UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
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COMMUNITY BANKS, INC.
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(Name of Registrant as Specified In Its Charter)
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COMMUNITY BANKS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
Date:May 1, 2001
Time:10:00 a.m.
Place:Four Points Sheraton
800 East Park Drive
Harrisburg, Pennsylvania
Matters to be voted on:
1. Election of Directors. Election of four (4) Class B Directors to serve
until the 2005 annual meeting.
2. Other Business. Any other business properly brought before the
shareholders at the meeting.
You can vote your shares of common stock if our records show that you owned
the shares at the close of business on March 16, 2001 (the "Record Date").
Your vote at the annual meeting is very important to us. Please vote your
shares of common stock by completing the enclosed proxy card and returning it
to us in the enclosed prepaid envelope. This proxy will not be used if you are
present at the meeting and desire to vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Patricia E. Hoch
PATRICIA E. HOCH
Secretary
Millersburg, Pennsylvania
March 28, 2001
COMMUNITY BANKS, INC.
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PROXY STATEMENT
MARCH 28, 2001
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GENERAL INFORMATION
This proxy statement has information about the annual meeting of
shareholders of Community Banks, Inc. ("CTY"). The respective management of
CTY, Community Banks, N.A. ("CBNA") and Peoples State Bank ("PSB") prepared
this proxy statement for the Board of Directors. We first mailed this proxy
statement and the enclosed proxy card to shareholders on March 28, 2001.
We will pay the costs of preparing, printing and mailing the proxy and all
related materials. In addition to sending you these materials, some of our
employees may contact you by telephone, by mail or in person.
Our executive offices are located at 150 Market Square, Millersburg,
Pennsylvania, and our telephone number is (717) 692-4781. Our mailing address
is P.O. Box 350, Millersburg, Pennsylvania 17061.
Shareholder Proposals for the 2002 Annual Meeting of Shareholders
If you want to include a shareholder proposal in Community's proxy
statement pursuant to SEC Rule 14a-8 for the 2002 annual meeting, you must
deliver the proposal to our secretary at our executive offices by November 30,
2001. Notice of any other type of shareholder proposal outside the processes
of Rule 14a-8 will be untimely unless you submit the notice by February 13,
2002.
If the date of our next annual meeting is advanced or delayed by more than
30 days fromMay 1, 2002, we will promptly inform you of the change of the
annual meeting and the date by which shareholder proposals must be received.
VOTING
Who can vote?
You can vote your shares of common stock if our records show that you owned
the shares at the close of business on March 16, 2001 (the "Record Date"). A
total of 7,161,687 shares of common stock were outstanding on the Record Date
and can vote at the annual meeting. You get one vote for each share of common
stock. The enclosed proxy card shows the number of shares you can vote. We
will hold the annual meeting if the holders of a majority of the shares of the
common stock entitled to vote either sign and return their proxy cards or
attend the meeting in person.
The Trust Department of CBNA, as sole trustee, holds 48,383 shares of CTY
common stock. The Trust Department may vote these shares at the annual
meeting.
As of the Record Date, management of CTY beneficially owned a total of
1,246,591 shares of CTY common stock.
1
What vote is required?
All matters to be voted on at the annual meeting, including election of
directors, must be approved by the holders of a majority of the shares of
common stock entitled to vote.
What if other matters come up at the annual meeting?
The matters described in this proxy statement are the only matters we know
will be voted on at the meeting. If other matters are properly presented at
the annual meeting, the proxyholders named in the enclosed proxy card will
vote your shares as they see fit.
How are votes counted?
Our transfer agent counts all votes cast by proxy before the annual
meeting. Our judges of election will manually count all votes which are cast
in person or by proxy at the annual meeting.
Voting is an important right of shareholders. If you abstain or otherwise
fail to cast a vote on any matter, the abstention or failure is not a vote and
will not be counted.
How do I vote?
Refer to the voting instructions on the proxy card. You may vote either by
completing and returning the enclosed proxy card, by telephone or by appearing
in person at the annual meeting. We encourage you to return the proxy card or
to vote by telephone, to ensure that your vote is counted. However, you may
attend the meeting and vote in person whether or not you have previously
returned a proxy card or voted by telephone.
Can I change my vote after I return my proxy card or vote by telephone?
Yes. At any time before the vote on a proposal, you can change your vote
either by:
. giving CTY's secretary a written notice revoking your proxy card;
. signing, dating and returning to us a new proxy card; or
. placing a second telephone vote.
We will honor the proxy card or the telephone vote with the latest date.
ELECTION OF DIRECTORS OF CTY
With respect to electing directors, CTY's bylaws provide as follows:
. the board of directors will consist of not less than five nor more than
25 directors;
. there will be four classes of directors, as nearly equal in number as
possible;
. each class will be elected for a term of four years; and
. each class will be elected in a separate election, so that the term of
office of one class of directors will expire in each year.
2
At the annual meeting, we will nominate the four persons named in this
proxy statement as Class B Directors. Although we do not know of any reason
why any of these nominees might not be able to serve, we will propose a
substitute nominee if any nominee is not available for election.
Shareholders also can nominate persons to be directors. If you want to
nominate someone, you must deliver or mail a notice to the secretary of CTY
not less than 45 days prior to the date of the annual meeting. Your notice
must state your name and residence address and the number of shares of CTY
which you own. Your notice must also contain the following information on each
proposed nominee:
. the name, address and age of the nominee;
. the principal occupation of the nominee;
. the number of shares of CTY common stock owned by the nominee; and
. the total number of shares that, to your knowledge, will be voted for
the nominee.
If you do not follow this procedure, the Chairman of the meeting will
disregard your nominations and the judges of election will disregard any votes
cast for your nominees.
The proxyholders named in the proxy card intend to vote for the election of
the four persons listed as Class B Directors to serve until the 2005 annual
meeting. Unless you indicate otherwise, your proxy will be voted in favor of
the election of those nominees. Each nominee for the position of Class B
Director is currently a director of CTY.
The following table shows the name and age of each nominee and the current
directors in each class. The table also shows the following information on
each nominee and director:
. business experience, including principal occupation for the past five
years;
. the period during which he or she has served as a director of CTY; and
. the number and percentage of outstanding shares of common stock of CTY
which he or she beneficially owned as of the Record Date.
3
Directors of CTY
Amount and
Business Experience, Nature of Percentage
Including Principal Director Beneficial of
Occupation for the Past Since Ownership Outstanding
Name and Age Five Years (1) (2) Stock Owned
- ------------ ------------------------- -------- ---------- -----------
CLASS B DIRECTORS(3):
To be elected for a four year term ending in 2005:
Thomas W. Long Partner, Millersburg 1981 11,682(13) *
Age 71 Hardware Co.,
Millersburg, PA
Donald L. Miller President, Miller 1981 98,023(13) 1.37
Age 71 Bros. Dairy,
Millersburg, PA
Samuel E. Cooper Retired Superintendent, 1992 3,436(13) *
Age 67 Warrior Run School
District
Eddie L. Dunklebarger President/CEO 1998 151,472(4) 2.09
Age 47 CTY, CBNA, and PSB
Prior to March 31, 1998 -
President/CEO of PSB
CLASS A DIRECTORS:
To continue in office until 2004:
Thomas L. Miller Retired Chairman and 1966 74,428(5) 1.03
Age 68 CEO of CTY, and Retired
Chairman, President and
CEO of CBNA
James A. Ulsh Attorney-at-Law, 1977 18,998(13) *
Age 54 Mette, Evans &
Woodside,
Harrisburg, PA
Ronald E. Boyer President, Alvord- 1981 27,028(6) *
Age 63 Polk, Inc.
(manufacturer of
cutting tools),
Millersburg, PA
Peter DeSoto CEO, J.T. Walker 1981 49,697(13) *
Age 61 Industries, Inc.
(manufacturer of
metal products),
Elizabethville, PA
4
Business Experience, Amount and Percentage
Including Principal Nature of of
Occupation for the Director Beneficial Outstanding
Name and Age Past Five Years Since (1) Ownership (2) Stock Owned
- ------------ ---------------------------- --------- ------------- -----------
CLASS D DIRECTORS:
To continue in office until 2003:
Robert W. Rissinger Secretary/Treasurer 1968 275,323(7) 3.84
Age 74 Alvord-Polk, Inc.
Engle Rissinger Auto Group
John W. Taylor, Jr. President, 1998 23,567(8) *
Age 70 Air Brake & Power
Equipment Co.
Susan K. Nenstiel Regional Director of 1996 1,238(13) *
Age 49 Development
Lutheran Welfare Services
Hazleton, PA;
Executive Director for the
League of Woman Voters
Wayne H. Mummert Retired U.S. Postal Service/ 1998 75,278(9) 1.05
Age 67 Farmer
CLASS C DIRECTORS:
To continue in office until 2002:
Kenneth L. Deibler Self-Employed 1966 36,585(13) *
Age 78 Insurance Broker,
Elizabethville, PA
Allen Shaffer Attorney-at-Law, 1961 53,184(10) *
Age 75 Millersburg and
Harrisburg, PA
Ernest L. Lowe Chairman--CTY, CBNA, 1990 55,188(11) *
Age 64 and PSB
Earl L. Mummert Consulting Actuary 1998 32,042(12) *
Age 56 Conrad M. Siegel, Inc.
Harrisburg, PA
- --------
* Less than 1%.
(1) Includes service as a director of CBNA (formerly Upper Dauphin National
Bank), a wholly-owned subsidiary of CTY, prior to 1983 and service as a
director of CTY after 1983.
(2) The securities "beneficially owned" by an individual are determined in
accordance with the definition of "beneficial ownership" set forth in the
regulations of the Securities and Exchange Commission. Accordingly, they
may include securities owned by or for, among others, the wife and/or
minor children of the individual and any other relative who has the same
home as such individual, as well as other securities as to which the
individual has or shares voting or investment power or has the right to
acquire under outstanding stock options within 60 days after March 16,
2001. Beneficial ownership may be disclaimed as to certain of the
securities.
(3) Ray N. Leidich, age 72, is a Class B director who will serve until his
term expires on the date of CTY's annual meeting. Mr. Leidich will
continue to serve as an emeritus director, but is not seeking re-election
for another term. Mr. Leidich is the beneficial owner of 75,390 shares
5
of CTY (1.05% of the outstanding stock of CTY), including 37,195 shares
owned by Dr. Leidich's wife, Dolores Leidich and stock options to acquire
1000 shares.
(4) Includes 11,091 shares owned by Mr. Dunklebarger's children, 351 owned by
Mr. Dunklebarger's wife, Connie Dunklebarger, 10,981 shares held in Mr.
Dunklebarger's 401K, 451 shares held in Mr. Dunklebarger's ESPP, 9,549
shares held in his IRA and stock options to acquire 88,007 shares.
(5) Includes 920 shares held by Mr. Miller's IRA and stock options to acquire
40,265 shares.
(6) Includes 7,428 shares owned by Alvord-Polk, Inc., the stock of which is
held 50% by Robert W. Rissinger and 50% by Ronald E. Boyer, 579 shares
owned by Mr. Boyer's wife, Judith Boyer, and stock options to acquire 1000
shares.
(7) Includes 7,428 shares owned by Alvord Polk Tool Co., Inc., the stock of
which is held 50% by Robert W. Rissinger and 50% by Ronald E. Boyer,
16,554 shares owned by Engle Rissinger Auto Group, Inc., 48,070 shares
owned by Mr. Rissinger's wife, Shirley Rissinger, 11,661 shares owned by
Engle Rissinger Auto Group, Inc. Profit Sharing Plan (R.Ibberson and H.
Engle Co-Trustees), 88,128 share held by Mr. Rissinger's IRA and stock
options to acquire 1000 shares.
(8) Includes 1,333 shares owned by Mr. Taylor's wife, Lou Ann Taylor, 953
shares held in Mr. Taylor's IRA, and stock options to acquire 1,000
shares.
(9) Includes 16,671 shares held by Mr. Mummert's wife, Shirley Mummert, and
stock options to acquire 3,208 shares.
(10) Includes 4,784 shares owned by Mr. Shaffer's retirement account and stock
options to acquire 1,000 shares.
(11) Includes 206 shares owned by Mr. Lowe's wife, Barbara Lowe, 25 shares
owned by Mr. Lowe's son, 228 shares held by Mr. Lowe's 401K, 1,626 shares
held by Mr. Lowe's IRA, and stock options to acquire 36,920 shares.
(12) Includes 20,913 shares held by Mr. Mummert's IRAs and stock options to
acquire 3,208 shares.
(13) Includes stock options to acquire 1,000 shares.
None of the directors or nominee directors are directors of other companies
with a class of securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934.
The following table shows all shares owned beneficially by all directors and
executive officers of CTY as a group:
Amount and Nature of
Beneficial Ownership (1)(2)
Title
of
Class Direct Indirect(3) Percent of Class
----- -------------- -------------------------------
Common 1,071,583 175,008 16.76%
- --------
(1) See footnote 2 on page 5.
(2) Included in these totals are shares held by director emeriti of CTY as
follows:
Leon E. Kocher--30,991 shares which includes 13,563 shares held by Mr.
Kocher's wife, Margaret Kocher and stock options to acquire 1,000 shares.
Joseph J. Monahan--22,651 shares which includes stock options to acquire
1,000 shares.
Harry B. Nell--37,223 shares which includes 925 shares held by Mr. Nell's
wife, Helen Nell, and stock options to acquire 3,208 shares.
(3) The 7,428 shares owned by Alvord-Polk, Inc. are counted only once in this
total. Alvord-Polk, Inc. is 50% owned by Robert W. Rissinger and 50% owned
by Ronald E. Boyer. Thus, these shares are indicated above as being
beneficially owned by both Mr. Rissinger and Mr. Boyer.
6
MANAGEMENT OF CTY
Executive Officers
The following table sets forth the executive officers of CTY (as determined
in accordance with the rules and regulations of the Securities and Exchange
Commission), their ages, their positions with CTY, their business backgrounds
and the beneficial ownership of Common Stock of CTY by each of such persons.
Share information is stated as of March 16, 2001.
Executive Officers of CTY
Amount and Percentage
Nature of of
Beneficial Outstanding
Name and Age Title Ownership(1) Stock
- ------------ ----------------------- ------------ -----------
Eddie L. Dunklebarger President and Chief 151,472 2.12
Age 47 Executive Officer(2)
Ernest L. Lowe Chairman(3) 55,188 *
Age 64
Robert W. Lawley Executive Vice- 18,218 *
Age 46 President/Operations(4)
Terry L. Burrows Executive Vice- 30,637 *
Age 52 President/Finance(5)
Anthony N. Leo Executive Vice- 14,476 *
Age 40 President/Financial
Services and
Administration(6)
Jeffrey M. Seibert Executive Vice- 51,982 *
Age 41 President/Banking
Services(7)
- --------
Less than 1%.
(1) Includes currently exercisable options to acquire shares of CTY.
(2) Mr. Dunklebarger has held this position since 1998. Prior to that time,
Mr. Dunklebarger was President and CEO of PSB.
(3) Mr. Lowe has been chairman since 1998. Prior to that time, Mr. Lowe was
President of CTY and EVP of CBNA.
(4) Mr. Lawley has been an executive vice president since 1984.
(5) Mr. Burrows has been an executive vice president since 1984.
(6) Mr. Leo has been an executive vice president since 1998, when PSB was
acquired by CTY. Prior to that time, Mr. Leo was an executive vice
president of PSB.
(7) Mr. Seibert has been an executive vice president since 1998, when PSB was
acquired by CTY. Prior to that time, Mr. Seibert was an executive vice
president of PSB.
7
BOARD EXECUTIVE COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Committee Interlocks and Insider Participation
Members of the Compensation Committee as of December 31, 2000 were, Robert
W. Rissinger, James A. Ulsh, Earl L. Mummert, Peter DeSoto, John W. Taylor,
Jr. and Donald L. Miller. None of these committee members have been officers
or employees of CTY or any of its subsidiaries at any time. James A. Ulsh is a
shareholder/employee of the law firm of Mette, Evans & Woodside, Harrisburg,
Pennsylvania, which CTY has retained in the last fiscal year and proposes to
retain in the current fiscal year. Earl L. Mummert is a consulting actuary
with Conrad M. Seigel, Inc. which provides actuarial services for CTY.
Through our executive compensation policy, we seek to achieve the following
goals in determining compensation of our executive officers:
. integrate compensation with CTY, CBNA and PSB annual and long-term
performance goals;
. reward exceptional performance;
. recognize individual initiative and achievements;
. attract and retain qualified executives;
. provide compensation packages competitive with those offered by other
similar bank holding companies and banks; and
. encourage stock ownership by executive officers.
The Compensation Committee considers a variety of criteria in evaluating
and establishing compensation. Among other things, the Compensation Committee
considers and compares information reported in SNL Securities Bank Performance
Report and the SNL Executive Compensation Review for Commercial Banks in
evaluating executive compensation.
The Compensation Committee believes that compensation for CTY's executive
officers can best be accomplished through a combination of techniques,
including:
. salary;
. the CTY Bonus Plan;
. the Long-Term Incentive Plan; and
. appropriate fringe benefits.
CTY Bonus Plan
We maintain a Bonus Plan for the executive officers of CTY and its
subsidiaries. Pursuant to this plan, a certain percentage of net income is
placed in a bonus pool. Bonuses paid to the executive officers are determined
by the Compensation Committee pursuant to guidelines established by the
Committee. The guidelines are based upon the level of net income CTY achieves
during the year. The remainder of the bonus pool is distributed to other
officers of CTY or its subsidiaries. The Compensation Committee delegates to
the Chief Executive Officer the distribution of the remainder of the bonus
pool. In 2000, Eddie L. Dunklebarger, Chief Executive Officer, and Ernest L.
Lowe, Chairman, each received bonuses of $113,000. The total amount of bonuses
paid to all executive officers, including those amounts paid to Mr.
Dunklebarger and Mr. officers of CTY and its subsidiaries totaled $339,944.
8
Long-Term Incentive Plan
In 1998, we adopted a Long-Term Incentive Plan. Under the plan, we can
issue incentive stock options, stock appreciation rights, and non-qualified
stock options. The Compensation Committee believes that stock ownership by
management helps align management's interests with the interests of the
shareholders in enhancing and increasing the value of CTY common stock. The
Compensation Committee considers the same criteria in awarding stock options
that it considers in making other compensation decisions.
Employment Agreements
We have entered into employment agreements with our executive officers.
Following is a summary of those agreements.
Mr. Dunklebarger and Mr. Lowe
Mr. Dunklebarger's employment agreement provides that he is employed for a
period of five (5) years beginning March 31, 1998. Upon the expiration of the
third year of the initial five-year term, and upon the expiration of each
additional year of employment, Mr. Dunklebarger's employment automatically
extends for an additional year (resulting in successive three-year terms)
unless, no later than ninety (90) days prior to the expiration date, either
the Board of Directors of CTY or Mr. Dunklebarger gives written notification
to the other of its/his intent not to renew the employment agreement.
Pursuant to his agreement, Mr. Lowe is employed for a period of three (3)
years beginning March 31, 1998. On each anniversary date of the effective date
of the agreement, the term of the employment agreements automatically renews
and is extended for an additional one-year period unless either party shall
have provided the other party with notice of intent not to renew within sixty
(60) days prior to the anniversary date.
Pursuant to their agreements, Mr. Dunklebarger and Mr. Lowe each received
an initial annual salary of $190,000. Their salaries are subject to increase
as the Compensation Committee and the Board of Directors deems appropriate.
For a period of two (2) years (beginning with calendar year 1998), Mr.
Dunklebarger and Mr. Lowe each received a bonus equal to the greater of (i)
$50,000, or (ii) any bonus to which he would be entitled to as a participant
in CTY's executive bonus plan. Going forward, Mr. Dunklebarger and Mr. Lowe
will each participate in CTY's executive bonus plan. Additionally, Mr.
Dunklebarger and Mr. Lowe are entitled to participate in or receive benefits
under all CTY employment benefit plans, including the right to receive options
for at least 6,000 shares of CTY Common Stock (to be adjusted for stock splits
and stock dividends), per year, under CTY's existing stock option plan. Mr.
Dunklebarger and Mr. Lowe will also be entitled to other benefits and
perquisites as CTY's Board of Directors deems appropriate.
Mssrs. Lawley, Burrows, Leo, and Seibert
The agreements with Robert W. Lawley, Terry L. Burrows, Anthony N. Leo, and
Jeffrey M. Seibert generally provide that they are employed for rolling terms
of two (2) years. On each anniversary date of the agreements, the term of the
agreements automatically renews and is extended for an additional one-year
period unless either party has provided the other party with notice of intent
not to renew within sixty (60) days before the anniversary date. The
agreements also provide that if the employee's employment is terminated
pursuant to a change in control, as defined in the agreements, the employee
may receive an amount equal to salary to which the employee would be entitled
to be paid between the date of termination and the end of the remaining term
of the agreement.
9
Executive Compensation
The Compensation Committee seeks to attract and retain qualified executive
officers by offering compensation competitive with that offered by similar
bank holding companies. The Compensation Committee considers objective and
subjective criteria. Among other things, the Committee considers data from the
SNL Executive Compensation Review. The SNL Executive Compensation Review helps
the Committee compare CTY's executive compensation to that of a peer group of
14 Pennsylvania bank holding companies with assets between $300,000,000 and
$1,350,000,000. The SNL Executive Compensation Review compares:
. asset size;
. return on assets;
. the salaries of the chief executive officer and other executive
officers;
. return on average assets; and
. return on average equity.
The Compensation Committee also considers the performance of CTY common
stock on the American Stock Exchange, particularly compared with the
performance of the stock of other comparable bank holding companies.
The Compensation Committee does not make its recommendations based solely
on corporate performance. The Committee also considers subjective factors.
However, the Committee considers peer group information and corporate
performance to be significant factors in determining executive compensation.
Eddie L. Dunklebarger--President and CEO of CTY, CBNA and PSB
For 2000, Mr. Dunklebarger received an annual salary of $235,000. He was
also a participant in the CTY Long Term Incentive Plan and the CTY Bonus Plan.
Mr. Dunklebarger received a bonus of $113,000, based on 1999 performance.
Pursuant to the CTY Long Term Incentive Plan, Mr. Dunklebarger received stock
options to purchase 15,000 shares of CTY common stock at an exercise price of
$19.438 per share. These options, granted in November of 2000, were based on
2000 performance.
Ernest L. Lowe - Chairman of CTY, CBNA and PSB
For 2000, Mr. Lowe received an annual salary of $215,000. He was also a
participant in the CTY Long Term Incentive Plan and CTY Bonus Plan. Mr. Lowe
received a bonus of $113,000, based on 1999 performance. Pursuant to the CTY
Long Term Incentive Plan, Mr. Lowe received stock options to purchase 10,000
shares of CTY common stock at an exercise price of $19.438 per share. These
options, granted in November of 2000, were based on 2000 performance.
Other Executive Officers
With respect to the compensation of CTY's other executive officers, the
Compensation Committee considers information provided by the Chief Executive
Officer about each executive officer including:
. level of individual performance;
. contribution to the consolidated organization; and
. salary history.
10
The Compensation Committee also considers:
. the earnings of CTY on a consolidated basis;
. the peer group compensation information discussed above;
. individual performance factors; and
. its subjective evaluation of the services provided by each executive
officer.
You can see the compensation paid to CTY's other executive officers in the
Summary Compensation Table on page 13 of this proxy statement.
This report is given by the Compensation Committee, consisting of Robert W.
Rissinger, Peter DeSoto, James A. Ulsh, Earl L. Mummert, John W. Taylor, Jr.,
and Donald L. Miller.
11
Stock Performance Graph
The following graph shows the yearly percentage change in CTY's cumulative
total shareholder return on its common stock from December 31, 1995 to
December 31, 2000 compared with the cumulative total return of the AMEX Stock
Market (US Companies) and a self-determined peer group consisting of 12 bank
holding companies. The bank holding companies in the peer group are Bryn Mawr
Bank Corp., Comm Bancorp, Inc., F & M Bancorp MD, First Colonial Group, Inc.,
Harleysville National Corp., Main Street Bancorp, Inc., National Penn
Bancshares, Inc., Omega Financial Corp., Patriot Bank Corp., Promistar
Financial Corp., S & T Bancorp, Inc., Sterling Financial Corp., and Sun
Bancorp, Inc.
[Stock Performance Graph Appears Here]
Legend
12/1995 12/1996 12/1997 12/1998 12/1999 12/2000
Community Banks, Inc. 100.0 108.5 188.4 173.3 170.6 165.8
AMEX Stock Market(US Companies) 100.0 101.5 127.3 136.6 179.3 168.4
Self-
Determined Peer Group 100.0 110.3 177.9 187.8 165.8 146.3
12
Cash Compensation
The following Summary Compensation Table shows the annual salary and other
compensation for our executive officers for the last three years.
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation
-------------------------------------------- -----------------------------
Other All
Annual Restricted Options/ LTIP Other
Name and Principal Compensation Stock SARs Payouts Compensation
Position Year Salary($) Bonus($) (1)($) Awards(2)($) (3)(#) (4)($) (5)($)
- ------------------ ---- --------- -------- ------------ ------------ -------- ------- ------------
Eddie L. Dunklebarger 2000 235,000 113,000 -- -- 15,000 -- 48,072
President & CEO of CTY, 1999 205,033 50,000 -- -- 15,750 -- 55,732
CBNA and PSB 1998 184,808 59,200 -- -- 34,179 -- 41,885
Ernest L. Lowe 2000 215,000 113,000 -- -- 10,000 -- 258,992
Chairman of CTY, CBNA 1999 205,000 50,000 -- -- 10,500 -- 103,100
and PSB 1998 190,000 36,586 -- -- 11,025 -- 5,400
Robert W. Lawley 2000 112,350 37,500 -- -- 5,000 -- 31,997
Executive Vice- 1999 107,000 25,137 -- -- 5,250 -- 17,404
President/Operations 1998 100,400 29,220 -- -- 5,512 -- --
Terry L. Burrows 2000 103,000 37,500 -- -- 5,000 -- 36,392
Executive Vice- 1999 98,000 25,137 -- -- 5,250 -- 18,297
President/Finance 1998 91,100 27,792 -- -- 5,512 -- --
Jeffrey M. Seibert 2000 106,000 37,500 -- -- 5,000 -- 19.994
Executive Vice- 1999 100,800 25,000 -- -- 5,250 -- 19,223
President/Banking 1998 88,269 29,200 -- -- 12,130 -- 17,624
Services
Anthony N. Leo 2000 106,000 37,500 -- -- 5,000 -- 26,484
Executive Vice- 1999 100,800 25,000 -- -- 5,250 -- 26,361
President/Financial 1998 88,269 29,200 -- -- 12,130 -- 24,582
Services and
Administration
(1) The total personal benefits provided by CTY and its subsidiaries for any
executive officer, individually or all executive officers as a group did
not exceed the lesser of (i) $50,000 or (ii) 10% of the salary and bonus
of the officer for any of the years shown. This does not include benefits
that are available to all salaried officers, directors and employees on a
non-discriminatory basis.
(2) We have not issued any Restricted Stock Awards to any executive officer.
(3) Stock Options for Mr. Dunklebarger, Mr. Seibert and Mr. Leo in 1998
include options awarded to them as officers of PSB, prior to the PSB
acquisition by CTY. When appropriate, stock options shown above have been
adjusted for subsequent stock dividends and stock splits.
(4) CTY does not maintain any Long-Term Incentive Plan as defined in the
applicable SEC regulations, and has made no payouts pursuant to any such
plan.
(5) "All other compensation" includes the following:
Mr. Dunklebarger--Director fees of $5,400 for 2000, $4,800 in 1999, and
$2,250 in 1998; employer contributions to the CTY 401(k) Plan of $13,600 in
2000, $14,354 in 1999, and $14,600 in 1998; SERP accruals of $29, 072 in 2000,
$26,978 in 1999, and $25,035 in 1998.
Mr. Lowe--Director fees of $5,400 for 2000, 1999 and 1998; employer
contributions to the CTY 401(k) Plan of $13,600 in 2000 and $12,800 in 1999;
SERP accruals of $239,992 in 2000 and $84,900 in 1999.
13
Mr. Lawley--Employer contributions to the CTY 401(k) Plan of $13,058 in
2000 and $10,714 in 1999; SERP accruals of $18,939 in 2000 and $6,700 in 1999.
Mr. Burrows--Employer contributions to the CTY 401(k) Plan of $12,647 in
2000 and $9,897 in 1999; SERP accruals of $23,745 in 2000 and $8,400 in 1999.
Mr. Seibert--Employer contributions to the CTY 401(k) Plan of $11,480 in
2000, $11,322 in 1999, and $10,292 in 1998; SERP accruals of $8,514 in 2000,
$7,901 in 1999, and $7,332 in 1998.
Mr. Leo--Employer contributions to the CTY 401(k) Plan of $11,480 in 2000,
$11,925 in 1999, and $10,667 in 1998; SERP accruals of $7,804 in 2000, $7,236
in 1999, and $6,715 in 1999; car allowance of $7,200 in 1998, 1999 and 2000.
Stock Options
In 1998, the shareholders of CTY adopted the CTY Long-Term Incentive Plan.
This plan allows us to issue awards to key officers of CTY. Awards may be made
in the form of incentive stock options (ISOs), nonqualified stock options
(NQSOs) and stock appreciation rights (SARs).
Incentive Stock Options
The Internal Revenue Code requires all ISOs to be granted at a price not
less than 100% of the fair market value of CTY common stock on the date the
ISO is granted. ISOs are not transferable, except upon death by will or
descent and distribution, and may not have a term of exercise longer than ten
years. In addition, no ISO may be exercised for a period of at least six
months after the ISO is granted.
In November 2000:
. Eddie L. Dunklebarger was granted 4,672 ISOs; and
. Ernest L. Lowe was granted 4,619 ISOs.
The plan requires adjustment of the options to reflect changes in the
number of outstanding shares caused by events such as the declaration and
payment of a stock dividend. Consequently, the option price of and number of
shares subject to all ISOs granted has been adjusted each time a stock
dividend has been declared and paid.
Nonqualified Stock Options (NQSO)
NQSOs may or may not have a vesting schedule, depending on the terms of the
grant as determined by the Committee administering the plan. Although tax
treatment of ISOs and NQSOs may differ, the plan imposes the same general
conditions and restrictions on NQSOs as it does on ISOs. These conditions are
described above. In November, 2000:
. Eddie L. Dunklebarger was granted 10,328 NQSOs; and
. Ernest L. Lowe was granted 5,381 NQSOs.
To date, all NQSOs granted have an option price equal to the fair market
value of CTY common stock on the date the NQSO was granted.
14
Stock Option Grants
The following table shows:
. the number of stock options granted to executive officers in 2000;
. the percentage which the executive's options bears in relation to the
total options granted to all key employees during the year;
. the option price;
. the potential realization value of the options assuming certain rates of
stock appreciation:
STOCK OPTION GRANTS
IN LAST FISCAL YEAR
Potential
Potentiale
Realizable Value
at Assumed Annual
Alternative Rates
of Stock Price
Appreciation for
Individual Grants Option Term
---------------------------------- -----------------
Number of % of Total Exercise
Securities Options/SARs or Base
Undrlying Granted to Price
Options/SARs Employees in ($/Sh) Expiration 5% ($) 10% ($)
Name Granted (#) Fiscal Year (1) Date (2) (2)
- ---- ------------ ------------ -------- ---------- -------- --------
Eddie L. Dunklebarger 15,000 13.10% $19.4380 11/30/2010 $183,367 $464,687
Ernest L. Lowe 10,000 8.73% $19.4380 11/30/2010 $122,245 $309,792
Robert W. Lawley 5,000 4.37% $19.4380 11/30/2010 $ 61,122 $154,896
Terry L. Burrows 5,000 4.37% $19.4380 11/30/2010 $ 61,122 $154,896
Anthony N. Leo 5,000 4.37% $19.4380 11/30/2010 $ 61,122 $154,896
Jeffrey M. Seibert 5,000 4.37% $19.4380 11/30/2010 $ 61,122 $154,896
(1) Options were granted in November, 2000, each with an exercise price of
$19.438 per share. The option prices in all events equal the fair market
value of CTY common stock on the date of the grant. The options granted in
November, 2000 were for calendar year 2000.
(2) Applicable SEC regulations require us to disclose the potential
appreciation in options granted to executive officers, assuming annualized
rates of stock price appreciation of 5% and 10% over the term of the
option. Appreciation is determined as of the expiration date of the
option. The figures shown above assume 5% and 10% rates of appreciation on
an annual basis, with annual compounding of the appreciation rate,
beginning with the original option price of $19.438 per share.
15
Stock Option Exercises
The following table shows:
. all options exercised by each executive officer of CTY during 2000;
. the number of shares acquired on exercise; . the value realized by the
executive officer upon exercise; and . the number of exercisable and un-
exercisable options outstanding
. for each executive officer, and the value of those options, as of
December 31, 2000:
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
Shares Value of Unexercised
Acquired In-the-Money
on Value Number of Unexercised Options/SARs at FY-
Exercise Realized Options/SARs at FY-End (#) End ($) Exercisable/
Name (#) *$) Exercisable/Unexercisable(1) Unexercisable(1),(2)
- ---- -------- ---------- ---------------------------- --------------------
Eddie L. Dunklebarger 2,250 $16,256.25 83,484/34,256 502,782/57,903
Ernest L. Lowe 7,250 $99,983.75 36,920/18,146 131,607/10,620
Robert W. Lawley 3,194 $44,772.99 18,138/14,022 96,814/8,712
Terry L. Burrows -- -- 7,430/14,022 18,233/8,712
Anthony N. Leo -- -- 9,959/12,508 808/5,310
Jeffrey M. Seibert -- -- 27,765/14,015 185,821/19,294
(1) All options granted through December 31, 2000 are reported. Exercisable
options are fully vested. Options which will vest in the future are
reported as unexercisable.
(2) The dollar values shown above were calculated by determining the
difference between the closing trading price of CTY common stock at
December 31, 2000, which was $20.50 per share, and the option price of
each option as of December 31, 2000.
Pension Plan
CBNA maintains a pension plan for some of its employees. Employees hired
prior to December 31, 1998 became participants in the pension plan on January
1 or July 1 after completing one year of service (12 continuous months) and
reaching age 21. The cost of the pension is actuarially determined and paid by
CBNA. The amount of monthly pension is equal to 1.15% of average monthly pay
up to $650, plus .60% of average monthly pay in excess of $650, multiplied by
the number of years of service completed by an employee. The years of service
for the additional portion are limited to a maximum of 37. Average monthly pay
is based upon the 5 consecutive plan years of highest pay preceding
retirement. The maximum amount of annual compensation used in determining
retirement benefits is $170,000. A participant is eligible for early
retirement after reaching age 60 and completing five years of service. The
early retirement benefit is the actuarial equivalent of the pension accrued to
the date of early retirement. As of December 31, 2000, the following officers
have been credited with the following years of service: Ernest L. Lowe --16
years of service, Robert W. Lawley--25 years of service, and Terry L.
Burrows--27 years of service.
In 1999, the Board of Directors amended the plan so that pension benefits
will be offset by employer contributions to the CTY 401(k) Plan. Employees
hired after December 31, 1998 are not eligible to participate in the pension
plan. The amount shown on the following table assumes an annual retirement
benefit for an employee who chose a straight life annuity and who will retire
at age 65. These amounts are offset for the employer contribution in the
401(k) Plan.
16
PENSION PLAN TABLE
Remuneration Years of Service
- ------------ ----------------------------------------------------------------------
15 20 25 30 35 40
$35,000 $ 8,486 $11,314 $14,143 $16,971 $19,800 $ 22,138
$55,000 $13,736 $18,314 $22,893 $27,471 $32,050 $ 35,778
$75,000 $18,986 $25,314 $31,643 $37,971 $44,300 $ 49,418
$95,000 $24,236 $32,314 $40,393 $48,471 $56,550 $ 63,058
$115,000 $29,486 $39,314 $49,143 $58,971 $68,800 $ 76,698
$135,000 $34,736 $46,314 $57,893 $69,471 $81,050 $ 90,338
$150,000 $38,673 $51,564 $64,455 $77,346 $90,237 $100,568
$175,000 $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$200,000 $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$225,000 $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$250,000 $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
$275,000 $41,298 $55,064 $68,830 $82,596 $96,362 $107,388
CTY 401(k) Profit Sharing Plan
Effective January 1, 2000, the previously existing PSB 401(k) Plan and CBNA
401(k) Plan were merged to create the CTY 401(k) Profit Sharing Plan for
employees of CTY and its subsidiaries. Each employee is eligible to
participate in the plan after they have completed six months of service and
have reached their twenty-first birthday. The plan offers both immediate and
future benefits to employees in the program. The plan was submitted to the
Internal Revenue Service for favorable determination as a tax deferred
retirement program.
CTY allocates for participating accounts an annual amount based on CTY's
earnings at the end of each calendar year. The amount allocated to an
employee's account is based on the relationship of the employee's annual
compensation to the total annual compensation paid by CTY to all employees
participating in the plan. Subject to limitations of the plan and the trust
under plan, an employee can receive a percentage (to be determined in the
discretion of the Board of Directors) of his or her annual compensation as a
contribution to the plan account each year. The monies allocated to each
employee's account are held and invested by the trustee for the plan.
Employees become fully vested in the plan after five years of service. Upon
retirement, employees will be eligible to withdraw their vested interest in
the plan according to the plan provisions. Should the participant become
disabled or upon his or her death, the plan allows for other payment options.
As a participant in the plan, the employee has the right to direct the
investment of all of his or her funds. An employee may split his or her
investment between two or more types of investments or instruct the
administrator to place the entire amount in one investment account.
In order to allow participants the opportunity to increase their retirement
income, each participant may, at the discretion of the administrator, elect to
voluntarily contribute no less than 1% and no more than 17% (subject to
certain limitations) of his or her total compensation earned while a
participant under the plan. The amounts in each participant's voluntary
contribution account are fully vested at all times and are not subject to
forfeiture for any reason. The normal retirement age under the plan is age 65.
Community Banks, N.A. / Peoples State Bank Executive Survivor Income
Agreements
On June 1, 1994, CBNA entered into Survivor Income Agreements with Ernest
L. Lowe, Robert W. Lawley, Terry L. Burrows, Lewis C. Bogle, and David E.
Hawley. On February 5, 1999, PSB and CTY entered into similar agreements with
Eddie L. Dunklebarger, Anthony N. Leo and Jeffrey M. Seibert. For the purpose
of describing the provisions of these agreements, CBNA and PSB will each be
referred to as the "Bank."
17
In these agreements, the Bank promised to pay to each executive employee's
designated beneficiary a survivor income benefit. The survivor's income
benefit is payable only if the executive employee dies before terminating
employment with the Bank and only to the extent that the Bank owns life
insurance policies on the executive employee's life at the time of his or her
death.
The base death benefit is equal to the lesser of:
. three times the executive employee's base salary for the calendar year
in which the executive's death occurs; or
. the amount of life insurance proceeds received by the Bank due to the
executive's death.
The base death benefit, however, will be increased by an amount equal to
the death benefit multiplied by CTY's projected highest marginal federal
income tax rate for the year in which the executive's death occurs. The
survivor's income benefit will be paid in a lump sum within 60 days after the
executive employee's death. These agreements are funded by life insurance
policies on each executive employee's life.
The life insurance policies are owned by the Bank, and are in place of each
executive employee's participation in the Bank's group life insurance plan. A
split dollar insurance agreement goes into effect after the executive employee
reaches the age of 65, as long he has completed ten (10) years of service.
Pursuant to the terms of the split dollar agreement, the executive employee
has the right to designate the beneficiary of the death proceeds of the policy
to the extent the proceeds exceed the cash surrender value of the policy on
the date before the executive employee's death.
Supplemental Executive Retirement Plans
CTY maintains Supplemental Executive Retirement Plans providing key man
life insurance on the lives of certain executive employees. Pursuant to the
plans, CTY has purchased key man life insurance policies with death benefits
payable to CTY if an executive dies in the course of his employment with CTY,
in initial net amounts of:
. $1,270,000 covering the life of Eddie L. Dunklebarger;
. $1,120,000 covering the life of Ernest L. Lowe;
. $912,000 covering the life of Robert W. Lawley;
. $679,500 covering the life of Terry L. Burrows;
. $575,000 covering the life of Anthony N. Leo; and
. $570,000 covering the life of Jeffrey M. Seibert.
The plans also provide salary continuation benefits for the executives
pursuant to Salary Continuation Agreements entered into between CTY and the
executives. If the executive remains employed by CTY until he or she reaches
age 62, then the executive will be entitled to salary continuation for twenty
years after retirement. Pursuant to their respective agreements, the following
individuals are entitled to the following amounts:
. Eddie L. Dunklebarger--$80,000 per year;
. Ernest L. Lowe--$45,000 per year;
. Anthony N. Leo--$40,000 per year;
. Jeffrey M. Seibert--$40,000 per year;
. Robert W. Lawley--$35,000 per year; and
. Terry L. Burrows--$25,000 per year.
18
If the executive's employment with CTY is terminated before age 62, the
executive will receive reduced benefits at age 62 in accordance with accrual
of benefits schedules set forth in the respective agreements. Benefits will
not be paid if an executive's employment is terminated for cause (as defined
in the respective agreements). In the event of termination due to disability,
CTY may elect to pay the accrued benefit immediately in a lump sum, discounted
to present value. In the event that an executive is terminated after a change
in control but prior to age 62, the executive will receive at age 62 his
accrued benefit, plus an additional benefit equal to three years additional
accrual in the case of Mr. Dunklebarger, and two years additional accrual in
the cases of Mssrs. Leo, Seibert, Lawley and Burrows. If the executive dies
prior to or during the benefit payment period, normal retirement benefits will
be payable to the executive's beneficiaries beginning within one month after
the executive's death.
Directors' Compensation
Attendance Fees
In 2000, each CTY director received a quarterly fee of $750. Each outside
director received a fee of $250 for each Board meeting attended. Each director
who was not an executive officer also received $250 for each Committee meeting
attended.
Directors' Stock Option Plan
In 2000, the shareholders of CTY approved the Directors' Stock Option Plan.
The purpose of the Directors' Stock Option Plan is to attract and retain non-
employee directors who have outstanding abilities. The plan enables the
directors to purchase shares on terms which will give the directors a direct
and continuing interest in the success of CTY. The price of the options must
equal at least the fair market values of CTY shares on the date the options
are granted. Directors may not exercise the options before the first
anniversary of the option grant or a change of control in CTY, whichever first
occurs. The options will expire in ten years, unless they are exercised.
On May 2, 2000, CTY granted options to all of its directors to acquire
1,000 shares at a price of $18.00 per share. On November 30, 2000, CTY granted
options to all but the emeritus directors to purchase 500 shares at a price of
$19.438 per share.
Section 16(a) Beneficial Ownership Reporting Compliance
Our directors and executive officers must file reports with the Securities
and Exchange Commission indicating:
. the number of shares of CTY common stock they beneficially own; and
. changes in their beneficial ownership.
To the best of our knowledge, our directors and executive officers filed
all required reports in 2000.
Transactions with Officers and Directors
During 2000, CBNA had, and expects to have in the future, banking
transactions in the ordinary course of business with directors, officers and
principal shareholders of CTY and their associates on substantially the same
terms, including interest rates and collateral on loans, as those prevailing
at the time for comparable transactions with other persons. Management
believes that these loans present no more than the normal risk of
collectibility or other unfavorable features.
19
Allen Shaffer, a director of CTY, is an attorney with offices in Harrisburg
and Millersburg, Pennsylvania, who has been retained in the last fiscal year
by CTY and who CTY proposes to retain in the current fiscal year. James A.
Ulsh, a director of CTY, is a shareholder/employee of the law firm of Mette,
Evans & Woodside, Harrisburg, Pennsylvania, which CTY has retained in the last
fiscal year and proposes to retain in the current fiscal year. Thomas J.
Carlyon, a director of CBNA, is an attorney in Hazleton, Pennsylvania, which
CTY has retained in the last fiscal year and proposes to retain in the current
fiscal year. Earl L. Mummert, a director of CTY, is an actuarial consultant
with Conrad M. Siegel, Inc., Harrisburg, Pennsylvania, which provides
actuarial services to CTY.
Committees of the Board of Directors of CTY
The Board of Directors of CTY has established three (3) committees:
. the Audit Committee;
. the Executive Committee; and
. the Compensation Committee.
We do not have a nomination committee but provide for the nomination of
directors as described under "ELECTION OF DIRECTORS OF CTY" on page 2 of this
proxy statement.
The Board of Directors met five (5) times during 2000. All directors
attended no fewer than 75% of the total number of meetings of the Board and
committees on which he or she served, except Samuel E. Cooper, Peter DeSoto
and Wayne H. Mummert who attended 67%, 63% and 73% respectively.
Audit Committee
Members: Ronald Boyer, Kenneth L. Deibler, Samuel E. Cooper, Ray N.
Leidich, Susan K. Nenstiel, Earl L. Mummert, Todd E. Elgin, Wayne
H. Mummert
Meetings: 4
The Board of Directors of Community has established an Audit Committee of
the Board. The general functions performed by the Audit Committee include
supervising and recommending to the Board changes in audit procedures,
recommending the hiring of outside auditors, reviewing the complete audit of
the books and financial statements of CTY and its subsidiaries, reviewing and
making recommendations to the Board regarding the internal auditor's report
and the certified public accountants' audit report, reviewing examination
reports by state and federal banking regulators, and the monitoring of risks,
which includes reviewing the adequacy of internal controls and assessing the
extent to which audit recommendations have been implemented.
With respect to fiscal year 2000, the Audit Committee has reviewed and
discussed the audited financial statements of Community with management.
Additionally, the Audit Committee has discussed with the independent auditors
the matters to be required to be discussed by Statement on Auditing Standards
No. 61, as may be modified or supplemented, has received the written
disclosures and the letter from the independent accountants required by
Independence Standards Board Standard No. 1, Independence Discussions with
Audit Committees, as may be modified or supplemented, and has discussed with
the independent accountant the independent accountant's independence. Based on
these discussions, the Audit Committee has recommended to the Board of
Directors of Community that the audited financial statements be included in
Community's Annual Report on Form 10-K.
A copy of the charter of the Audit Committee that has been adopted by
Community's Board of Directors is included in this Proxy Statement as Appendix
A. All members of the Committee are independent directors of Community, under
the standards of the American Stock Exchange.
20
By: Ronald Boyer, Kenneth L. Deibler, Samuel E. Cooper, Ray N. Leidich,
Susan K. Nenstiel, Earl L. Mummert, Todd E. Elgin, Wayne H. Mummert
Executive Committee
Members: Robert W. Rissinger Peter DeSoto
Allen Shaffer James A. Ulsh
Donald L. Miller John W. Taylor, Jr.
Earl L. Mummert Wayne H. Mummert
Thomas L. Miller
Meetings: 9
Functions:
. Review policies and other items to be presented to the Board; and
. Act on behalf of the Board between scheduled Board meetings as permitted
by law.
Compensation Committee
Members: Robert W. Rissinger James A. Ulsh
Earl L. Mummert Peter DeSoto
John W. Taylor, Jr. Donald L. Miller
Meetings: 2
Functions:
. Evaluate CTY's compensation policies and plans;
. Review and evaluate the individual performance of executive officers;
and
. Make recommendations to the Board regarding the compensation of
executive officers.
OTHER BUSINESS
At the date of mailing of this proxy statement, we are not aware of any
business to be presented at the annual meeting other than the proposals
discussed above. If other proposals are properly brought before the meeting,
any proxies returned to us will be voted as the proxyholders see fit.
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have engaged PricewaterhouseCoopers, LLP as principal accountant to
audit the financial statements of Community for the year 2000. This firm has
no material relationship with Community and is considered to be well
qualified. A representative of the firm is expected to be at the annual
meeting and will have the opportunity to make a statement if he so desires and
to respond to appropriate questions.
21
FEES BILLED BY INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
PricewaterhouseCoopers has billed the following fees for work relating to
CTY's 2000 financial reports and condition. The Audit Committee has determined
that the preparation of tax returns and the performance of other miscellaneous
duties by PricewaterhouseCoopers is compatible with maintaining that firm's
independence.
Audit Fees (Review of CTY's 2000 Financia Information Systems All Other Fees (Preparation of Tax
-------------------------------- --------------------------------- ----------------------------------
Annual Report and 2000 Forms 10-Q) Design and Implementation Fees(1) Returns and Miscellaneous Duties)
- ---------------------------------- --------------------------------- ----------------------------------
$91,255 $0 $39,788
(1) PricewaterhouseCoopers does not perform these services for us.
FORM 10-K ANNUAL REPORT
You can obtain a copy of the CTY Form 10-K Annual Report for the year ended
December 31, 2000 at no charge by writing to:
Terry L. Burrows, EVP/CFO
Community Banks, Inc.
P.O. Box 350
Millersburg, Pennsylvania 17061
Our Annual Report on Form 10-K for the year ended December 31, 2000, which
we filed with the SEC, is incorporated in this proxy statement by reference.
All information appearing in this proxy statement should be read together with,
and is qualified in its entirety by, the information and financial statements
(including notes) appearing in the Annual Report.
RETURN OF PROXY
You should sign, date and return the enclosed proxy card as soon as possible
whether or not you plan to attend the meeting in person. If you wish to vote in
person at the meeting, you may then withdraw your proxy. By order of the Board
of Directors,
/s/ Patricia E. Hoch
Patricia E. Hoch
Secretary
Millersburg, Pennsylvania
March 28, 2001
22
APPENDIX "A"
COMMUNITY BANKS, INC.
AUDIT COMMITTEE CHARTER
The Board of Directors of Community Banks, Inc. (CTY) hereby constitutes
and establishes an Audit Committee with its authority, structure,
responsibilities, and specific duties as follows:
AUTHORITY
The authority for the Audit Committee is derived from the full Board of
Directors. The Committee membership is reviewed annually, and members are
appointed accordingly.
STRUCTURE
The Committee shall be comprised of at least three members and consist of
independent directors only. All directors must be able to read and understand
fundamental financial statements, including a company's balance sheet, income
statement, and cash flow statement. At least one director must have past
employment experience in finance/accounting, requisite professional
certification in accounting, or other comparable experience or background,
including a current or past position as a chief executive or financial officer
or other senior officer with financial oversight responsibilities.
Under exceptional and limited circumstances, however, one non-independent
director may serve on the Committee, provided that the Board determines it to
be in the best interest of the corporation and its shareholders, and the Board
discloses the reasons for the determination in the corporation's next annual
proxy statement.
RESPONSIBILITIES
The primary responsibilities of the Committee include oversight of the
internal audit function, the external audit function, and the analysis of
regulatory examinations. Specific responsibilities include:
* * * Meet at least quarterly, but as many times as the Committee deems
necessary.
* * * Review the scope and general extent of the accountant's examinations,
including their engagement letter. At this time the Committee should
discuss with the accountants, the quality of the corporation's
financial and accounting personnel and practices, and any relevant
recommendations. In addition, the Committee should determine if the
accountants possess the objectivity to carry out the audit
independently. Fees are to be arranged with management and annually
presented to the Committee for approval. This entire process results
in the recommendation to hire or terminate the independent auditor.
* * * Review and approve the annual audit plan for both the internal and
external auditor, the corporation's financial statements, the reports
of examination by all regulatory authorities, and the results of the
internal audit work.
* * * Review the adequacy of internal control systems and the extent to
which significant audit recommendations have been implement.
* * * Oversee the quarterly report process.
* * * Issue a letter signed by the Chairman of the Audit Committee to be
included in the annual report to stockholders describing the
Committee's responsibilities and activities during the year.
* * * Keep detailed minutes of the meetings that will document the audit
reports and major findings discussed and record any action taken.
These minutes will be used by the Audit Chairman when making his
regular report to the full Board at the regularly scheduled Board
Meeting.
A-1
This Audit Committee Charter has been reviewed and approved by the Audit
Committee of Community Banks, Inc. at the scheduled meeting held on May 19,
2000. The Charter was ratified by the Board of Directors of Community Banks,
Inc. at its August 8, 2000 meeting.
Patricia E. Hoch
Secretary
Ronald E. Boyer
Audit Committee Chairman
A-2