EXHIBIT 2
THIS OPTION, AND THE SECURITIES FOR WHICH THIS OPTION MAY BE EXERCISED, HAS NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), OR THE SECURITIES, OR "BLUE SKY," LAWS OF ANY STATE OR OTHER DOMESTIC OR
FOREIGN JURISDICTION. THIS OPTION HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH
A VIEW TO DISTRIBUTION AND RESALE AND NEITHER THIS OPTION NOR ANY INTEREST
THEREIN, OR IN THE SECURITIES FOR WHICH THIS OPTION MAY BE EXERCISED, MAY BE
SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED OR OTHERWISE DISPOSED
OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT IN EFFECT UNDER THE SECURITIES
ACT AND OTHER APPLICABLE LAWS OR A WRITTEN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE FOR SUCH TRANSACTIONS UNDER THE
SECURITIES ACT AND OTHER APPLICABLE LAWS.
THE OPTION EVIDENCED BY THIS OPTION AGREEMENT SHALL BE NON-TRANSFERABLE, EXCEPT
IN THE CASE OF THE HOLDER'S DEATH WHERE THE HOLDER IS A NATURAL PERSON, AND
THEREUPON ONLY BY WILL OR UNDER THE LAWS OF DESCENT AND DISTRIBUTION. UPON ANY
SUCH DEATH OF THE HOLDER, THE DECEASED HOLDER'S LEGAL OR PERSONAL
REPRESENTATIVE, OR ANY PERMITTED TRANSFEREE OF THIS OPTION SHALL, WITHIN 30 DAYS
OF THE HOLDER'S DEATH, NOTIFY COMMUNITY BANCSHARES, INC. (THE "COMPANY") OF SUCH
EVENT AND THE NEW HOLDER'S NAME, ADDRESS AND CAPACITY IN WHICH THIS OPTION IS
HELD. SUCH PERMITTED TRANSFEREE WILL BE SUBJECT TO, AND BOUND BY, THE TERMS AND
PROVISIONS OF THIS OPTION TO THE SAME EXTENT AS THE ORIGINAL HOLDER; PROVIDED,
HOWEVER, THAT THIS OPTION SHALL IMMEDIATELY TERMINATE UNLESS SUCH PERMITTED
TRANSFEREE IS ALSO THE PERMITTED TRANSFEREE AND ACTUAL RECIPIENT AND HOLDER OF
ALL SHARES OF THE COMMON STOCK, PAR VALUE $0.10 PER SHARE, OF THE COMPANY, AS
PURCHASED BY THE DECEASED HOLDER PURSUANT TO THE COMPANY'S OFFERING MEMORANDUM,
DATED DECEMBER 8,2003.
FORM OF NONTRANSFERABLE OPTION AGREEMENT
FOR THE OPTION TO PURCHASE
SHARES OF SERIES 2003 PREFERRED STOCK
OF
COMMUNITY BANCSHARES, INC.
Name of Holder: _________________________________
Total Purchase Price for Shares: $_______________
Page 10 of 18
THIS OPTION AGREEMENT (this "Agreement") is dated as of December 10, 2003, and
is entered into by and between Community Bancshares, Inc., a Delaware
corporation (the "Company"), and the Holder named above (the "Holder," and,
together with the Company, the "Parties")). The option ("Option") represented by
this Agreement is being granted to the Holder in consideration of, and as an
inducement to, the Holder's purchase of shares (such shares, the "Shares") of
the Company's common stock, par value $0.10 per share (the "Common Stock"),
pursuant to the terms of a Subscription Agreement, dated as of the date hereof,
by and between the Parties (the "Subscription Agreement"), at a total purchase
price equal to the total purchase price set forth above (the "Purchase Price").
Section 1. Exercise of Option.
1.1 Vesting. The Holder's rights under this Option are fully vested as of
the date hereof.
1.2 Exercisability: Termination. This Option shall be exercisable by the
Holder, only in whole and not in part, at any time from the date hereof until
the earlier to occur of the following (each, an "Expiration Event," and the
period from the date hereof to the earliest Expiration Date, the "Exercise
Period"):
(i) December 31, 2008;
(ii) the Holder's attempted sale, transfer, conveyance or other
disposition of this Option or any interest herein, except as
permitted hereby, at which point this Option shall immediately
terminate and become null and void;
(iii) the sale, transfer, conveyance or other disposition by the Holder of
any of the Shares or any interest therein purchased by the Holder
pursuant to the Subscription Agreement; and
(iv) the Company's consolidation with, merger into, or share exchange
with, another corporation or other entity, where the Company is not
the continuing corporation after such merger or consolidation.
Upon the occurrence of any Expiration Event, this Option shall immediately and
automatically terminate and become null and void without any further action by
either of the Parties.
1.3 Procedure for Exercise of Option.
(a) Upon proper exercise, the Holder is entitled to receive that
number of whole and fractional shares of the Company's Series 2003
Preferred Stock (as defined below) having an aggregate Liquidation
Preference (as defined below) equal to the Purchase Price. "Series 2003
Preferred Stock" or "Preferred Shares" shall mean the noncumulative
preferred stock of the Company designated as the Series 2003 Noncumulative
Preferred Stock, having the rights and designations set forth on the
Company's Certificate of Designations therefor, as filed with the
Secretary of State of the State of Delaware (the "Certificate of
Designations"). The term "Liquidation Preference" shall have the meaning
ascribed to it in the Certificate of Designations. Each whole Preferred
Share shall have a Liquidation Preference of S500,000.
Page 11 of 18
(b) To exercise this Option, the Holder shall deliver to the
Company, at 00000 Xxxx Xxxxxx, Xxxxxxxxxxxx, Xxxxxxx 00000, Facsimile No.
(000) 000-0000, Attention: Xxxxxxx X. Xxxxxxxx, Xx., at any time during
the Exercise Period: (i) a completed and signed Notice of Exercise
(including a completed and separately executed IRS Substitute Form W-9,
which forms a part thereof), a form of which is attached hereto; (ii)
those certificates representing all of the same Shares purchased by the
Holder pursuant to the Subscription Agreement, duly endorsed to effect a
transfer to the Company with no further action by the Company; and (iii)
this Option. No commission or other remuneration shall be paid or given
directly or indirectly in connection with such exchange. Upon the
Company's irrevocable receipt of such IRS Substitute Form W-9, the Shares
and the Option Agreement, the Company shall issue the Preferred Shares to
the Holder and in the same name as the Shares are registered on the
Company's books, and the Holder shall be deemed to be the holder of record
of such Preferred Shares, notwithstanding that the stock transfer books of
the Company may then be closed or that certificates representing such
Preferred Shares may not then be actually delivered to the Holder. At the
same time, the Company shall cancel the certificate(s) representing the
Shares, return the Shares to authorized but unissued shares of Common
Stock, and cancel the Option Agreement.
(c) The Company shall, as promptly as practicable after completion
of the actions specified in Section 1.3(b) above, and in no event later
than ten (10) business days after the completion of such actions, cause to
be executed, and deliver to the Holder a certificate representing the
aggregate number of whole and/or fractional Preferred Shares. Each
certificate representing the Preferred Shares so delivered shall be
registered in the name of the Holder as set forth on the Subscription
Agreement. The Company shall pay all expenses, stock transfer taxes and
other charges payable in connection with transfer of the Shares of Common
Stock to the Company and the preparation, execution and delivery of the
certificates for the Preferred Shares.
1.4 Restrictive Legend. Each certificate for Preferred Shares shall
contain the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES, OR "BLUE SKY,"
LAWS OF ANY STATE OR OTHER DOMESTIC OR FOREIGN JURISDICTION. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
DISTRIBUTION AND RESALE AND NEITHER THESE SECURITIES NOR ANY INTEREST
THEREIN MAY BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, TRANSFERRED
OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO A REGISTRATION STATEMENT IN
EFFECT UNDER THE SECURITIES ACT AND OTHER APPLICABLE LAWS OR A WRITTEN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED AND THAT AN EXEMPTION FROM SUCH REGISTRATION
IS AVAILABLE FOR SUCH TRANSACTIONS UNDER THE SECURITIES ACT AND OTHER
APPLICABLE LAWS.
Page 12 of 18
The certificates shall also bear any additional legends that are required
by, or are appropriate with respect to the rules and regulation of, any state,
local, foreign or other securities authorities. The Company's transfer agent and
registrar will maintain stop transfer instructions on record for the Preferred
Shares until it has been notified by the Company, upon the advice of counsel,
that such instructions may be waived. Such stop transfer instructions will limit
the method of sale of the Preferred Shares, consistent with Securities and
Exchange Commission (the "SEC") Rule 144 or other available exemptions from
registration under the Securities Act of 1933, as amended. Any transfers will
require an opinion of counsel reasonably satisfactory to the Company and its
counsel prior to such transfers.
1.5 Character of Preferred Shares. The Company represents and warrants
that all Preferred Shares shall be duly authorized, validly issued, and, upon
payment of the Exercise Consideration therefor, fully paid and nonassessable,
and free from all taxes, liens, hypothecations, security interests, adverse
claims or interests and charges created in respect of the issue thereof. Each
person in whose name any such certificate for Preferred Shares is issued shall
for all purposes be deemed to have become the holder of record of the Preferred
Stock represented thereby on the date of proper exercise of the Option resulting
in the issuance of such shares, irrespective of the date of issuance or delivery
of such certificate.
1.6 Fractional Shares. The Company shall, where necessary, issue
fractional Preferred Shares, or scrip representing fractional Preferred Shares,
as may be appropriate under this Option.
1.7 Notice of Proposed Actions. In the event that the Company shall
propose to undertake any action as described in paragraph (iv) of Section 1.2
above, then the Company shall forward, at the same time and in the same manner,
to the Holder (if not previously notified) such notice and related proxy or
other materials, if any, that the Company gives to holders of its Common Stock.
Failure to give such notice, or any defect therein, however, shall not affect
the legality or validity of any such action.
Section 2. Ownership and Transfer.
2.1 Ownership. The Company may deem and treat the person in whose name
this Option is registered as the Holder and owner hereof (notwithstanding any
notations of ownership or writing hereon made by anyone other than the Company)
for all purposes and shall not be affected by any notice to the contrary.
2.2 Transfers. This Option is not separable from the Shares and is
non-transferable, except in the case of the Holder's death where the Holder is a
natural person, and thereupon only by will or under the laws of descent and
distribution. Upon any such death of the Holder, the deceased Holder's legatees
or legal or personal representatives, or any permitted transferee of this option
shall, within 30 days of the Holder's death, notify the Company of such event
and the proposed new holder's name, address, capacity and the basis upon which
such proposed new holder is a permitted transferee, in which this option may be
transferred and held. Such permitted transferee will be subject to, and bound
by, the terms and provisions of this Option to the same extent as the original
Holder; provided, however, that this Option shall immediately terminate unless
such permitted transferee is also the permitted transferee and the actual
recipient and holder of all of the Shares purchased by the Holder pursuant to
the Subscription Agreement.
Page 13 of 18
2.3 Replacement. Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft or destruction of this Option, and of
indemnity or security reasonably satisfactory to it, or upon surrender of this
Option if mutilated, the Company will make and deliver a new Option of like
tenor, in lieu of this Option. This Option shall be promptly canceled by the
Company upon the surrender hereof in connection with any transfer or
replacement. Except as otherwise provided above in the case of the loss, theft
or destruction of an Option, the Company shall pay all expenses, taxes and other
charges payable in connection with any transfer or replacement of this Option.
Applicants for such substitute Options shall also comply with such other
reasonable regulations and pay such other reasonable charges incidental thereto
as the Company may reasonably prescribe. Any such new Option shall constitute an
original contractual obligation of the Company, whether or not the allegedly
lost, stolen, mutilated or destroyed Option shall at any time be presented.
2.4 Cancellation of Option. Any Option surrendered upon exercise shall be
cancelled and shall not be reissued by the Company. This Option shall terminate
upon a transfer of any related Shares automatically and without action by
anyone, and shall expire and be cancelled if not exercised by December 31, 2008.
Any Option so cancelled shall be marked cancelled and destroyed by the Company.
Section 3. Miscellaneous.
3.1 Reservation of Shares. The Company covenants that, at all times during
the Exercise Period, it will reserve a sufficient number of shares of the
Company's Series 2003 Preferred Stock to provide for the issuance of the
Preferred Shares upon the exercise of this Option.
3.2 No Rights as Stockholder; Limitation of Liability. This Option shall
not entitle the Holder to any of the rights of a holder of Shares or of the
Company's Series 2003 Preferred Stock, including, without limitation, any
liquidation preference, prior to the exercise of this Option and the delivery to
the Company of the Shares as consideration therefor.
3.3 Amendment. This Option Agreement may only be modified or amended, and
any provision hereof may only be waived, by a writing executed by the Company
and the Holder of this Option.
3.4 Successors and Assigns. This Option Agreement shall be binding upon,
and inure to the benefit of, the Parties and their respective successors and
assigns permitted hereunder, and no other parties shall have any rights
hereunder.
3.5 Goveming Law. This Option Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of Alabama.
3.6 Entire Agreement; Other Benefits. Except as otherwise expressly
provided herein, this Option Agreement constitutes the entire agreement among
the Parties with respect to the transactions contemplated hereunder and
supersedes all prior arrangements or understandings with respect thereto,
written or oral.
Page 14 of 18
3.7 Standing. Nothing in this Option Agreement is intended, or shall be
construed, to confer upon, or give to, any person other than the Company and the
Holder any right, remedy or claim under or by reason of this Option Agreement or
of any covenant, condition, stipulation, promise or agreement contained herein.
All covenants, conditions, stipulations, promises and agreements contained in
this Option Agreement shall be for the sole and exclusive benefit of the Company
and its successors, and the Holder (and his legatees and beneficiaries as
provided in Section 2.2 above, and no other person shall have any other rights
or interests herein, whether as third party beneficiaries, transferees,
assignees or otherwise.
3.8 Headings. etc. The descriptive headings of the articles and sections
of this Option Agreement are inserted for convenience of reference only and
shall not control or affect the meaning or construction of any of the provisions
hereof. As under herein, the singular shall include the plural and the terms
"include" and "including" shall mean without limitation by way of enumeration or
otherwise.
3.9 Counterparts. This Option Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
Page 15 of 18
IN WITNESS WHEREOF, the parties hereto have set their hands or caused this
Agreement to be executed by their respective officers thereunto duly authorized
as of the date first written above.
COMMUNITY BANCSHARES, INC.
By:
----------------------------------
Name:
Title:
THE HOLDER
By:
----------------------------------
Name:
Title:
Page 16 of 18
FORM OF NOTICE OF EXERCISE OF
OPTION TO PURCHASE SHARES OF
THE SERIES 2003 NONCUMULATIVE PREFERRED STOCK OF
COMMUNITY BANCSHARES, INC.
To: Community Bancshares, Inc.
The undersigned, duly authorized and acting for and on behalf of the
registered owner of this Option, hereby irrevocably elects to exercise the
exchange rights represented thereby for, and to acquire, by exchange and
surrender to Community Bancshares, Inc. (the "Company") in good delivery form,
shares of the Company's common stock purchased in the Company's offering of its
common stock pursuant to a Confidential Limited Offering Memorandum, dated
December 8, 2003 (the "Offering"), shares of Series 2003 Noncumulative Preferred
Stock (the "Preferred Shares") of the Company, representing the number of whole
and partial shares of Preferred Stock having an aggregate liquidation preference
equal to the owner's total investment in the Company's Offering of its common
stock, and herewith surrenders, in good delivery form, the same shares of the
Company's common stock purchased in the Offering for cancellation and that there
are no pledges, liens, encumbrances or other adverse interests upon or in such
shares of common stock or option. The undersigned is sole owner of the shares of
common stock and Option and hereby surrenders, assigns and conveys to the
Company all rights, title and interest in and to the shares of common stock and
Option. The undersigned requests that certificates evidencing the shares of
Preferred Stock to be issued as a result of this exercise of the Option and
related exchange, be registered in the name of and be delivered to:
Name: _______________________________
Address: _______________________________
_______________________________
_______________________________
_______________________________
Social Security or
Tax ID. Number: _______________________________
Dated: _________________
THE HOLDER
By:
----------------------------------
Name:
Title:
Page 17 of 18
SUBSTITUTE FORM W-9
Under the penalties of perjury, I certify that:
(1) the Social Security Number or Taxpayer Identification Number given
below is correct; and
(2) I am not subject to backup withholding either because I have not
been notified that I am subject to backup withholding as a result of
a failure to report all interest or dividends, or because the
Internal Revenue Service has notified me that I am no longer subject
to backup withholding.
Important Instructions: You must cross out #2 above if you have been notified by
the Internal Revenue Service that you are subject to backup withholding because
of under reporting interest or dividends on your tax return and if you have not
received a notice from the Internal Revenue Service advising you that backup
withholding due to notified payee under reporting has terminated. For additional
instructions, please refer to the attached "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9."
Signature*: ________________________
Date: ______________________________
----------
* If a corporation, please sign in full corporate name by president or other
authorized officer. When signing as officer, attorney, custodian, trustee,
administrator, guardian, etc., please give your full title as such. In case of
joint tenants, each person must sign.
THIS NOTICE OF EXERCISE SHALL NOT BE GIVEN EFFECT
BY THE COMPANY UNLESS THE HOLDER OF THE UNDERLYING
OPTION HAS PROPERLY COMPLETED AND SIGNED BOTH
THE NOTICE OF EXERCISE FORM AND THE SUBSTITUTE FORM W-9.
Page 18 of 18
