<PAGE>
As filed with the Securities and Exchange Commission _____________________, 1998
Registration No.: ________________
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-8
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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COMMUNITY BANKS, INC.
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(Exact Name of Registrant as Specified in its Charter)
Pennsylvania
- --------------------------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
6022
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(Primary Standard Industrial Classification No.)
23-2251762
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(I.R.S. Employer Identification No.)
150 Market Square, Millersburg, Pennsylvania 17061 (717) 692-4781
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(Address, including zip code, and telephone number, including area code, or
registrant's principal executive offices)
1998 Long-Term Incentive Plan
-----------------------------
(Full title of plan)
EDDIE L. DUNKLEBARGER
President and C.E.O.
COMMUNITY BANKS, INC.
150 Market Square
Millersburg, Pennsylvania 17061 (717) 692-4781
----------------------------------------------------
(Name, address and telephone number of Agent for Service)
Copies to:
BRADLEY A. WALKER
METTE, EVANS & WOODSIDE
3401 North Front Street
P.O. Box 5950
Harrisburg, Pennsylvania 17110-0950
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
Proposed
Title of each class Amount Proposed maximum
of securities to be to be maxiumu offering aggregate offering Amount of
registered Registered price per unit /1/ price registration fee
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock 1,000,000 $24.9375 $24,937,500 $7,556.82
Par value
$5.00 per share
- --------------------------------------------------------------------------------------------------------
</TABLE>
/1/ Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457, and based on the average of the high and low prices
of the Common Stock on June 12, 1998, as reported on the American Stock
Exchange.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF DOCUMENTS BY REFERENCE.
The following documents filed by Community Banks, Inc. (the "Company") with
the SEC, or other governing body as appropriate, are incorporated herein by
reference:
(1) The Annual Report of the Company on Form 10-K for its fiscal year ended
December 31, 1997.
(2) All other reports filed pursuant to Section 13(a) or 15(d) of the
Exchange Act of 1934 since December 31, 1997.
(3) The description of the Company's common stock contained in the
Registration Statement filed with the Board of Governors of the Federal Reserve
System pursuant to Section 12(g) of the Exchange Act of 1934, which Registration
Statement became effective on or about October 7, 1994.
(4) All documents subsequently filed by the Company with the SEC pursuant
to Section 13(a), (c), 14 or 15(d) or the Exchange Act of 1934, prior to the
filing of a post-effective amendment which indicates that all securities offered
have been sold or which deregisters all securities then remaining unsold, shall
be deemed to be incorporated by reference in this Registration Statement and to
be part hereof from the date of filing of such documents.
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<PAGE>
ITEM 4. DESCRIPTION OF SECURITIES.
Not applicable. The Company's common stock is registered under Section 12
of the Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL.
James A. Ulsh, a shareholder in the law firm of Mette, Evans & Woodside,
the Company's general counsel, is a voting director of the Company.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Sections 1741 and 1742 of the Pennsylvania Business Corporation Law of
1988, as amended (the "BCL") provide that a business corporation may indemnify
directors and officers against liability they may incur as such provided that
the particular person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation and,
with respect to any criminal proceeding, had no reasonable cause to believe his
or her conduct was unlawful. In the case of actions against a director or
officer by or in the right of the corporation, the power to indemnify extends
only to expenses (not judgments and amounts paid in the settlement) and such
power generally does not exist if the person otherwise entitled to
indemnification shall have been adjudged to be liable to the corporation unless
it is judicially determined that, despite the adjudication of liability but in
view of all the circumstances of the case, the person is fairly and reasonably
entitled to indemnification for specified expenses. Under Section 1743 of the
BCL, the Company is required to indemnify directors and officers against
expenses they may incur in defending actions against them in such capacities if
they are successful on the merits or otherwise in the defense of such actions.
Under Section 1745 of the BCL, a corporation may pay the expenses of a director
or officer incurred in defending an action or proceeding in advance of the final
amounts advanced unless it is ultimately determined that such person is entitled
to indemnification from the corporation. Article 12 of the Company's Articles
of Incorporation and Article 20 of the Company's Bylaws provide indemnification
of directors, officers and other agents of the Company and advancement of
expenses to the extent otherwise permitted by the BCL.
Section 1746 of the BCL grants a corporation broad authority to indemnify
is directors, officers and other agents for liabilities and expenses incurred in
such capacity, except in circumstances where the act or failure to act giving
rise to the claim for indemnification is determined by a court to have
constituted wilful misconduct or recklessness. Article 12 of the Company's
Articles of Incorporation provides that the Company indemnify any and all
persons whom it shall have the power to indemnify for and against any and all
expenses, liabilities or other matters for which indemnification is permitted by
applicable laws.
Article 20 of the Company's Bylaws conditions any indemnification or
advancement of expenses upon a determination, made in accordance with the
procedures specified in Section 1744 of the BCL, by the Company's directors or
shareholders that indemnification or advancement of expenses is proper because
the director or officer met the standard of conduct set forth in Section 1741 or
1742 of the BCL, as applicable.
As authorized by Section 1747 of the BCL and Article XIV, the Company
maintains, on behalf of its directors and officers, insurance protection against
certain liabilities arising out of the discharge of their duties, as well as
insurance covering the Company for indemnification payments made to its
directors and officers for certain liabilities. The premiums for such insurance
are paid by the Company.
-3-
<PAGE>
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED.
Not Applicable. No exemption from registration is claimed.
ITEM 8. EXHIBITS.
4. 1998 Long-Term Incentive Plan of the Company.
5. Opinion of Mette, Evans & Woodside, General Counsel of the Company.
23.a. Consent of Mette, Evans & Woodside, General Counsel of the Company -
included in Exhibit 5.
23.b. Consent of Coopers & Lybrand (Auditors).
24. Powers of Attorney included in "SIGNATURES" on page 5.
ITEM 9. UNDERTAKINGS.
1. The undersigned Registrant hereby undertakes as follows:
(a) to file, during any period in which offers or sales are being made, a post
effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent post-
effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement;
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(b) that, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) to remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering.
2. The undersigned Registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of such request,
and to send the incorporated documents by first class mail or other equally
prompt means. This includes information contained in documents filed subsequent
to the effective date of the Registration Statement through the date of
responding to the request.
-4-
<PAGE>
3. The undersigned Registrant hereby undertakes to supply by means of a post-
effective amendment all information concerning a transaction, and the company
being acquired involved therein, that was not the subject of and included in the
registration statement when it became effective.
4. The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's Annual Report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
5. Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
6. The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of a registration statement as
permitted by Rule 430A and contained in the form of prospectus to be filed by
the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities
Act shall be deemed to be part of the registration statement at the time it was
declared effective.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as
amended, the registrant has duly caused this Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Millersburg,
Pennsylvania, on June 10, 1998.
COMMUNITY BANKS, INC.
By: /s/ Eddie L. Dunklebarger
-----------------------------------
Eddie L. Dunklebarger
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated. Each person whose
signature appears below in so signing also makes, constitutes and appoints Eddie
L. Dunklebarger and Ernest L. Lowe, and each of them acting alone, his true and
lawful attorney-in-fact, with full power of substitution, for him in any and all
capacities, to execute and cause to be filed with the Securities and Exchange
Commission any or all amendments and post-effective amendments to this
Registration Statement, with exhibits
-5-
<PAGE>
thereto and other documents in connection therewith, and hereby ratifies and
confirms all that said attorney-in-fact or his substitute or substitutes may do
or cause to be done by virtue hereof.
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------- ----------------------------- -------------
<S> <C> <C>
/s/ President and Chief Executive June 10, 1998
- -----------------------
Eddie L. Dunklebarger Officer and a Director
/s/ Chief Operations Officer June 10, 1998
- -----------------------
Ernest L. Lowe and a Director
/s/ Director June 10, 1998
- -----------------------
Ronald E. Boyer
/s/ Director June 10, 1998
- -----------------------
Samuel E. Cooper
/s/ Director June 10, 1998
- -----------------------
Kenneth L. Deibler
/s/ Director June 10, 1998
- -----------------------
Peter DeSoto
/s/ Director June 10, 1998
- -----------------------
Leon E. Kocher
/s/ Director June 10, 1998
- -----------------------
Ray N. Leidich
/s/ Director June 10, 1998
- -----------------------
Thomas W. Long
/s/ Director June 10, 1998
- -----------------------
Donald L. Miller
/s/ Director June 10, 1998
- -----------------------
Susan K. Nenstiel
/s/ Director June 10, 1998
- -----------------------
Robert W. Rissinger
/s/ Director June 10, 1998
- -----------------------
Allen Shaffer
/s/ Director June 10, 1998
- -----------------------
William C. Troutman
/s/ Director June 10, 1998
- -----------------------
James A. Ulsh
/s/ Director June 10, 1998
- -----------------------
Earl L. Mummert
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
- ----------------------- ----------------------------- -------------
<S> <C> <C>
/s/ Director June 10, 1998
- -----------------------
Harry B. Nell
/s/ Director June 10, 1998
- -----------------------
Wayne H. Mummert
</TABLE>
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<PAGE>
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION
- -------------- -----------
4. 1998 Long-Term Incentive Plan of the Company.
5. Opinion of Mette, Evans & Woodside, General Counsel of the
Company.
23.a. Consent of Mette, Evans & Woodside, General Counsel of the
Company -included in Exhibit 5 .
23.b. Consent of Coopers & Lybrand. (Auditors).
24. Powers of Attorney included in "SIGNATURES" on page 5.
-8-
<PAGE>
EXHIBIT 4.
COMMUNITY BANKS, INC.
1998 LONG-TERM INCENTIVE PLAN
1. PURPOSE.
The purpose of the Community Banks, Inc. Long-Term Incentive Plan (the
"Plan") is to attract, retain and motivate highly qualified employees for
Community Banks, Inc. ("CBI") and its subsidiaries by making provision for the
payment of supplemental compensation ("Awards") to key employees for services
which substantially contribute to the success of CBI and its subsidiaries. The
Plan is designed to provide incentives to those employees who are in a position
to contribute to the long-term growth and profitability of CBI and its
subsidiaries. The Plan will also make CBI's compensation program more
competitive with those of other bank holding companies and banks. CBI will
benefit from the added interest which employees will have in the success of CBI
and its subsidiaries as a result of their proprietary interest in CBI.
2. ADMINISTRATION OF THE PLAN.
(a) The Plan shall be administered by a committee (the "Committee")
composed of not less than three (3) or more than six (6) members of CBI's Board
of Directors (which Committee may, but need not be, the Executive and
Compensation Committee). No director who is an employee of CBI or any
subsidiary shall serve on the Committee. The Board may from time to time remove
members from, or add members to, the Committee. Vacancies on the Committee,
howsoever caused, shall be filled by the Board. All members of the Committee
must be ineligible (and must have been ineligible for a one (1) year period
prior to appointment to the Committee) to receive an Award under the Plan or any
other similar plan of CBI.
(b) Subject to the express provisions of the Plan and to such orders or
resolutions not inconsistent with the provisions of the Plan as may be issued or
adopted from time to time by the Board, the Committee shall have full power and
authority, in its discretion, to grant Awards hereunder, to determine to whom
and the time when Awards will be granted, to designate Awards as Incentive Stock
Options, Nonqualified Stock Options (Incentive Stock Options and Nonstatutory
Stock Options are collectively referred to as "Options"), or Stock Appreciation
Rights (hereinafter referred to as "SAR's"), to determine the purchase price of
Community common stock ("Stock") covered by each Option and the term of each
Option, to determine the terms and provisions of the Option agreements and SAR
agreements (which need not be identical) entered into in connection with awards
under the Plan, to interpret the Plan, to supervise the administration of the
Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, and to make all other determinations and take any other action deemed
necessary or desirable to the proper operation or administration of the Plan.
(c) Any determination, decision, or action of the Committee provided for
in the Plan may be made or taken by action of a majority of the members of the
Committee, and shall be final and binding on all persons (including plan
participants, CBI, subsidiaries of CBI, any stockholder of CBI, any employee of
CBI, or any subsidiary of CBI). No member of the Committee shall be liable for
any action or determination made in good faith with respect to the Plan or any
Award granted under it.
(d) Neither the Committee, the Board of Directors, CBI, nor any officer or
employee of CBI or any subsidiary of CBI shall have any duty to advise Plan
participants of any rules,
-9-
<PAGE>
interpretations or determinations by the Committee, and each participant shall
be bound by such rules, interpretations or determinations upon communication
thereof to such participant effective as of such date (prior to, subsequent to
or concurrent with such communication) that each such rule, interpretation or
determination shall have been intended to be effective by the Committee.
3. STOCK SUBJECT TO THE PLAN, SCOPE, AND DURATION.
(a) Awards under the Plan may be granted in the form of Incentive Stock
Options ("ISO's"), in conformity with Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code"), in the form of Nonqualified Stock Options
("NQSO's"), or in the form of Stock Appreciation Rights ("SAR's").
(b) The total number of shares of Stock as to which Options or SAR's may
be granted under this Plan during the period ending May 30, 2008, shall be
1,000,000 shares. Issuance of Stock upon exercise of an Option shall reduce the
total number of shares of Stock available under the Plan. There shall not be
counted against this total any shares of Stock covered by an Option that has
lapsed unexercised or which has been forfeited as hereinafter provided.
(c) Shares of Stock as to which Options under the Plan may be granted may
be made available by CBI from authorized but unissued Stock or from Stock
reacquired by CBI (including Stock purchased in the open market).
(d) The Plan shall terminate on May 31, 2008.
4. ELIGIBLE EMPLOYEES.
The persons who shall be eligible to receive Awards under this Plan shall
be such key executive employees (including officers and directors who are
employees) of CBI or any of its wholly-owned subsidiaries, without limitation as
to length of service, who are from time to time serving in a managerial,
administrative, or professional position and who are recommended to, and
authorized by, the Committee for Awards under the Plan.
5. GRANTING AWARDS.
(a) The Committee, subject to the limitations of this Plan, shall select
from eligible employees those persons to be granted Awards ("Participants") and
shall determine the time when each Award shall be granted, the number of shares
of Stock to be subject to an Award, and the terms and conditions consistent with
this Plan, upon which Awards are to be made. The Committee shall make Awards to
the key employees so selected for the number of Options or SAR's and upon the
terms and conditions so determined. No Options, SAR's, or Stock shall be issued
or distributed under this Plan unless and until all legal requirements
applicable to the issuance or transfer of such Options, SAR's, and/or Stock have
been complied with to the satisfaction of the Committee and CBI. Awards may be
made at any time, from time to time, after such consultation with and
consideration of the recommendations of management as the Committee deems
desirable.
(b) No Awards shall be granted under this Plan after its termination on
May 31, 2008, but Awards granted prior to such termination date may extend
beyond the date, and the terms of the Plan shall continue to apply to such
Awards.
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<PAGE>
5. TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS.
(a) General. Options may be made from time to time in the form of ISO's
-------
and NQSO's. Each Option, whether an ISO or NQSO, shall be subject to all of the
terms and conditions provided in this Section, all other applicable terms and
conditions in the Plan, and such other terms and conditions ("Discretionary
Conditions") as may be specified by the Committee with respect to the Option and
the Stock covered thereby at the time of the making of the Award or as may be
specified thereafter by the Committee in the exercise of its powers under the
Plan. Without limiting the foregoing, it is understood that the Committee may,
at any time and from time to time after the granting of an Option under this
Plan, specify such additional terms and conditions with respect to such Option
as may be deemed necessary or appropriate to ensure compliance with any and all
applicable laws, including, but not limited to, terms and conditions for
compliance with federal and state securities and tax laws. The terms and
conditions with respect to any Option, or with respect to any Award to any
Participant, need not be identical with the terms and conditions with respect to
any other Option or any other Participant.
(b) Option Agreement. Receipt of an Option shall be subject to execution
----------------
of a written agreement (the "Option Agreement") between CBI and the Participant,
in a form approved by the Committee, which shall set forth the number of Options
awarded, the number of shares of Stock that may be purchased pursuant to such
Options, the applicable Option Price (as defined herein) and such other terms
and conditions provided in the Plan as may be deemed appropriate by the
Committee, including, but not limited to, any Discretionary Conditions. The
Option Agreement shall be subject to, and shall be deemed amended to include,
such additional Discretionary Conditions as the Committee may thereafter specify
in the exercise of its powers under this Plan. A fully executed original
counterpart of the Agreement shall be provided to CBI and the Participant.
(c) Fair Market Value of Stock. The Fair Market Value of a share of the
--------------------------
CBI common stock shall mean the closing sales price of the Stock on the
principal stock exchange on which the stock is traded on the day the Option is
granted; or if no sale of the Stock has been made on any stock exchange on that
day, the Fair Market Value shall be determined by reference to such price for
the next preceding day on which a sale occurred.
(d) Payment of Option Price. The Option Price for the shares as to which
-----------------------
an Option is exercised shall be paid to CBI in full on or within ten (10) days
after the date of exercise. At the election of the Participant, such payment
may be (i) in cash, (ii) in shares of Stock owned by the Participant prior to
exercising the Option and having a Fair Market Value on date of payment equal to
the Option Price for the shares of Stock being purchased and which satisfy such
other requirements as may be imposed by the Committee, or (iii) partly in cash
and partly in such shares of Stock. Stock acquired by the Participant which is
identified as having been obtained through an ISO under this Plan and still
subject to ISO holding requirements as defined in the Code, may not be tendered
in payment of the Option Price.
(e) Right as a Stockholder. No Participant shall have any rights to
----------------------
dividends or other rights of a stockholder with respect to shares of Stock
subject to an Option until the Participant has given written notice of exercise
of the Option, has paid in full the Option Price for such shares of Stock and
has otherwise complied with this Plan, the Option Agreement and such rules and
regulations as may be established by the Committee.
(f) Listing and Registration of Shares. No Option granted pursuant to the
----------------------------------
Plan shall be exercisable in whole or in part if at any time the Committee shall
determine in its discretion that the listing, registration, or qualifications of
the shares of Stock subject to such option on any securities exchange or under
any applicable law, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of such option or the issue of shares thereunder, unless such listing,
registration, qualification, consent, or approval shall have been effected or
obtained free of any conditions not acceptable to the Committee.
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<PAGE>
(g) Investment Purpose. Each Option under this Plan shall be granted on
------------------
the condition that the purchases of shares of Stock hereunder shall be for
investment purposes, and not with a view to resale or distribution. This
condition shall not be applicable if the Stock subject to the Option is
registered under the Securities Act of 1933, as amended, or if, in the opinion
of counsel for CBI, a resale of such stock without registration is permitted
under the Securities Act of 1933 and any other applicable law, regulation, or
rule of any governmental agency.
(h) Investment Representation. The Committee may require each person
-------------------------
purchasing shares of Stock pursuant to the exercise of an Option to represent to
and agree with CBI in writing that such shares are being acquired for investment
and without a view to distribution thereof. The Certificates for shares of
Stock so purchased may include any legend which the Committee deems appropriate
to reflect any restriction or transfer. The Committee also may impose, in its
discretion, as a condition of any Option, any restrictions on the
transferability of shares of Stock acquired through the exercise of such Option
as it may deem fit. Without limiting the generality of the foregoing, the
Committee may impose conditions restricting absolutely the transferability of
shares of Stock acquired through the exercise of Options for such periods as the
Committee may determine and, further, in the event a Participant's employment by
CBI or a subsidiary terminates during the period in which such shares of Stock
are nontransferable, the Participant may be required, if required by the related
Option Agreement, to sell such Stock back to CBI at such price and on such other
terms as the Committee may have specified in the Option Agreement.
7. INCENTIVE STOCK OPTIONS.
In addition to the other terms and conditions set forth in this Plan, the
following shall be applicable to all ISO's:
(a) Option Price. The purchase price per share of Stock deliverable upon
------------
the exercise of an ISO shall not be less than one hundred percent (100%) of the
Fair Market Value of the Stock on the day the Option is granted, but in no event
less than the par value of such Stock.
(b) Exercise Term. Each ISO agreement shall state the period or periods
-------------
of time within which the ISO may be exercised by the participant, in whole or in
part, which shall be such period or periods of time as may be determined by the
Committee, provided that the exercise period shall not commence earlier than six
(6) months after the date of the grant of the ISO nor end later than ten (10)
years after the date of the grant of the ISO. The Committee shall have the
power to permit in its discretion an acceleration of the previously determined
exercise terms, subject to the terms set forth herein, under such circumstances
and upon such terms and conditions as it deems appropriate.
(c) Notwithstanding anything herein to the contrary, no ISO shall be
granted to any individual if at the time the ISO is to be granted the individual
owns Stock possessing more than ten percent (10%) of the total combined voting
power of all classes of Stock of CBI unless at the time such ISO is granted the
ISO price is at least one hundred ten percent (110%) of the Fair Market Value of
the Stock subject to the ISO and such ISO's by its terms is not exercisable
after the expiration of five (5) years from the date such ISO is granted. For
purposes of the preceding sentence, the attribution rule of Stock ownership set
forth in Section 425(d) of the Code shall apply.
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<PAGE>
(d) Notice of Sale. A Participant shall give prompt notice to CBI of any
--------------
disposition of shares of Stock acquired upon exercise of an ISO if such
disposition occurs within either two (2) years after grant of the ISO or one (1)
year after receipt of such Stock by the Participant.
(e) Other Terms. Each ISO agreement shall contain such other terms,
-----------
conditions and provisions as the Committee may determine to be necessary or
desirable in order to qualify such ISO as a tax-favored option within the
meaning of Section 422 of the Code. Subject to the limitations of Paragraph 14,
and without limiting any other provisions hereof, the Committee shall have the
power without further approval to amend the terms of this Plan or any Awards or
agreements thereunder for such purpose.
8. NONQUALIFIED STOCK OPTIONS.
In addition to the other terms and conditions set forth in this Plan, the
following shall be applicable to all NQSO's:
(a) Option Price. The purchase price per share of Stock deliverable upon
------------
the exercise of a NQSO shall not be less than eighty percent (80%) of the Fair
Market Value of the Stock on the day the NQSO is granted, as determined by the
Committee, but in no event less than the par value of such Stock.
(b) Exercise of Term. Each NQSO agreement shall state the period or
----------------
periods of time within which the NQSO may be exercised by the Participant, in
whole or in part, which shall be such period or periods of time as may be
determined by the Committee, provided that the exercise period shall not
commence earlier than six (6) months after the date of the grant of the NQSO nor
end later than ten (10) years after the date of the grant of the NQSO. The
Committee may impose a vesting schedule in conjunction with the grant of any
NQSO.
9. STOCK APPRECIATION RIGHTS.
Awards may be made from time to time in the form of SAR's. SAR's shall be
evidenced by SAR agreements in such form and not inconsistent with this Plan as
the Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:
(a) Award and Exercise. SAR's shall be granted for a period of not less
------------------
than one (1) year nor more than ten (10) years, and shall be exercisable in
whole or in part, at such time or times and subject to such other terms and
conditions as shall be prescribed by the Committee at the time of grant, subject
to the following:
(i) SAR's shall not be exercisable, in whole or in part, during the
six (6) month period starting with the date of grant;
(ii) SAR's will be exercisable only during a Participant's employment
by CBI or a subsidiary, except that in the discretion of the Committee, a
SAR may be made exercisable for up to three (3) months after the
Participant's employment is terminated for any reason, including
retirement, other than death or disability. In the event that a
Participant dies or becomes disabled without having fully exercised his
SAR's, the Participant or his successor shall have the right to exercise
the SAR's during their term within a period of six (6) months after the
date of such termination due to death or disability to the extent that the
right was exercisable at the date of such termination, or during such other
period and subject to such terms as may be determined by the Committee.
The Committee in its sole discretion may reserve the right to accelerate
previously determined exercise terms, within the terms of the Plan, under
such circumstances and upon such terms and conditions as it deems
appropriate.
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<PAGE>
(iii) The Committee shall establish such additional terms and
conditions, without limiting the foregoing, as it determines to be
necessary or desirable to avoid "insider trading" liability in connection
with an SAR under Section 16(b) of the Securities and Exchange Act of 1934.
(b) Payment. Upon exercise of an SAR, payment shall be made in the form
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of Stock at Fair Market Value on the date of exercise, in cash, or in a
combination thereof, as the Committee, in its sole discretion, shall determine.
(c) Options. SAR's may be granted in connection with an Option, but shall
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not be granted in a manner or form which will result in the failure of any ISO
to qualify for favorable tax treatment under Section 422A of the Code.
10. NONTRANSFERABILITY OF OPTIONS AND SAR'S.
Options and SAR's granted under this Plan shall not be transferable by the
Participant other than by will or by the laws of descent and distribution.
During the lifetime of a Participant, Options, and SAR's may be exercised only
by the Participant. Options and SAR's exercisable after the death of a
Participant may be exercised by the legatees, personal representatives, or
distributees of the Participant.
11. STOCK ADJUSTMENTS.
(a) In the event that the shares of Stock shall be changed into or
exchanged for a different number or kind of shares of stock of CBI or of another
corporation (whether by reason of merger, consolidation, recapitalization,
reclassification, stock split, combination of shares or otherwise), or if the
number of such shares of Stock shall be increased through the payment of a stock
dividend, then there shall be substituted for or added to each share of Stock
subject to, or which may become subject to, an Award under this Plan, the number
and kind of shares into which each outstanding share of Stock shall be
exchanged, or to which each such share shall be entitled, as the case may be.
Outstanding Awards shall also be appropriately amended as to Option Price and
other terms as may be necessary to reflect the foregoing events. In the event
there shall be any other change in the number or kind of outstanding shares of
the Stock, or any shares into which such shares shall have been changed, or for
which the Committee shall, in its sole discretion, determine that such change
equitably requires an adjustment in any Award theretofore granted or which may
be granted under this Plan, such adjustments shall be made in accordance with
such determination.
(b) Fractional shares resulting from any adjustment in Awards pursuant to
this Paragraph 13 may be settled in cash or otherwise as the Committee shall
determine. Notice of any adjustments shall be given by CBI to each holder of an
Award which shall have been so adjusted and such adjustment (whether or not such
notice is given) shall be effective and binding for all purposes of this Plan.
The Committee may round down to the next whole number any shares of Stock
resulting from any adjustment in Awards in order to eliminate fractional shares.
(c) The Committee shall have the power, in the event of any merger or
consolidation of CBI with or into any other corporation, or the merger or
consolidation of any other corporation with or into CBI, or the sale of all or
substantially all of the assets of CBI, or an offer to purchase made by a party
other than CBI to all shareholders of CBI for all or any substantial portion of
the outstanding Stock, to amend all outstanding Awards to permit the exercise of
all such Awards prior to the effectiveness of any such merger, consolidation, or
sale or the expiration of any such offer to purchase and to terminate such
Awards as of such effectiveness or expiration.
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(d) In making the adjustments provided for by this Paragraph 11,
consideration shall be given to applicable tax and securities laws in order to
avoid a premature lapse or disqualifying disposition of an Option due solely to
such adjustment.
12. WITHHOLDING TAXES.
(a) Subject to the provisions of subparagraph (b), CBI may require that
any Participant, as a condition of the exercise of an Option, other than an ISO,
or SAR, pay or reimburse any taxes which CBI or a subsidiary is required to
withhold in connection with the exercise of the Option or SAR.
(B) A Participant may satisfy the withholding obligation described in
subparagraph (a), in whole or in part, by electing to have CBI withhold shares
of Stock (otherwise issuable upon the exercise of an Option) having a Fair
Market Value equal to the amount required to be withheld. An election by a
Participant to have shares withheld for this purpose shall be subject to the
following restrictions:
(i) it must be made prior to the date on which the amount of tax to
be withheld is determined;
(ii) it shall be irrevocable;
(iii) it shall be subject to disapproval by the Committee; and
(iv) it shall be ineffective if the effect of such election is to
cause a violation of any regulation of the Securities and Exchange
Commission.
13. EFFECTIVE DATE, TERMINATION, AND AMENDMENT OF THE PLAN.
(a) This Plan shall become effective on June 1, 1998 provided that CBI's
stockholders shall have adopted the Plan at the Company's 1998 Annual Meeting of
Stockholders. Once effective, this Plan shall terminate on May 31, 2008.
(b) The Board may, insofar as permitted by law, from time to time and at
any time, with respect to any Stock at the time not subject to Awards,
terminate, suspend, alter, amend or discontinue the Plan, in whole or in part,
except that no such modification, alteration, amendment, or discontinuation
shall, without the Participant's consent, impair the rights of any Participant
under any Award granted to such Participant, except in accordance with the
provisions of this Plan and/or the Agreement applicable to any such Award, and
further, no modification, alteration, or amendment shall, without the approval
by the holders of a majority of the then outstanding voting stock of CBI
represented and entitled to vote at a stockholders' meeting:
(i) increase the total number of shares of Stock reserved for the
purpose of the Plan;
(ii) decrease the Option Price of any ISO to less than one hundred
percent (100%) of Fair Market Value on the date of grant of any ISO;
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(iii) decrease the Option Price of any NQSO to less than eighty
percent (80%) of Fair Market Value on the date of grant of any NQSO; and
(iv) materially increase the benefits occurring to Participants under
this Plan.
14. MISCELLANEOUS.
(a) No Rights to Continued Employment or Award. This Plan does not,
------------------------------------------
directly or indirectly, create any rights in any employee or class of employees
to receive any Awards under the Plan, or create in any employee or class of
employees any right with respect to continuation of employment by CBI or a
subsidiary, and it shall not be deemed to interfere in any way with the right of
CBI or any subsidiary to terminate or otherwise modify an employee's employment
at any time.
(b) Failure to Comply with Terms and Conditions. Notwithstanding any
-------------------------------------------
other provision of this Plan, no payment or delivery with respect to any Award
shall be made, and all rights of the Participant who receives such Award (or his
designated beneficiary or legal representative) to such payment or delivery
under this Plan shall be forfeited, at the discretion of the Committee, if,
prior to the time of such payment or delivery, the Participant breaches any
restriction or any of the terms, restrictions and/or conditions of this Plan
and/or any agreement with respect to such Award.
(c) Parties in Interest. The provisions of this Plan and the terms and
-------------------
conditions of any Award shall, in accordance with their terms, be binding upon,
and inure to the benefit of, all successors of each Participant, including,
without limitation, such Participant's estate, executors, administrators or
trustees thereof, heirs and legatees and any receiver of such estate.
(d) Indemnification. No member of the Committee shall be personally
---------------
liable by reason of any contract or other instrument executed by him or on his
behalf in his capacity as a member of the Committee, nor for any mistake or
judgment made in good faith, and CBI shall indemnify and hold harmless each
member of the Committee and each other officer, employee or director of CBI to
whom any duty or power relating to the administration or interpretation of this
Plan may be allocated or delegated, against any cost or expense (including
counsel fees) or liability (including any sum paid in settlement of a claim with
the approval of the Board) arising out of any act or omission to act in
connection with this Plan, unless arising out of such person's own fraud or bad
faith. This provision shall in no way limit the right to indemnification, or
affect the lack of personal liability to which an employee, officer, or director
is entitled under CBI's Bylaws or under applicable law.
(d) Designation of Beneficiary. Each Participant may designate a
--------------------------
beneficiary or beneficiaries (on a form supplied by the Committee) to exercise
his Awards in the event of his death, and may change such designation from time
to time and at any time prior to the death of such Participant.
(e) Governing Law. All questions pertaining to construction, validity and
-------------
effect of the provisions of this Plan and the rights of all persons hereunder
shall be governed by the laws of the Commonwealth of Pennsylvania.
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EXHIBIT 5
OPINION OF COUNSEL
Community Banks, Inc.
150 Market Square
Millersburg, PA 17061
Re: Community Banks, Inc. 1998 Long-Term
Incentive Plan Form S-8 Registration
Gentlemen:
This opinion is rendered in connection with the Registration Statement filed on
Form S-8 with the Securities and Exchange Commission under the Securities Act of
1933, under which up to 1,000,000 shares of common stock of Community Banks,
Inc. ("Community"), par value $5.00 per share, are to be registered pursuant to
the 1998 Long-Term Incentive Plan adopted by Community's Board of Directors and
Shareholders.
We have reviewed the corporate proceedings relating to the proposed stock
offering and such other legal matters as we have deemed appropriate for the
purpose of this opinion. Based on the foregoing, and assuming all necessary
shareholder and governmental approvals, we are of the opinion that the shares of
common stock covered by the aforesaid Registration Statement will, when issued
in accordance with the terms set forth in the Prospectus, applicable law and the
Bylaws of Community, be validly issued, fully paid and nonassessable by
Community.
We hereby consent to the filing of this opinion as an Exhibit to the
aforementioned Registration Statement.
Very truly yours,
METTE, EVANS & WOODSIDE
By /s/ Bradley A. Walker
--------------------------------------
Bradley A. Walker, Esquire
<PAGE>
EXHIBIT 23.b.
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement on
Form S-8 of our report dated January 13, 1998, on our audits of the consolidated
financial statements of Community Banks, Inc.
/s/ Coopers & Lybrand L.L.P.
Coopers & Lybrand L.L.P.
Harrisburg, Pennsylvania
June 18, 1998
