMENT

                              DATED MARCH 23, 2000

                     BETWEEN COMMUNITY (AL) CAPITAL TRUST 1

                           COMMUNITY BANCSHARES, INC.

                                       AND

                            SALOMON SMITH BARNEY, INC

              ----------------------------------------------------

<PAGE>   2

COMMUNITY (AL) CAPITAL TRUST I

$10,000,000
10 7/8% Fixed Rate Capital Trust Pass-Through Securities(R) (TruPS)(R)

Fully and Unconditionally Guaranteed as to Distributions
and Other Payments by
Community Bancshares Inc.

PLACEMENT AGREEMENT

New York, New York
March 9, 2000

Salomon Smith Barney Inc.
388 Greenwich Street
New York, New York 10013

Ladies and Gentlemen:

          Community Bancshares Inc., a bank holding company incorporated in
Delaware (the "Company") and Community (AL) Capital Trust I, a Delaware
statutory business trust (the "Trust"), propose, subject to the terms and
conditions stated herein, to issue and sell $10,000,000 of 10 7/8% Fixed Rate
Capital Trust Pass-through Securities(R) of the Trust, having a stated
liquidation amount of $1,000 per capital security (the "Capital Securities").
Salomon Smith Barney Inc. is acting as the exclusive agent of the Company and
the Trust in connection with the offering of the Capital Securities.

          The Capital Securities will be fully and unconditionally guaranteed on
a subordinated basis by the Company with respect to distributions and amounts
payable upon liquidation, redemption or repayment (the "Guarantee") pursuant to
the Guarantee Agreement (the "Guarantee Agreement"), to be dated as of the
Closing Date specified in Section 3 hereof and executed and delivered by the
Company and The Bank of New York, as trustee (the "Guarantee Trustee"), for the
benefit of the holders from time to time of the Capital Securities. The entire
proceeds from the sale of the Capital Securities will be combined with the
entire proceeds from the sale by the Trust to the Company of its common
securities (the "Common Securities"), and will be used by the Trust to purchase
$10,310,000 in principal amount of the Fixed Rate Junior Subordinated Deferrable
Interest Debentures due 2030 of the Company (the "Subordinated Debt
Securities"). The Capital Securities and the Common Securities for the Trust
will be issued pursuant to the Amended and Restated Declaration of Trust (the
"Declaration"), to be dated as of the Closing Date among the Company, as
sponsor, the Administrator(s) named therein (the "Administrators"), The Bank of
New York

<PAGE>   3

(Delaware), a Delaware corporation (the "Delaware Trustee"), The Bank of New
York (the "Institutional Trustee"), and the holders from time to time of
undivided beneficial interests in the assets of the Trust. The Subordinated Debt
Securities will be issued pursuant to an Indenture, to be dated as of the
Closing Date (the "Indenture"), between the Company and The Bank of New York, as
trustee (the "Indenture Trustee").

          The Capital Securities, the Common Securities and the Subordinated
Debt Securities are collectively referred to herein as the "Securities." This
Agreement, the Indenture, the Declaration, the Guarantee Agreement and the
Securities are referred to collectively as the "Operative Documents."
Capitalized terms used herein without definition have the respective meanings
specified in the Declaration.

          The Securities have not been and will not be registered under the
Securities Act of 1933, as amended (the "Securities Act").

          1. Representations and Warranties. The Company and the Trust jointly
and severally represent and warrant to, and agree with you as set forth below in
this Section 1.

          (a) Neither the Company nor the Trust, nor any of their Affiliates (as
defined in Rule 501(b) of Regulation D under the Securities Act ("Regulation
D")), nor any person acting on its or their behalf has, directly or indirectly,
made offers or sales of any security, or solicited offers to buy any security,
under circumstances that would require the registration of any of the Securities
under the Securities Act.

          (b) Neither the Company nor the Trust, nor any of their Affiliates,
nor any person acting on its or their behalf has engaged in any form of general
solicitation or general advertising (within the meaning of Regulation D) in
connection with any offer or sale of any of the Securities.

          (c) The Securities satisfy the eligibility requirements of Rule
144A(d)(3) under the Securities Act.

          (d) Neither the Company nor the Trust, nor any of their Affiliates,
nor any person acting on its or their behalf, has engaged or will engage in any
directed selling efforts with respect to the Securities within the meaning of
Regulation S.

          (e) Neither the Company nor the Trust is an "investment company" or an
entity "controlled" by an "investment company," in each case within the meaning
of Section 3(a) of the Investment Company Act of 1940, as amended (the
"Investment Company Act") without regard to Section 3(c) of the Investment
Company Act.

          (f) Neither the Company nor the Trust has paid or agreed to pay to any
person any compensation for soliciting another to purchase any of the
Securities.

          (g) The Trust has been duly created and is validly existing in good
standing as a business trust under the Delaware Business Trust Act, 12 Del. C.
3801, et seq. (the "Business Trust Act") with the power and authority to own
property and to conduct the business it transacts and proposes to transact and
to enter into and perform its obligations under the Operative

                                       22
<PAGE>   4

Documents. The Trust is duly qualified to transact business as a foreign entity
and is in good standing in each jurisdiction in which such qualification is
necessary, except where the failure to so qualify or be in good standing would
not have a material adverse effect on such Trust. The Trust is not a party to or
otherwise bound by any agreement other than the Operative Documents. The Trust
is and will, under current law, be classified for federal income tax purposes as
a grantor trust and not as an association taxable as a corporation.

          (h) The Declaration has been duly authorized by the Company and, on
the Closing Date, will have been duly executed and delivered by the Company and
the Administrators of the relevant Trust, and, assuming due authorization,
execution and delivery by the Delaware Trustee and the Institutional Trustee, be
a valid and binding obligation of the Company and such Administrators,
enforceable against them in accordance with its terms, subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and to general principles of equity ("Bankruptcy and Equity"). Each of the
Administrators of the Trust is an employee of the Company and has been duly
authorized by the Company to execute and deliver the Declaration.

          (i) Each of the Guarantee Agreement and the Indenture has been duly
authorized by the Company and, on the Closing Date will have been duly executed
and delivered by the Company, and, assuming due authorization, execution and
delivery by the Guarantee Trustee, in the case of the Guarantee, and by the
Indenture Trustee, in the case of the Indenture, be a valid and binding
obligation of the Company enforceable against it in accordance with its terms,
subject to Bankruptcy and Equity.

          (j) The Capital Securities and the Common Securities have been duly
authorized by the Declaration and, when issued and delivered against payment
therefor on the Closing Date to you, in the case of the Capital Securities, and
to the Company, in the case of the Common Securities, will be validly issued and
represent undivided beneficial interests in the assets of the Trust. The
issuance of none of the Capital Securities or the Common Securities is subject
to preemptive or other similar rights. On the Closing Date, all of the issued
and outstanding Common Securities will be directly owned by the Company free and
clear of any pledge, security interest, claim, lien or other encumbrance.

          (k) The Subordinated Debt Securities have been duly authorized by the
Company and, at the Closing Date, will have been duly executed and delivered to
the Indenture Trustee for authentication in accordance with the Indenture, and,
when authenticated in the manner provided for in the Indenture and delivered
against payment therefor by the Trust, will constitute valid and binding
obligations of the Company entitled to the benefits of the Indenture enforceable
against the Company in accordance with their terms, subject to Bankruptcy and
Equity.

          (l) This Agreement has been duly authorized, executed and delivered by
the Company and the Trust.

          (m) The Trust is not in violation of the Declaration or any provision
of the Business Trust Act. The execution, delivery and performance of the
Operative Documents to which it is a party by the Company or Trust, and the
consummation of the transactions contemplated herein or therein, will not
conflict with or constitute a breach of, or a default under, or result in the
creation

                                       23
<PAGE>   5

or imposition of any lien, charge or other encumbrance upon any property or
assets of the Trust, the Company or any of the Company's subsidiaries pursuant
to any contract, indenture, mortgage, loan agreement, note, lease or other
instrument to which the Trust, the Company or any of its subsidiaries is a party
or by which it or any of them may be bound, or to which any of the property or
assets of any of them is subject, except for a conflict, breach, default, lien,
charge or encumbrance which could not reasonably be expected to have an adverse
effect on the consummation of the transactions contemplated herein or therein,
nor will such action result in any violation of the Declaration or the Business
Trust Act or require the consent, approval, authorization or order of any court
or governmental agency or body.

          (n) The Company has been duly incorporated and is validly existing as
a corporation in good standing under the laws of Delaware, with all requisite
corporate power and authority to own its properties and conduct the business it
transacts and proposes to transact, and is duly qualified to transact business
and is in good standing as a foreign corporation in each jurisdiction where the
nature of its activities requires such qualification except where the failure of
the Company to be so qualified would not, singly or in the aggregate, have a
materially adverse effect on the condition (financial or otherwise), earnings or
business of the Company and its subsidiaries taken as a whole, whether or not
occurring in the ordinary course of business (a "Material Adverse Effect").

          (o) Each of the Company's significant subsidiaries listed in Exhibit 1
(the "Subsidiaries") has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the jurisdiction in which it is
chartered or organized, with all requisite corporate power and authority to own
its properties and conduct the business it transacts and proposes to transact,
and is duly qualified to transact business and is in good standing as a foreign
corporation in each jurisdiction where the nature of its activities requires
such qualification except where the failure of such Subsidiary to be so
qualified would not, singly or in the aggregate, have a Material Adverse Effect.

          (p) The Company and each of its Subsidiaries have all requisite power
and authority, and all necessary material authorizations, approvals, orders,
licenses, certificates and permits of and from regulatory or governmental
officials, bodies and tribunals, to own or lease their respective properties and
to conduct their respective businesses as now being conducted, and neither the
Company nor any of the Subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such authorizations,
approvals, orders, licenses, certificates or permits which, singly or in the
aggregate, if the failure to be so licensed or approved or if the subject of an
unfavorable decision, ruling or finding, would have a Material Adverse Effect;
and the Company and its Subsidiaries are in compliance with all applicable laws,
rules, regulations and orders and consents, the violation of which would have a
Material Adverse Effect.

          (q) The audited consolidated financial statements (including the notes
thereto) and schedules of the Company and its consolidated subsidiaries for
December 31, 1998 (the "Financial Statements") and the interim unaudited
consolidated financial statements of the Company and its consolidated
subsidiaries for December 31, 1999 (the "Interim Financial Statements") provided
to you are the most recent available audited and unaudited consolidated
financial statements of the Company and its consolidated subsidiaries,
respectively, and fairly presents in all

                                       24
<PAGE>   6

material respects, in accordance with generally accepted accounting principles,
the financial position of the Company and its consolidated subsidiaries, and the
results of operations and changes in financial condition as of the dates and for
the periods therein specified, subject, in the case of Interim Financial
Statements, to year-end adjustments. Such consolidated financial statements and
schedules have been prepared in accordance with generally accepted accounting
principles consistently applied throughout the periods involved (except as
otherwise noted therein).

          (r) The Company's report on FRY-9C dated December 31, 1999 (the
"FRY-9C") provided to you is the most recent available such report and the
information therein fairly presents in all material respects the financial
position of the Company and its subsidiaries.

          (s) Since the respective dates of the Financial Statements, Interim
Financial Statements and the FRY-9C, there has been no material adverse change
or development with respect to the financial condition or earnings of the
Company and its subsidiaries, taken as a whole.

          (t) Neither the Company nor any of the Subsidiaries is in violation of
its respective charter or by-laws or similar organizational documents or in
default in the performance or observance of any obligation, agreement, covenant
or condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which the Company or any of the
Subsidiaries is a party or by which it or any of them may be bound or to which
any of the property or assets of the Company or any of the Subsidiaries is
subject, the effect of which violation or default in performance or observance
would have a Material Adverse Effect.

          (u) The Company is duly registered as a bank holding company under the
Bank Holding Company Act of 1956, as amended (the "Bank Holding Company Act"),
and the regulations of the Board of Governors of the Federal Reserve System (the
"Federal Reserve"), and the deposit accounts of the Company's subsidiary banks
are insured by the Federal Deposit Insurance Corporation ("FDIC") to the fullest
extent permitted by law and the rules and regulations of the FDIC, and no
proceeding for the termination of such insurance are pending or threatened.

          2. Sale of the Capital Securities. Subject to the terms and conditions
and in reliance upon the representations and warranties herein set forth, the
Company and the Trust jointly and severally hereby appoint you as placement
agent (the "Placement Agent"), and you hereby accept such appointment, to act as
the exclusive agent of the Company and the Trust, in connection with the
offering of the Capital Securities contemplated hereby, for the purpose of
soliciting offers and sales of the Capital Securities.

          The Placement Agent shall solicit offers to purchase Capital
Securities in connection with the offering contemplated hereby. The Placement
Agent shall use its best efforts, subject to the terms and conditions of this
Agreement, to procure subscribers for the Capital Securities with an aggregate
stated liquidation amount of $10,000,000 at a purchase price equal to 100% of
the stated liquidation amount thereof. The Placement Agent shall not, in
fulfilling its obligations hereunder, act as an underwriter for the Capital
Securities and is in no way obligated, directly or indirectly, to advance its
own funds to purchase any Capital Securities.

          If the sale and delivery of the Capital Securities as provided herein
is consummated, the Company will pay to the Placement Agent on the Closing Date
a commission per Capital

                                       25
<PAGE>   7

Security equal to 3% of the stated liquidation amount thereof. Any payment
pursuant to this Section 2 shall be made by wire transfer in immediately
available funds to the U.S. account designated in writing by the party entitled
to receive such payment.

          The dividend rate of the Capital Securities, as of the date hereof, is
10 7/8%. Under certain circumstances, the dividend rate of the Capital
Securities may be reduced pursuant to a written agreement between you and the
Company made prior to the Closing Date.

          3. Delivery and Payment. Delivery of and payment for the Capital
Securities shall be made at 10:00 AM, New York City time, on March 23, 2000, or
such later date as you shall designate, which date and time may be postponed by
agreement between you, on the one hand, and the Company and the Trust, on the
other hand (such date and time of delivery and payment for the Capital
Securities being herein called the "Closing Date").

          Delivery of the Capital Securities shall be made at such location, and
in such names and denominations, as you shall designate at least one business
day in advance of the Closing Date. The Company and the Trust agree to have the
Capital Securities available for inspection and checking by you in New York, New
York, not later than 1:00 PM on the business day prior to the Closing Date. The
closing for the purchase and sale of the Capital Securities shall occur at the
offices of Cleary, Gottlieb, Steen & Hamilton, One Liberty Plaza, New York, NY
10006, or such other place as the parties hereto shall agree.

          4. Representations. You represent to the Company and the Trust that:

          (a) You are aware that the Securities have not been and will not be
registered under the Securities Act and may not be offered or sold within the
United States or to U.S persons except in accordance with Rule 903 of Regulation
S under the Securities Act or pursuant to an exemption from the registration
requirements of the Securities Act. You will not offer, sell or arrange for the
offer or sale of any Securities to purchasers ("Purchasers") except in privately
negotiated transactions that will not require registration of the Securities
under the Securities Act. Terms used in the first sentence of this subsection
(a) have the meanings given to them by Regulation S under the Securities Act.

          (b) You have not offered or sold or and will not arrange for the offer
or sale of the Capital Securities except (i) in an offshore transaction
complying with Rule 903 of Regulation S under the Securities Act, (ii) to those
you reasonably believe are qualified institutional buyers (as defined in Rule
144A under the Securities Act) and that in connection with each such sale, you
have taken or will take reasonable steps to ensure that the purchaser of any
Capital Securities is aware that such sale is being made in reliance on Rule
144A or (iii) to "accredited investors" (as defined in Rule 501(a)(1), (2), (3)
or (7) of Regulation D) who provide to you and to the Company a letter in the
form set out in the Declaration.

          (c) You represent and agree that you and each of your Affiliates has
not entered, and will not enter into any contractual arrangement with respect to
the distribution of the Securities except with the prior written consent of the
Company

          (d) Neither you, nor any of your Affiliates, nor any person acting on
your or their

                                       26
<PAGE>   8

behalf has engaged, or will engage, in any form of general solicitation or
general advertising (within the meaning of Regulation D) in connection with any
offer or sale of the Securities.

          (e) Neither you nor any or your Affiliates, nor any person acting on
your or their behalf, has engaged or will engage in any directed selling efforts
within the meaning of Regulation S under the Securities Act with respect to the
Securities.

          5. Agreements. The Company and the Trust agree with the Placement
Agent that:

          (a) The Company and the Trust will arrange for the qualification of
the Capital Securities for sale under the laws of such jurisdictions as you may
designate and will maintain such qualifications in effect so long as required
for the sale of the Capital Securities. The Company or the Trust, as the case
may be, will promptly advise you of the receipt by the Company or the Trust, as
the case may be, of any notification with respect to the suspension of the
qualification of the Capital Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose.

          (b) Neither the Company nor the Trust will, nor will either of them
permit any of its Affiliates to, resell any Capital Securities that have been
acquired by any of them.

          (c) Neither the Company nor the Trust will, nor will either of them
permit any of its Affiliates, nor any person acting on its or their behalf, to,
directly or indirectly, make offers or sales of any security, or solicit offers
to buy any security, under circumstances that would require the registration of
any of the Securities under the Securities Act.

          (d) Neither the Company nor the Trust will, nor will either of them
permit any of its Affiliates, nor any person acting on its or their behalf, to,
engage in any form of general solicitation or general advertising (within the
meaning of Regulation D) in connection with any offer or sale of the any of the
Securities.

          (e) Neither the Company nor the Trust will, nor will either of them
permit any of its Affiliates, nor any person acting on its or their behalf to
engage in any directed selling efforts within the meaning of Regulation S under
the Securities Act with respect to the Securities.

          (f) So long as any of the Securities are outstanding and are
"restricted securities" within the meaning of Rule 144(a)(3) under the
Securities Act, each of the Company and the Trust will, during any period in
which it is not subject to and in compliance with Section 13 or 15(d) of the
Exchange Act or it is not exempt from such reporting requirements pursuant to
and in compliance with Rule 12g3-2(b) under the Exchange Act, provide to each
holder of such restricted securities and to each prospective purchaser (as
designated by such holder) of such restricted securities, upon the request of
such holder or prospective purchaser, any information required to be provided by
Rule 144A(d)(4) under the Securities Act. This covenant is intended to be for
the benefit of the holders, and the prospective purchasers designated by such
holders, from time to time of such restricted securities. The information
provided by the Company and the Trust pursuant to this Section 5(f) hereof will
not, at the date thereof, contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein, in the
light of the

                                       27
<PAGE>   9

circumstances under which they were made, not misleading.

          (g) Neither the Company nor the Trust will, until 180 days following
the Closing Date, without your prior written consent, offer, sell, contract to
sell, grant any option to purchase or otherwise dispose of, directly or
indirectly, (i) any Capital Securities or other securities of the Trust other
than as contemplated by this Agreement, (ii) any securities that are
substantially similar to the Securities or (iii) any other securities
convertible into, or exercisable or exchangeable for, any of (i) or (ii), or
enter into an agreement, or announce an intention, to do any of the foregoing.

          (h) The Company agrees to pay (i) the costs incident to the
authorization, issuance, sale and delivery of the Capital Securities and any
taxes payable in that connection; (ii) the fees and expenses of qualifying the
Capital Securities under the securities laws of the several jurisdictions as
provided in Section 5(a); and (iii) the fees and expenses of the Institutional
Trustee (as defined in the Declaration), the Guarantee Trustee and the Indenture
Trustee.

          6. Conditions to Your Obligations. Your obligations to use your best
efforts to procure subscription and payment for the Capital Securities shall be
subject to the accuracy of the representations and warranties on the part of the
Company and the Trust contained herein as of the date and time that this
Agreement is executed (the "Execution Time") and the Closing Date, to the
accuracy of the statements of the Company and the Trust made in any Capital
Securities pursuant to the provisions hereof, to the performance by the Company
and the Trust of their obligations hereunder and to the following additional
conditions:

          (a) The Company shall have furnished to you the opinion of Bishop K.
Walker, Jr., General Counsel to the Company, dated the Closing Date, addressed
to you to, in substantially the form set out in Annex A hereto.

          (b) The Company shall have furnished to you the opinion of Bishop K.
Walker, Jr., special tax counsel to the Company, dated the Closing Date,
containing such assumptions, qualifications and limitations as shall be
reasonably acceptable to you and your counsel to the effect that for U.S.
federal income tax purposes, the Subordinated Debt Securities will constitute
indebtedness of the Company.

          (c) You shall have received the opinion of Richards, Layton & Finger,
special Delaware counsel for the Company and the Trust, dated the Closing Date,
addressed to you, in substantially the form set out in Annex B hereto.

          (d) You shall have received the opinion of White & Case, LLP, counsel
for the Guarantee Trustee, the Institutional Trustee and the Indenture Trustee,
dated the Closing Date addressed to you, in substantially the form set out in
Annex C hereto.

          (e) You shall have received the opinion of Richards, Layton & Finger,
counsel for the Delaware Trustee, dated the Closing Date, addressed to you, in
substantially the form set out in Annex D hereto.

          (f) The Company shall have furnished to you a certificate of the
Company, signed by a Vice President and by a Treasurer or Chief Financial
Officer of the Company, dated the Closing

                                       28
<PAGE>   10

Date, to the effect that:

                    (i) the representations and warranties of the Company and
          the Trust in this Agreement are true and correct in all material
          respects on and as of the Closing Date with the same effect as if made
          on the Closing Date, and the Company and the Trust have complied with
          all the agreements and satisfied all the conditions on either of their
          part to be performed or satisfied at or prior to the Closing Date; and

                    (ii) since the date of the most recent financial statements
          provided to you, there has been no material adverse change in the
          condition (financial or other), earnings, business or properties of
          the Company and its subsidiaries, whether or not arising from
          transactions in the ordinary course of business.

          (g) Subsequent to the Execution Time there shall not have been any
change, or any development involving a prospective change, in or affecting the
business or properties of the Company and its subsidiaries the effect of which,
is, in your judgment, so material and adverse as to make it impractical or
inadvisable to proceed with the offering or delivery of the Capital Securities.

          (h) Prior to the Closing Date, the Company and the Trust shall have
furnished to you such further information, certificates and documents as you may
reasonably request.

          (i) At the Closing Date, each of the Operative Documents shall have
been duly authorized, executed and delivered by each party thereto, and copies
thereof shall have been delivered to you.

          If any of the conditions specified in this Section 6 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions, certificates and documents mentioned above or
elsewhere in this Agreement shall not be in all material respects reasonably
satisfactory in form and substance to you, this Agreement and all your
obligations hereunder may be canceled at, or at any time prior to, the Closing
Date by you. Notice of such cancellation shall be given to the Company and the
Trust in writing or by telephone or telegraph confirmed in writing.

          7. Reimbursement of Your Expenses. If the sale of the Capital
Securities provided for herein is not consummated because any condition to set
forth in Section 6 hereof is not satisfied, because of any termination pursuant
to Section 9 hereof or because of any refusal, inability or failure on the part
of the Company or the Trust to perform any agreement herein or comply with any
provision hereof, the Company will reimburse you upon demand for all
out-of-pocket expenses (including reasonable fees and disbursements of counsel)
that shall have been incurred by you in connection with the proposed offering of
the Capital Securities.

          8. Indemnification. (a) The Company and the Trust agree jointly and
severally to indemnify and hold harmless you and your directors, officers,
employees and agents and each person who controls you within the meaning of
either the Securities Act or the Exchange Act against any and all losses,
claims, damages or liabilities, joint or several, to which they or any of them
may become subject under the Securities Act, the Exchange Act or other Federal
or state statutory law

                                       29
<PAGE>   11

or regulation, at common law or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon any untrue statement or alleged untrue statement of a material fact
contained in any information (whether oral or written) or documents furnished or
made available to you in connection with the transactions contemplated herein,
or arise out of or are based upon the omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and agrees to reimburse each such indemnified
party, as incurred, for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action. This indemnity agreement will be in addition to any
liability which the Company or the Trust may otherwise have.

          (b) The Company agrees to indemnify the Trust against all loss,
liability, claim, damage and expense whatsoever, as due from the Trust under
Section 8(a) hereunder.

          (c) Promptly after receipt by an indemnified party under this Section
8 of notice of the commencement of any action, such indemnified party will, if a
claim in respect thereof is to be made against the indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof;
but the failure so to notify the indemnifying party (i) will not relieve the
indemnifying party from liability under paragraph (a), above unless and to the
extent that the indemnifying party did not otherwise learn of such action and
such failure results in the forfeiture by the indemnifying party of substantial
rights and defenses and (ii) will not, in any event, relieve the indemnifying
party from any obligations to any indemnified party other than the
indemnification obligation provided in paragraph (a) above. The indemnifying
party shall be entitled to appoint counsel of the indemnifying party's choice at
the indemnifying party's expense to represent the indemnified party in any
action for which indemnification is sought (in which case the indemnifying party
shall not thereafter be responsible for the fees and expenses of any separate
counsel retained by the indemnified party or parties except as set forth below);
provided, however, that such counsel shall be satisfactory to the indemnified
party. Notwithstanding the indemnifying party's election to appoint counsel to
represent the indemnified party in an action, the indemnified party shall have
the right to employ separate counsel (including local counsel), and the
indemnifying party shall bear the reasonable fees, costs and expenses of such
separate counsel if (i) the use of counsel chosen by the indemnifying party to
represent the indemnified party would present such counsel with a conflict of
interest, (ii) the actual or potential defendants in, or targets of, any such
action include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties which are different
from or additional to those available to the indemnifying party, (iii) the
indemnifying party shall not have employed counsel satisfactory to the
indemnified party to represent the indemnified party within a reasonable time
after notice of the institution of such action or (iv) the indemnifying party
shall authorize the indemnified party to employ separate counsel at the expense
of the indemnifying party. An indemnifying party will not, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding.

                                       30
<PAGE>   12

          9. Termination. This Agreement shall be subject to termination in the
absolute discretion of you, by notice given to the Company and the Trust prior
to delivery of and payment for the Capital Securities, if prior to such time (i)
trading in any of the Company's securities shall have been suspended by the
Commission or trading in securities generally on the New York Stock Exchange
shall have been suspended or limited or minimum prices shall have been
established on such Exchange, (ii) a banking moratorium shall have been declared
either by Federal or Delaware authorities or (iii) there shall have occurred any
outbreak or escalation of hostilities, declaration by the United States of a
national emergency or war or other calamity or crisis the effect of which on
financial markets is such as to make it, in your judgment, impracticable or
inadvisable to proceed with the offering or delivery of the Capital Securities.

          10. Representations and Indemnities to Survive. The respective
agreements, representations, warranties, indemnities and other statements of the
Company and the Trust or their respective officers or trustees and of you set
forth in or made pursuant to this Agreement will remain in full force and
effect, regardless of any investigation made by or on behalf of you, the Company
or the Trust or any of the officers, directors or trustees, administrators,
controlling persons, and will survive delivery of and payment for the Capital
Securities. The provisions of Sections 7 and 8 hereof shall survive the
termination or cancellation of this Agreement.

          11. Notices. All communications hereunder will be in writing and
effective only on receipt, and, if sent to you, will be mailed, delivered or
telegraphed and confirmed to at 388 Greenwich Street , New York, New York 10013,
attention of the Legal Department; if sent to the Company or the Trust, will be
mailed, delivered or telegraphed and confirmed to it at 68149 Main Street,
Blountsville, Alabama 35031, Attention: Kennon R. Patterson, Sr., Chairman and
Chief Executive Officer, and copy to: William H. Caughran, Assistant Secretary.

          12. Successors. This Agreement will inure to the benefit of and be
binding upon the parties hereto and their respective successors and the officers
and directors and controlling persons, and no other person will have any right
or obligation hereunder.

          13. Applicable Law. THIS AGREEMENT WILL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK WITHOUT REFERENCE TO
PRINCIPLES OF CONFLICTS OF LAW.

                                       31
<PAGE>   13

          If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Company, the Trust and you.

                                     Very truly yours,

                                     Community Bancshares, Inc.

                                     By:  /s/ Kennon R. Patterson, Sr.
                                         --------------------------------------
                                         Name: Kennon R. Patterson, Sr.
                                         Title:  Chairman, President and Chief
                                                 Executive Officer

                                     Community (AL) Capital Trust I

                                     By:
                                         ----------------------------

                                     By:  /s/ Denny Kelly
                                         ----------------------------
                                         Name: Denny Kelly
                                         Title: Administrator

The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written.

Salomon Smith Barney Inc.

By:   /s/ Paul R. Bitler
   ----------------------
    Name: Paul R. Bitler
    Title: Vice President

                                       32
<PAGE>   14

SCHEDULE 1

List of Significant Subsidiaries

         Community Bank

                                       33
<PAGE>   15

ANNEX A

          Pursuant to Section 6(a) of the Placement Agreement, the General
Counsel of the Company shall deliver an opinion to the effect that:

                    (i) each of the Company and the Subsidiaries (A) has been
          duly incorporated and is validly existing as a corporation in good
          standing under the laws of the jurisdiction in which it is chartered
          or organized, with full corporate power and authority to own its
          properties and conduct the business it transacts and proposes to
          transact, (B) is duly qualified to do business as a foreign
          corporation and is in good standing under the laws of each
          jurisdiction which requires such qualification wherein it owns or
          leases material properties or conducts material business, except where
          the failure to be so qualified would not, singularly or in the
          aggregate, have a Material Adverse Effect, and (C) holds all material
          approvals, authorizations, orders, licenses, certificates and permits
          from governmental authorities necessary for the conduct of its
          business, except where the failure to hold such approvals,
          authorizations, orders, licenses, certificates and/or permits would
          not, singularly or in the aggregate, have a Material Adverse Effect;

                    (ii) no consent, approval, authorization or order of any
          court or governmental agency or body is required for the consummation
          of the transactions contemplated herein or in the Operative Documents,
          in connection with the solicitation of the purchase and sale of the
          Capital Securities by you or the purchase of the Subordinated Debt
          Securities by the Trust except such approvals (specified in such
          opinion) as have been obtained;

                    (iii) neither the issue and sale of the Capital Securities
          or the Subordinated Debt Securities, the execution and delivery of the
          Operative Documents by the Company or the Trust and the consummation
          of any other of the transactions therein contemplated in any Operative
          Document nor the fulfillment of the terms thereof will conflict with,
          result in a breach or violation of, or constitute a default under any
          law or the charter or by-laws of the Company or any of its
          Subsidiaries, the terms of any indenture or other agreement or
          instrument known to such counsel and to which the Company or any of
          its Subsidiaries is a party or bound or any judgment, order, decree,
          of any court, regulatory body, administrative agency, governmental
          body or arbitrator having jurisdiction over the Company or any of its
          Subsidiaries, or any provision of applicable law, known to such
          counsel to be applicable to the Company or any of its Subsidiaries,
          except for such conflicts, breaches, violations or defaults which are
          not, in the aggregate, material to the Company and its subsidiaries
          taken as a whole and which do not adversely affect the consummation of
          the transactions contemplated in this Agreement and the Operative
          Documents;

                    (iv) the Company is duly registered as a bank holding
          company under the Bank Holding Company Act and the regulations
          thereunder of the Federal Reserve, and the deposit accounts of the
          Company's banking subsidiaries are insured by the FDIC to the fullest
          extent permitted by law and the rules and regulations of the FDIC, and
          no proceeding for the termination of such insurance are pending or
          threatened;

                                       1
<PAGE>   16

                    (v) each of the Indenture and the Guarantee Agreement has
          been duly authorized, executed and delivered by the Company, and (in
          the case of the Indenture and the Guarantee, respectively, assuming it
          is duly authorized, executed and delivered by the Indenture Trustee
          and the Guarantee Trustee, respectively) constitutes a legal, valid
          and binding instrument of the Company enforceable against the Company
          in accordance with its terms, subject to Bankruptcy and Equity; the
          Subordinated Debt Securities have been duly and validly authorized and
          delivered to the Indenture Trustee for authentication in accordance
          with the Indenture, when authenticated in accordance with the
          provisions of the Indenture and delivered to and paid for by the
          relevant Trust, will constitute legal, valid and binding obligations
          of the Company entitled to the benefits of the Indenture and
          enforceable against the Company in accordance with its terms, subject
          to Bankruptcy and Equity;

                    (vi) this Agreement has been duly authorized, executed and
          delivered by the Company;

                    (vii) the Declaration has been duly authorized, executed and
          delivered by the Company and the Trust;

                    (viii) this Agreement has been duly executed and delivered
          by the Trust;

                    (ix) neither the Company nor the Trust is an "investment
          company" or an entity "controlled" by an "investment company," in each
          case within the meaning of Section 3(a) of the Investment Company Act;
          and

                    (x) assuming the accuracy of the representations and
          warranties and compliance with the agreements contained herein, no
          registration of any of the Securities under the Securities Act is
          required for the offer and sale to you of the Capital Securities in
          the manner contemplated by this Agreement, and the Indenture, the
          Declaration and the Guarantee are not required to be qualified under
          the Trust Indenture Act of 1939.

                  In rendering such opinions, such counsel may (A) state that
         its opinion is limited to the laws of Delaware and New York, the
         corporate laws of the State of Delaware and the Federal laws of the
         United States and (B) rely as to matters involving the application of
         laws of any jurisdiction other than New York and Delaware or the United
         States, to the extent deemed proper and specified in such opinion, upon
         the opinion of other counsel of good standing believed to be reliable
         and who are satisfactory to you and as to matters of fact, to the
         extent deemed proper, on certificates of responsible officers of the
         Company and public officials.

                                       2
<PAGE>   17

ANNEX B

          Pursuant to Section 6(c) of the Placement Agreement, Richards, Layton
& Finger shall deliver an opinion in the following form.

          (i) The Trust is a duly formed and validly existing statutory business
trust in good standing under the Business Trust Act of the State of Delaware
with the business trust power and authority to enter into and perform its
obligations under this Agreement, the Securities and the Declaration and to own
property and conduct its business as described in the Declaration.

          (ii) Under the Delaware Business Trust Act and the Declaration, the
execution and delivery by the Trust of this Agreement, and the performance by
the Trust of its obligations hereunder, have been duly authorized by all
necessary business trust action on the part of the Trust.

          (iii) The Declaration constitutes a valid and binding obligation of
the Company and the Trustees, enforceable against the Company and the Trustees,
in accordance with its terms, subject, as to enforcement, to the effect upon the
Declaration of (a) bankruptcy, insolvency, moratorium, receivership,
liquidation, fraudulent conveyance and transfer, reorganization and other
similar laws relating to or affecting the remedies and rights of creditors, (b)
general principles of equity (regardless of whether considered or applied in a
proceeding in equity or at law), (c) considerations of public policy or the
effect of applicable law relating to fiduciary duties, and (d) principles of
course of dealing or course of performance and standards of good faith, fair
dealing, materiality or reasonableness that may be applied by a court to the
exercise of rights or remedies.

          (iv) The Common Securities have been duly authorized for issuance by
the Trust and upon issuance and delivery by the Trust to the Company against
payment therefor as described in the Declaration, will be duly and validly
issued and will represent duly issued beneficial interests in the Trust. The
issuance of the Common Securities is not subject to preemptive or other similar
rights under the Declaration or the Business Trust Act; provided, that such
counsel may note that the holders of Common Securities may be required to make
payment or provide indemnity or security as set forth in the Declaration.

          (v) The Capital Securities have been duly authorized for issuance by
the Trust, and, when issued and delivered against payment therefor as provided
herein, will be duly and validly issued and, subject to the qualifications set
forth herein, fully paid and non-assessable beneficial interests in the Trust;
the issuance of the Capital Securities is not subject to preemptive or other
similar rights under the Declaration or the Business Trust Act; and the holders
of the Capital Securities will be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware; provided that such
counsel need express no opinion as to any holder of a Capital Security that is,
was or becomes a named Trustee of the Trust. Such counsel may note that the
holders of the Capital Securities may be required to make payment or provide
indemnity or security as set forth in the Declaration.

          (vi) The issuance and sale by the Trust of the Securities, the
execution, delivery

                                       1
<PAGE>   18

and performance by the Trust of the Agreement, the consummation by the Trust of
the transactions contemplated therein and the compliance by the Trust with its
obligations thereunder do not violate (a) any of the provisions of the
Certificate of Trust of the Trust or the Declaration or (b) any Delaware law or
Delaware administrative regulation applicable to the Trust.

          (vii) Assuming that the Trust derives no income from or connected with
sources within the State of Delaware and has no assets, activities (other than
having a Delaware trustee as required by the Delaware Business Trust Act and the
filing of documents with the Secretary of State of the State of Delaware) or
employees in the State of Delaware, no authorization, approval, consent or order
of any Delaware court or Delaware governmental authority or Delaware agency is
required to be obtained by the Trust solely as a result of the issuance and sale
of the Capital Securities, the consummation by the Trust of the transactions
contemplated herein or the compliance by the Trust with its obligations
hereunder, except such as have been obtained and such as may be required by the
securities laws of the State of Delaware (as to which such counsel need express
no opinion).

          (viii) Assuming that the Trust derives no income from or connected
with sources within the State of Delaware and has no assets, activities (other
than having a Delaware trustee as required by the Delaware Business Trust Act
and the filing of documents with the Secretary of State of the State of
Delaware) or employees in the State of Delaware, and assuming that the Trust is
treated as a grantor trust for federal income tax purposes and that the holders
of the Capital Securities are viewed for federal income tax purposes as owners
of either all of, or their liquidation and accrued but unpaid share of, the
Subordinated Debt Securities held by the Trust, the holders of Capital
Securities (other than those holders of Capital Securities, or persons who are
partners or S corporation shareholders for federal income tax purposes in such
holders of Capital Securities, who reside or are domiciled in the State of
Delaware or who are otherwise subject to income taxation in the State of
Delaware) will have no liability for income taxes imposed by the State of
Delaware solely as a result of their participation in the Trust, and the Trust
will not be liable for any income tax imposed by the State of Delaware (in
rendering the opinion expressed in this paragraph (viii), such counsel need
express no opinion concerning the securities laws of the State of Delaware).

                                       2
<PAGE>   19

ANNEX C

          Pursuant to Section 6(d) of the Placement Agreement, White & Case LLP
shall deliver an opinion to the effect that:

                    (i) The Bank of New York, is a national banking association
          with trust powers duly organized and validly existing in good standing
          under the laws of the United States of America with all necessary
          corporate power and authority to execute, deliver and carry out and
          perform its obligations under the terms of the Guarantee Agreement,
          the Declaration and the Indenture;

                    (ii) the execution, delivery and performance by The Bank of
          New York of the Guarantee Agreement, the Declaration and the Indenture
          have been duly authorized by all necessary corporate action on the
          part of The Bank of New York and each of the Guarantee Agreement, the
          Declaration and the Indenture has been duly executed and delivered by
          The Bank of New York, and constitutes the legal, valid and binding
          obligation of The Bank of New York, enforceable against it in
          accordance with its terms (subject to Bankruptcy and Equity);

                    (iii) the execution, delivery and performance of the
          Guarantee Agreement, the Declaration and the Indenture by The Bank of
          New York do not conflict with or constitute a breach of the charter or
          by-laws of The Bank of New York; and

                    (iv) no consent, approval or authorization of, or
          registration with or notice to, any governmental authority or agency
          of the United States of America governing the banking or trust powers
          of The Bank of New York is required for the execution, delivery or
          performance by it of the Guarantee Agreement, the Declaration and the
          Indenture.

                                       1
<PAGE>   20

ANNEX D

          Pursuant to Section 6(e) of the Placement Agreement, Richards, Layton
& Finger shall deliver an opinion to the following form.

                                       1

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