Exhibit 10.1
 
Form of Letter Agreement
 
, 2006
Community Banks, Inc.
CommunityBanks
777 East Park Drive
Harrisburg, PA 17111
Attn.: President and CEO

Dear Mr. Dunklebarger:
 
Community Banks, Inc. (“CMTY”), CommunityBanks (“Community” and, together with
CMTY, the “Community Parties”) and East Prospect State Bank (“East Prospect”)
are considering entering into an Agreement and Plan of Merger (the “Merger
Agreement”), pursuant to which, and subject to the terms and conditions set
forth therein: (a) Community will acquire East Prospect by a merger of East
Prospect with and into Community; and (b) shareholders of East Prospect will
receive shares of CMTY common stock and/or cash in exchange for their shares of
East Prospect common stock owned on the closing date (collectively, the
“Transactions”).
 
I have been advised that I may be deemed to be an “affiliate” of East Prospect
for purposes of certain rules issued by the Securities and Exchange Commission
(the “SEC”) under the Securities Act of 1933.
 
I understand that the Community Parties are requiring, as a condition to their
execution and delivery to East Prospect of the Agreement, that I execute and
deliver to the Community Parties this Letter Agreement. Intending to be legally
bound hereby, I irrevocably agree and represent as follows:
 
1. I agree to vote or cause to be voted for approval of the Merger Agreement all
shares of East Prospect common stock over which I exercise sole or shared voting
power as of the record date of the East Prospect shareholder meeting at which
the Merger Agreement will be presented for approval.
 
2. Through the conclusion of the Transactions, I agree not to offer, sell,
transfer or otherwise dispose of, or to permit the offer, sale, transfer or
other disposition of, any shares of East Prospect common stock over which I
exercise sole or shared voting power.
 
3. I have sole or shared voting power over the number of shares of East Prospect
common stock set forth below opposite my signature line. The Community Parties
recognize that with respect to any such shares which have been pledged to a
third party (which are specifically identified below), I will not be able to
control the voting or disposition of such shares in the event of a default.
 
4. I agree not to offer, sell, transfer or otherwise dispose of any shares of
CMTY common stock received pursuant to the Transactions, except:
 

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

(a) at such time as a registration statement under the Securities Act of 1933,
as amended (“Securities Act”), covering sales of such CMTY common stock is
effective and a prospectus is made available under the Securities Act;
 
(b) within the limits, and in accordance with the applicable provisions of,
Rule 145 under the Securities Act (“Rule 145”); or
 
(c) in a transaction which, in an opinion of counsel satisfactory to CMTY or as
described in a “no-action” or interpretive letter from the staff of the SEC (a
“No Action Letter”), is not required to be registered under the Securities Act;
 
5. I acknowledge and agree that CMTY is under no obligation to register the
sale, transfer or other disposition of CMTY common stock by me or on my behalf,
or to take any other action necessary to make an exemption from registration
available.
 
6. CMTY shall take all steps necessary to ensure that CMTY is in compliance with
all those requirements of Rule 145 and Rule 144 with which CMTY must comply in
order for the resale provisions of Rule 145(d) to be available to me.
 
7. I agree that CMTY shall not be bound by any attempted sale of any shares of
CMTY common stock acquired by me pursuant to the Transactions, and CMTY’s
transfer agent shall be given appropriate stop transfer orders and shall not be
required to register any such attempted sale, unless the sale has been effected
in compliance with the terms of this Letter Agreement; and I further agree that
the certificate representing shares of CMTY common stock acquired by me pursuant
to the Transactions by me may be endorsed with a restrictive legend consistent
with the terms of this Letter Agreement, stating in substance as follows:
 
“THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION TO
WHICH RULE 145 APPLIES AND MAY ONLY BE TRANSFERRED (A) IN CONFORMITY WITH RULE
145(d), OR (B) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (C) IN ACCORDANCE WITH A WRITTEN OPINION
OF COUNSEL, REASONABLY ACCEPTABLE TO THE ISSUER IN FORM AND SUBSTANCE, THAT SUCH
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.”
 
The undersigned understands and hereby further acknowledges that the legend set
forth above will be removed from any such certificate (by delivery of a
substitute certificate without such legend) and CMTY will instruct its transfer
agent to remove such legend from any such certificate, if the undersigned
delivers to CMTY (i) satisfactory written evidence that the shares of CMTY
common stock represented by any such certificate have been sold in compliance
with Rule 145(d) (as such rule may be hereafter amended) (in which case, the
substitute certificate will be issued in the name of the transferee), (ii) a No
Action Letter, or (iii) an opinion of counsel, in form and substance reasonably
satisfactory to CMTY, to the effect that public sale of shares represented by
such certificate by the holder thereof is no longer subject to the restrictions
imposed by Rule 145.
 

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

8. I represent that I have no present plan or intention to offer, sell,
exchange, or otherwise dispose of any shares of CMTY common stock to be received
in the Transactions.
 
9. I represent that I have the capacity to enter into this Letter Agreement and
that it is a valid and binding obligation enforceable against me in accordance
with its terms, subject to bankruptcy, insolvency and other laws affecting
creditors’ rights and general equitable principles.
 
I am signing this Letter Agreement in my capacity as a shareholder of East
Prospect and not in any other capacity (including as a director). This Letter
Agreement shall be effective upon acceptance by the Community Parties.
 
Execution of this Agreement by the undersigned is not an admission by the
undersigned that he is an “affiliate” for purposes of the Rule 145 of the
Securities Act.
 
This Letter Agreement shall terminate concurrently with, and automatically upon,
any termination of the Merger Agreement in accordance with its terms, except
that any such termination shall be without prejudice to the rights of the
Community Parties arising out of any willful breach of any covenant or
representation contained herein.
 

 
                                         Very truly yours,

                                                                                                                   
          _____________________________________
                                          Name:
__________________________________
Witness

Number of shares held:
Sole voting power:   _______

Shared voting power:        _______

Number of pledged
shares:                              _______

Accepted:
Community Banks, Inc.
 
 
By:_________________________________________    
Name: Eddie L. Dunklebarger, Chairman, President and CEO
 
Accepted:
CommunityBanks
 
 
By:_______________________________      
Name: Eddie L. Dunklebarger, President and CEO