COMMUNITY BANCSHARES INC /DE/
NONQUALIFIED STOCK OPTION AGREEMENT, MARCH 11, 2004
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<TYPE>EX-10.35
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<DESCRIPTION>NONQUALIFIED STOCK OPTION AGREEMENT, MARCH 11, 2004
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 <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="right"><FONT FACE="Times New Roman" SIZE="2"><B>EXHIBIT 10.35 </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>COMMUNITY BANCSHARES, INC. </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT
FACE="Times New Roman" SIZE="2"><B>2004 NONQUALIFIED STOCK OPTION AGREEMENT </B></FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">THIS AGREEMENT is made and entered into as of March 11, 2004, between grantor Community Bancshares, Inc., a Delaware corporation (the &#147;Corporation&#148;) and grantee,
<U>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</U> (the &#147;Grantee&#148;). </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px" ALIGN="center"><FONT FACE="Times New Roman" SIZE="2"><B>W I T N E S S E T H: </B></FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">The Board of Directors of the Corporation (the &#147;Board&#148;) approved
the grant to Grantee of awards under the Corporation&#146;s long-term incentive program and established the terms and conditions of such awards, as contained in this Agreement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">NOW, THEREFORE, the parties hereto agree as follows: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">1. <B>Grant of Option.</B> Grantee shall have the right and option to purchase on the terms and conditions set forth herein, all or any part
of an aggregate of 25,000 shares (&#147;Option Shares&#148;) of the $.10 par value common stock of the Corporation (the &#147;Common Stock&#148;) at the purchase price of $5.50 per share (the &#147;Option Price&#148;). The Option Price is 100% of
the fair market value of the Common Stock on March 11, 2004, the date of the grant of the option covered by this Agreement. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">2. <B>Terms and Conditions. </B>It is understood and agreed that the option evidenced hereby is subject to the following terms and conditions: </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(a) <U>Expiration Date.</U> The option shall expire five (5) years after the
date of grant (the &#147;Expiration Date&#148;). After the Expiration Date, the parties shall have no further rights or obligations hereunder. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(b) <U>Exercise of Option.</U> The option covered by this Agreement may be exercised by Grantee from time to time, in whole or in part, at any time prior
to the Expiration Date subject to the restrictions in Section 2(d), (e) and (f). </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">(c) <U>Method of Exercise and Payment of Purchase Price Upon Exercise.</U> The Grantee may elect to exercise the option by giving written notice of such election to the Corporation, in such form as the Board may
require, accompanied by payment of the full purchase price of the Option Shares for which the election is made. Payment of the Option Price shall be made in cash or Common Stock that was acquired at least six (6) months prior to the exercise of the
option, or a combination thereof. To the extent permitted by applicable law, the option may be exercised and the exercise price paid pursuant to arrangements with brokerage firms permitted under Regulation T of the Federal Reserve Board or successor
regulations or statutes. Any federal or state tax withholding requirements can be satisfied by shares of Common Stock acquired pursuant to the option exercise. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P>
<P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">(d) <U>Exercise Upon Termination of Affiliation with the Corporation </U>. If the Grantee&#146;s affiliation in any capacity (i.e. as an employee or a
director), but not necessarily in all capacities, with the Corporation and/or its subsidiaries is terminated for Cause (as defined below), the option shall expire on the date of termination of Grantee&#146;s affiliation with the Corporation. Except
as provided in the preceding sentence, the option may be exercised at any time during the stated term of the option notwithstanding the termination of Grantee&#146;s affiliation with the Corporation due to death, disability, retirement or other
reasons. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">3. <B>No Rights as Shareholder or to Employment or to Directorship.
</B>No option granted hereunder shall entitle the holder thereof to any rights as a shareholder in the Corporation with respect to any shares to which the option relates until such shares have been paid for in full and issued. Furthermore, the
option shall not confer upon the Grantee any rights of employment with the Corporation or any of its subsidiaries or any rights to be a director of the Corporation or any of its subsidiaries or affect the right of the Corporation or its subsidiaries
to terminate the affiliation of the Grantee at any time, with or without cause. </FONT></P>

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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">4. <B>Restrictions on Transfer of Shares and Option.</B> Grantee hereby agrees for himself or herself and his or her
legal representative, heirs and distributees, that if a registration statement covering the shares issuable upon exercise of any option hereunder is not effective under the Securities Act of 1933, as amended (the &#147;Act&#148;), at the time of
such exercise, or if some other exemption from the provisions of the Act is not available, then all shares of Common Stock then received or purchased upon such exercise shall be acquired for investment, and that the notice of exercise delivered to
the Corporation shall be accompanied by a representation in writing acceptable in scope and form to counsel to the Corporation and signed by Grantee or Grantee&#146;s legal representative, heirs or distributees, as the case may be, to the effect
that the shares are being acquired in good faith for investment and not with a view to distribution thereof. Any shares so acquired may be deemed restricted securities under Rule 144 as promulgated by the Securities and Exchange Commission under the
Act, and as the same may be amended or replaced and subject to restrictions upon sale or other disposition. This option has not been registered under the Act or any applicable state securities laws in reliance upon registration exemptions in the Act
and such laws. Grantee represents that Grantee is acquiring this option for Grantee&#146;s own account for investment and not with a view to any resale or distribution thereof. Grantee understands and agrees that the option (in addition to the
restriction on transfer set forth in Section 6) this option may not be sold, transferred or otherwise disposed of without registration under the Act and applicable state securities laws except in compliance with an exemption from such registration,
the availability of which has been confirmed by an opinion of legal counsel or other evidence satisfactory to the Corporation. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">5. <B>Registration of Shares.</B> If at any time the Board shall determine that the listing, registration or qualification of any shares subject to the option upon any
securities exchange, or under any state or federal law, or the consent or approval of any governmental or regulatory body is necessary or desirable as a condition of or in connection with the issuance or purchase of shares hereunder, the option may
not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval has been effected or obtained free of any conditions not acceptable to the Board. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">6. <B>Transfer of Rights.</B> This option is not transferable except by will or by the laws
of descent and distribution and shall be exercisable during Grantee&#146;s lifetime only by Grantee. After the death of Grantee, this option may be exercised only by Grantee&#146;s estate or by the person or persons entitled to the option under
Grantee&#146;s will or the laws of descent and distribution, as appropriate. In the event the option is transferred to the Grantee&#146;s estate, the option may be exercised by the estate only to the extent that the Grantee would have been entitled
had the option not been transferred. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">7. <B>Definitions</B>. For the purposes
of this Agreement, the following term shall have the definition set forth below: </FONT></P> <P STYLE="margin-top:0px;margin-bottom:-6px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT
FACE="Times New Roman" SIZE="2">&#147;Cause&#148; means (i) any act (A) that constitutes, on the part of the Grantee, fraud, dishonesty, a felony or gross malfeasance of duty and (B) that directly results in a material injury to the Corporation; or
(ii) conduct by the Grantee in his office with the Corporation that is grossly inappropriate and demonstrably likely to lead to material injury to the Corporation, as determined by the Board acting reasonably and in good faith; provided, however,
that in the case of (ii) above, such conduct shall not constitute Cause unless the Board shall have delivered to the Grantee notice setting forth with specificity (A) the conduct deemed to qualify as Cause, (B) reasonable action that would remedy
such objection, and (C) a reasonable time (not less than 30 days) within which the Grantee may take such remedial action, and the Grantee shall not have taken such specified remedial action within such specified reasonable time. </FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">8. <B>Disposition of Shares. </B>Grantee agrees to notify the Corporation promptly of the
disposition of any shares of Common Stock purchased pursuant to this option which are disposed of within one year after transfer of such shares to Grantee, or within two years of the date of the grant of such option. For purposes of such
notification, &#147;disposition&#148; shall have the meaning assigned to it in Section 425(c) of the Code. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">9. <B>Adjustment of Awards. </B>In the event of any change in corporate capitalization, such as stock split, or a corporate transaction, such as a merger, consolidation, separation or other distribution of stock or
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 <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">property of the Corporation, any reorganization (whether or not such reorganization comes within the definition of such
term in Code Section 368) or any partial or complete liquidation of the Corporation, such adjustment shall be made in the number and class of and/or price of the Option Shares as may be determined to be appropriate and equitable by the
Corporation&#146;s Board of Directors, in its sole discretion, to prevent dilution or enlargement of the benefits or potential benefits intended to be available under this agreement; provided that the number of Option Shares shall always be a whole
number. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">10. <B>Interpretation. </B>Any question of interpretation or
application of this Agreement shall be resolved by the Corporation&#146;s Board of Directors and its determination shall be final and binding on the Corporation and Grantee. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">11. <B>Notices.</B> All notices hereunder shall be in writing and, if to the Corporation, shall be delivered personally to the Chairman or
mailed to the Corporation&#146;s principal office at P.O. Box 1000, Blountsville, Alabama 35031, addressed to the attention of the Chairman; and if to Grantee, shall be delivered personally or mailed to him at the address for Grantee found in the
Corporation&#146;s records. Such addresses may be changed at any time by notice from one party to the other. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT
FACE="Times New Roman" SIZE="2">12. <B>Binding Effect.</B> This Agreement shall bind and inure to the benefit of the parties hereto, the successors and assigns of the Corporation and the person to whom the rights of Grantee are transferred by will
or the laws of descent and distribution. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT FACE="Times New Roman" SIZE="2">13. <B>Amendment.</B> This Agreement
may be amended from time to time by the Board, but no such amendment shall impair the rights of the Grantee without the Grantee&#146;s consent. </FONT></P> <P STYLE="margin-top:0px;margin-bottom:0px"><FONT SIZE="1">&nbsp;</FONT></P> <P
STYLE="margin-top:0px;margin-bottom:0px; text-indent:4%"><FONT FACE="Times New Roman" SIZE="2">IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. </FONT></P> <P
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<TD VALIGN="bottom" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">COMMUNITY BANCSHARES, INC.</FONT></P></TD></TR>
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<TD VALIGN="bottom"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">/s/ Patrick M. Frawley</FONT></P><HR WIDTH="76%" SIZE="1" NOSHADE COLOR="#000000" ALIGN="left"></TD></TR>

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<TD VALIGN="bottom" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">GRANTEE:</FONT></P></TD></TR>
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<TD VALIGN="bottom" COLSPAN="3"> <P STYLE="margin-top:0px;margin-bottom:0px; margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">/s/ Grantee</FONT></P><HR WIDTH="76%" SIZE="1" NOSHADE COLOR="#000000"
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<TD VALIGN="bottom" COLSPAN="3"> <P STYLE="margin-left:1.00em; text-indent:-1.00em"><FONT FACE="Times New Roman" SIZE="2">Signature</FONT></P></TD></TR>
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