S-4/A

As filed with the Securities and Exchange Commission on April 12, 2004

Registration No. 333-113581

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Amendment No. 1

to

FORM S-4

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

COMMUNITY BANK SYSTEM, INC.

(Exact name of registrant as specified in its charter)

Delaware	6712	16-1213679
(State or other jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
incorporation or organization)	Classification Code Number)	Identification No.)

5790 Widewaters Parkway

DeWitt, New York 13214

(315) 445-2282

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

Sanford A. Belden

President and Chief Executive Officer

Community Bank System, Inc.

5790 Widewaters Parkway

DeWitt, New York 13214

(315) 445-2282

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With copies to:

George J. Getman, Esq. Bond, Schoeneck & King, PLLC One Lincoln Center Syracuse, New York 13202-1355 (315) 218-8000 John J. Cunningham, III, Esq. Cozen O’Connor 1900 Market Street Philadelphia, Pennsylvania 19103 (215) 575-7000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of the registration statement.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨ ____________

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨ ____________

If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box: ¨

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(A) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(A), may determine.

EXPLANATORY NOTE

This amendment is being filed solely to file Exhibits 8.1, 8.2, 23.3, 23.4 and 23.5 to this Registration Statement on Form S-4 as set forth below in Item 21 of Part II.

PART II:

INFORMATION NOT REQUIRED IN THE PROSPECTUS

Item 20. Indemnification of Directors and Officers

Section 145 of the Delaware General Corporation Law authorizes a corporation to indemnify any director, officer, employee or other agent of the corporation.

The Registrant’s By-laws provide indemnity to the Registrant’s directors and officers in such capacity or as directors or officers of a wholly-owned subsidiary of the Registrant for liability resulting from judgments, fines, expenses or settlement amounts actually and reasonably incurred in connection with any action brought against such person in such capacity to the fullest extent and in the manner set forth in and permitted by the Delaware General Corporation Law, and any other applicable law, as from time to time in effect. Under Delaware law and the By-laws, no indemnification may be provided for any person with respect to any matter as to which he or she shall have been adjudicated in any proceeding not to have acted in good faith in the reasonable belief that his or her action was in the best interests of the Registrant or of such subsidiary.

In addition, as permitted under Delaware law, the Registrant maintains liability insurance covering directors and officers of the Registrant and its subsidiaries.

Item 21. Exhibits and Financial Statement Schedules

(a) The following exhibits are filed as part of this Registration Statement:

Exhibit Number	Description of Exhibit
2.1	Agreement and Plan of Merger, dated as of January 6, 2004, as amended, by and among the Registrant, Community Bank, N.A. and First Heritage Bank (1)
3.1	Certificate of Incorporation, as amended, of the Registrant (2)
3.2	Bylaws, as amended, of the Registrant (2)
5.1*	Opinion of Bond, Schoeneck & King, PLLC as to the validity of the securities being registered
8.1	Opinion of PricewaterhouseCoopers LLP as to tax matters
8.2	Opinion of Cozen O’Connor as to tax matters
10.1*	Form of Voting Agreement by and between the Registrant and the non-officer directors and certain shareholders of First Heritage Bank
10.2*	Form of Affiliates Agreement by and between Registrant and the directors, executive officers and certain shareholders of First Heritage Bank
10.3*	Form of Non-competition Agreement by and between Registrant and certain shareholders of First Heritage
10.4*	Form of Employment Agreement by and among the Registrant, Community Bank, N.A. and James M. O’Brien
10.5*	Form of Employment Agreement by and among the Registrant, Community Bank, N.A. and Robert P. Matley
23.1*	Consent of PricewaterhouseCoopers LLP

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Exhibit Number	Description of Exhibit
23.2*	Consent of Bond, Schoeneck & King, PLLC (included in Exhibit 5.1)
23.3	Consent of PricewaterhouseCoopers LLP (included in Exhibit 8.1)
23.4	Consent of Danielson Associates Inc.
23.5	Consent of Cozen O’Connor (included in Exhibit 8.2)
24.1*	Power of Attorney
99.1*	Form of proxy card for the special meeting of the shareholders of First Heritage Bank.
99.2*	Consent of Charles E. Parente pursuant to Rule 438 promulgated under the Securities Act

* Previously filed.

(1) Attached as Annex A to the proxy statement/prospectus included in this Registration Statement on Form S-4.

(2) Incorporated by reference to the exhibit with the same exhibit number filed with the Registration Statement on Form S-4 (Registration No. 333-48374) filed by the Registrant on October 20, 2000.

(b) Not applicable.

(c) A fairness opinion of Danielson Associates Inc. is attached as Annex B to the proxy statement/ prospectus included in this Registration Statement on Form S-4.

Item 22. Undertakings

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.

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 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.

The undersigned Registrant hereby undertakes to respond to requests for information that is incorporated by reference into the prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or

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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.

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 herein, that was not the subject of and included in the registration statement when it became effective.

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SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized, in DeWitt, New York on this 12th day of April, 2004.

COMMUNITY BANK SYSTEM, INC.
By:	/s/    Sanford A. Belden
Name:	Sanford A. Belden
Title:	President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, the Registration Statement has been signed by the following persons in the capacities and on the dates indicated below.

Signature	Title	Date
/s/    Sanford A. Belden         Sanford A. Belden	Director, President and Chief Executive Officer (Principal Executive Officer)	April 12, 2004
* Mark E. Tryniski	Executive Vice President, Chief Operating Officer and Chief Financial Officer (Principal Financial Officer)	April 12, 2004
* Charles M. Ertel	Assistant Treasurer (Principal Accounting Officer)	April 12, 2004
* Brian R. Ace	Director	April 12, 2004
* John M. Burgess	Director	April 12, 2004
* Paul M. Cantwell, Jr.	Director	April 12, 2004
* William M. Dempsey	Director	April 12, 2004
* Nicholas A. DiCerbo	Director	April 12, 2004
* James A. Gabriel	Director	April 12, 2004
* Lee T. Hirschey	Director	April 12, 2004

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Signature	Title	Date
* Harold Kaplan	Director	April 12, 2004
* Saul Kaplan	Director	April 12, 2004
* David C. Patterson	Director	April 12, 2004
* Peter A. Sabia	Director	April 12, 2004
* William N. Sloan	Director	April 12, 2004
* Sally A. Steele	Director	April 12, 2004

*By:	/s/    Sanford A. Belden
	Sanford A. Belden Attorney-in-Fact

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EX-8.1

Exhibit 8.1

[GRAPHIC APPEARS HERE]

PricewaterhouseCoopers LLP

1177 Avenue of the Americas

New York NY 10036

Telephone (646) 471 4000

Facsimile (646) 471 4100

Board of Directors

Community Bank System, Inc.

5790 Widewaters Parkway

DeWitt, New York 13214

April 12, 2004

Re: Merger of First Heritage Bank and Community Bank, N.A.

Ladies and Gentlemen:

You have requested the opinion of PricewaterhouseCoopers LLP (“the Firm”) as to certain U.S. Federal income tax consequences of the transaction contemplated by the Agreement and Plan of Merger dated as of January 6, 2004 and the amendment, dated as of March 11, 2004 (together, the “Agreement”), by and among Community Bank System, Inc. (“CBSI”), a Delaware corporation, Community Bank, N.A. (“Community Bank”), a national banking association and direct wholly-owned subsidiary of CBSI, and First Heritage Bank (“First Heritage”), a Pennsylvania chartered bank, as described in detail below. Section I of this letter (the “Opinion Letter”) contains the facts upon which our opinion is based. Section II contains our opinion (the “Opinion”) and certain underlying assumptions, as well as qualifications of, and limitations on, the Opinion.

Unless otherwise indicated, all “section” references used herein refer to the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury regulations promulgated thereunder (the “Regulations”).

I. Facts

CBSI is a publicly traded corporation listed on the New York Stock Exchange (“NYSE”) and trading under the symbol “CBU.” CBSI is a registered bank holding company and the second-largest community banking franchise headquartered in Upstate New York. Community Bank is CBSI’s wholly owned operating subsidiary. First Heritage is a closely-held Pennsylvania chartered bank, with branch offices in Luzerne County.

A. The Merger

Pursuant to the Agreement and in accordance with the National Bank Act, as amended (the “Bank Act”), First Heritage will merge with and into Community Bank (the “Merger”). The Merger will be effective at the time and on the date specified in the certificate of the Comptroller of the Currency approving the Merger and, if applicable, the approval letter issued by the

[GRAPHIC APPEARS HERE]

Community Bank System, Inc.

April 12, 2004

Page 2

Pennsylvania Department of Banking (the “Effective Time”). Upon the Merger, First Heritage will cease to exist and Community Bank will continue as the surviving corporation, carrying on First Heritage’s banking business in Pennsylvania under the name of “First Liberty Bank & Trust,” a division of Community Bank.

Subject to the provisions of the Agreement, at the Effective Time, by virtue of the Merger, and without any action on the part of CBSI, Community Bank, First Heritage, or any holder of First Heritage common stock, each share of First Heritage common stock issued and outstanding immediately prior to the Effective Time (other than any share for which dissenters’ rights are exercised under the Bank Act) will be exchanged for such number of shares of CBSI common stock, based on the following exchange ratio (the “Exchange Ratio”): (A) if the CBSI Market Price is greater than $60.60, then 1.898; (B) if the CBSI Market Price is greater than $56.35 but is equal to or less than $60.60, then a quotient (rounded to the nearest one-thousandth) obtained by dividing $115.00 by the CBSI Market Price; (C) if the CBSI Market Price is equal to or greater than $41.65, but is equal to or less than $56.35, then 2.041; (D) if the CBSI Market Price is less than $41.65, but is equal to or greater than $38.50, then a quotient (rounded to the nearest one-thousandth) obtained by dividing $85.00 by the CBSI Market Price; and (E) if the CBSI Market Price is less than $38.50, then 2.208; provided however, that if CBSI shall exercise the Top-Up Right pursuant to Section 7.1(h) of the Agreement, then the exchange ratio shall be a quotient (rounded to the nearest one-thousandth) obtained by dividing $72.86 by the CBSI Market Price. CBSI Market Price shall mean the average closing sale price of a share of the CBSI common stock over the twenty (20) consecutive trading days immediately prior to the Closing Date on the NYSE, as reported in the Wall Street Journal.

The Exchange Ratio will be adjusted proportionately if the outstanding shares of CBSI or First Heritage are changed by reason of any stock split, combination, stock dividend, recapitalization, or reclassification or other similar change between the date of the Merger but prior to the Effective Time.

At the Effective Time, First Heritage’s employee stock options, as defined in section 2.3(b) of the Agreement (“Employee Options”) shall be deemed assumed by CBSI and converted to options to acquire such number of shares of CBSI equal to the product of (x) the number of shares of First Heritage common stock that would have been issued upon exercise of the Employee Options, and (y) the Exchange Ratio; provided, however, that (i) no fractional shares will be issued; (ii) the exercise price shall be equal to the quotient of (w) the exercise price of the Employee Options, divided by (z) the Exchange Ratio (rounded to the nearest one-thousandth); and (iii) the vesting of such Employee Options shall be accelerated so that such Employee Options shall be exercisable in full immediately after the Effective Time. Notwithstanding the foregoing, in the event that any unexpired Employee Options are held by an individual or estate at the Effective Time and the terms of CBSI’s 1994 Long Term

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Community Bank System, Inc.

April 12, 2004

Page 3

Incentive Compensation Program do not permit such individual or estate to exercise an option thereunder, then such Employee Options shall be converted into the right to receive cash as though such Employee Options were investor options, as defined in section 2.3(a) of the Agreement (“Investor Options”).

Pursuant to the Agreement, at the Effective Time, Investor Options to purchase shares of First Heritage common stock shall be converted into the right to receive cash (payable by check), without interest, in an amount equal to the difference between (i) the product of (x) the number of shares of First Heritage common stock that would have been issuable upon exercise of the Investor Options, and (y) the Exchange Ratio multiplied by the CBSI Market Price, and (ii) the aggregate exercise price of the Investor Options. Each Investor Option, regardless of whether the shares covered thereby have been vested in full prior to the Effective Time, shall be convertible into the right to receive cash in accordance with Section 2.3(a) of the Agreement.

The Agreement also provides that, in lieu of issuing fractional shares, CBSI will pay to each former First Heritage shareholder that would have otherwise received a fractional share of CBSI Common Stock cash equal to such fraction multiplied by the CBSI Market Price.

B. Dissenting Shares

Pursuant to the Agreement, First Heritage shareholders that do not wish to participate in the Merger are entitled to certain rights provided under the PBC. Under the Bank Act, dissenters are entitled to consideration other than an equity interest in CBSI in an amount equal to the fair market value of their interest in First Heritage before the merger. All First Heritage shareholders that perfect their rights as a dissenting shareholder under the PBC will be compensated as such by CBSI. However, the Agreement expressly provides as a condition to the Merger that holders of no more than five (5) percent of the outstanding First Heritage stock will assert their right to dissent in accordance with the PBC.

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Community Bank System, Inc.

April 12, 2004

Page 4

II. Opinion

For purposes of the Opinion set forth below, we have read and relied upon the copies or originals, certified or otherwise identified, of the following documents, including all schedules and exhibits attached thereto: (i) the Agreement; (ii) the Registration Statement on Form S-4 containing the Proxy Statement/Prospectus prepared by CBSI and First Heritage in connection with the Merger and filed with the Securities and Exchange Commission pursuant to the Securities Act of 1933, as amended; and (iii) factual representations in letters dated April 12, 2004 from Charles M. Ertel, Assistant Treasurer of CBSI and James M. O’Brien, Chief Executive Officer of First Heritage, respectively.

In addition, we have assumed that (i) the statement of facts in Section I hereof is a complete and accurate statement of the material facts relating to the Merger, (ii) both CBSI and First Heritage will comply with all reporting obligations with respect to the Merger required under both the Code and the Regulations; and (iii) all signatures on all documents presented to us are genuine, all documents submitted to us as originals or reproductions thereof are accurate originals or reproductions thereof, all information submitted to us was accurate, true and authentic, and all persons executing and delivering originals or copies of documents examined by us were duly authorized and competent to execute and deliver such documents. Any inaccuracy in, or breach of, any of the aforementioned statements, representations, and assumptions, could adversely affect our opinion. No ruling has been (or will be) sought from the Internal Revenue Service by CBSI or First Heritage as to the U.S. federal income tax consequences of any aspect of the Merger.

Based upon and subject to the foregoing as well as the limitations set forth below, it is our opinion that the Merger will constitute a tax-free reorganization described in Section 368(a)(1)(A) and 368(a)(2)(D) of the Code.

¹ Under section 368(c), control is defined as the ownership of stock possessing at least 80 percent of the total combined voting power of all shares entitled to vote and at least 80 percent of the total number of shares of each class of nonvoting stock of the corporation.

² See note 1.

³ “Investment Company” is defined as a regulated investment company, a real estate investment trust, or a corporation 50 percent or more of the value of whose total assets are stock and securities and 80 percent or more of the value of whose total assets are assets held for investment. In making the 50-percent and 80-percent determinations under the preceding sentence, stock and securities in any subsidiary corporation is disregarded and the parent corporation is deemed to own its ratable share of the subsidiary’s assets. A corporation is considered a subsidiary if the parent owns 50 percent or more of the combined voting power of all classes of stock entitled to vote, or 50 percent or more of the total value of shares of all classes of stock outstanding.

[GRAPHIC APPEARS HERE]

Community Bank System, Inc.

April 12, 2004

Page 5

As such, the Merger will have the following U.S. federal income tax consequences:

1) No gain or loss will be recognized by CBSI or Community Bank as a result of the Merger (Treas. Reg. Section 1.1032-2);

2) CBSI, Community Bank and First Heritage will each be a “party to the reorganization” within the meaning of Section 368(b) of the Code;

3) No gain or loss will be recognized by First Heritage as a result of the Merger (Section 361(a)(1));

4) No gain or loss will be recognized by the First Heritage shareholders with respect to shares of CBSI common stock received in exchange for all of their shares of First Heritage (Section 354(a)(1)). First Heritage shareholders will recognize gain or loss with respect to cash received in lieu of fractional shares. The payment of cash in lieu of fractional shares of CBSI common stock will be treated as if the fractional shares were distributed as part of the exchange and then redeemed by CBSI. These cash payments will be treated as having been received as distributions in full payment in exchange for the stock redeemed (Rev. Rul. 66-365, 1966-2 C.B. 116, Section 302(a));

5) The aggregate tax basis of CBSI common stock received by each First Heritage shareholder in the transaction will equal the aggregate tax basis of such shareholder’s First Heritage shares surrendered in the Merger, reduced by the portion of tax basis allocable to any fractional shares (Section 358(a)(1));

6) The holding period of the CBSI common stock received by the First Heritage shareholders will include the holding period during which the First Heritage common stock surrendered in exchange therefor was held, provided that such stock is held as a capital asset in the hands of the First Heritage shareholders on the date of the exchange (Section 1223(1)).

III. Limitations & Caveats

The conclusions reached in this Opinion represent and are based upon our best judgment regarding the application of federal income tax laws arising under the Internal Revenue Code, judicial decisions, administrative regulations, published rulings and other tax authorities existing as of the date of this opinion. This Opinion is not binding upon the Internal Revenue Service or the courts and there is no guarantee that the Internal Revenue Service will not successfully assert a contrary position. Furthermore, no assurance can be given that future legislative or administrative changes, on either a prospective or retroactive basis, would not

[GRAPHIC APPEARS HERE]

Community Bank System, Inc.

April 12, 2004

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adversely affect the accuracy of the conclusions stated herein. The Firm undertakes no responsibility to advise any party or shareholder of any new developments in the application or interpretation of the federal income tax laws.

This Opinion is limited to the foregoing federal income tax consequences of the Merger as a reorganization pursuant to Section 368(a)(1)(A) and 368(a)(2)(D) of the Code. This Opinion does not address any federal tax consequences of the transactions set forth herein, or transactions related or proximate to such transactions, except as specifically set forth herein. This Opinion does not address any state, local, foreign, or other tax consequences that may result from any of the transactions set forth herein, or transactions related to such transactions. This Opinion is being furnished to you in connection with the Merger and may not be relied upon for any other transaction or purpose. We hereby consent to the filing of this Opinion as an exhibit to the aforementioned Proxy Statement/Prospectus and to the reference to this firm under the caption “Material United States Federal Income Tax Consequences” in the Proxy Statement/Prospectus.

This Opinion is based upon the representations, documents, facts, and assumptions that have been included or referenced herein and the assumption that such information is, in all material respects, accurate, true, and authentic. This Opinion does not address any transactions other than those described herein. This Opinion does not address any transactions whatsoever if all the transactions described herein are not consummated as described herein without waiver or breach of any provision thereof or if the assumptions set forth herein are not true and accurate at all relevant times. In the event any one of the facts or assumptions is incorrect, in whole or in part, the conclusions reached in this opinion might be adversely affected.

Very Truly Yours,

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

EX-8.2

[LETTERHEAD OF COZEN O’CONNOR]

April 12, 2004

First Heritage Bank

Board of Directors

64 North Franklin Street

Wilkes Barre, Pennsylvania 18701

Re: Merger of First Heritage Bank with and into Community Bank, N.A.

Ladies and Gentlemen:

You have requested our opinion regarding certain United States federal income tax consequences that will result from the merger (the “Merger”) of First Heritage Bank, a Pennsylvania chartered bank (“First Heritage”), with and into Community Bank, N.A., a national banking association (“Community Bank”), which is a wholly owned subsidiary of Community Bank System, Inc., a Delaware corporation (“CBSI”), pursuant to that certain Agreement and Plan of Merger, dated as of January 6, 2004, amended as of March 11, 2004, by and among CBSI, Community Bank and First Heritage (the “Agreement”). This opinion is being furnished pursuant to Section 6.1(f) of the Agreement. All capitalized terms used herein, unless otherwise specified, have the meanings assigned thereto in the Agreement.

In connection with our opinion, we have examined and are familiar with originals or copies, certified or otherwise identified to our satisfaction, of the Agreement, the exhibits thereto, and such other documents as we have deemed necessary or appropriate for the opinion set forth below. For purposes of this opinion, we have assumed (i) the validity and accuracy of the documents and corporate records that we have examined and the facts and representations concerning the Merger that have come to our attention during our engagement, (ii) that the Merger will be consummated in the manner described in the Agreement, and (iii) that the representations made to us by First Heritage, CBSI and Community Bank in their letters to us dated April 12, 2004, and delivered to us for purposes of this opinion are accurate and complete at all relevant times, including the Effective Time of the Merger, and that any representation made “to the best knowledge” or similarly qualified is correct without such qualification. In our examination of documents, we have assumed the authenticity of original documents, the accuracy of copies, the genuineness of signatures, and the legal capacity and authority of the signatories. The opinion expressed herein is conditioned on the initial and continuing accuracy of the facts, information, and representations contained in the aforesaid documents or otherwise referred to above.

In rendering our opinion, we have considered applicable provisions of the Internal Revenue Code of 1986, as amended (“Code”), Treasury Department regulations promulgated thereunder, pertinent judicial authorities, interpretive rulings of the Internal Revenue Service (“IRS”), and such other authorities as we have deemed relevant.

First Heritage Bank

April 12, 2004

Page 2

Based upon and subject to the foregoing and upon the assumptions and qualifications set forth herein, we are of the opinion that, for United States federal income tax purposes:

1.    The Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

2.    Each of First Heritage, CBSI and Community Bank will be a party to the reorganization within the meaning of Section 368(b) of the Code.

3.    The Merger will not result in the recognition of gain or loss to First Heritage.

4.    First Heritage shareholders will not recognize gain or loss with respect to shares of CBSI Common Stock received by them in the Merger, but gain or loss will be recognized by First Heritage shareholders with respect to cash received in lieu of fractional shares.

5.    Each First Heritage shareholder’s tax basis in the CBSI Common Stock received in the Merger will be the same as the tax basis of the shares of First Heritage Common Stock exchanged in the Merger, decreased by any tax basis allocable to fractional shares, if any, of CBSI Common Stock for which cash is received.

6.    Each First Heritage shareholder’s holding period in the CBSI Common Stock received in the Merger will include the period during which the First Heritage shareholder held the First Heritage Common Stock exchanged in the Merger, provided that the First Heritage Common Stock is a capital asset in the hands of the First Heritage shareholder at the Effective Time of the Merger.

No opinion is expressed as to any transaction other than the Merger as described in the Agreement or as to any transaction whatsoever, including the Merger, if all the transactions described in the Agreement are not consummated in accordance with the terms of the Agreement and without waiver or breach of any material provision thereof, or if all of the representations, warranties, statements and assumptions upon which we rely are not true and accurate at all relevant times including the Effective Time of the Merger. In the event that any of the statements, representations, warranties or assumptions upon which we have relied to render this opinion is incorrect, our opinion might be adversely affected and may not be relied upon.

Except as set forth above, we express no other opinion as to the tax consequences of the Merger and related transactions to any party under federal, state, local or foreign laws. Further, no opinion is expressed as to the tax consequences to holders of Options receiving cash in connection with the Merger. Our opinion represents only our best judgment regarding the application of United States federal income tax laws as of the date of this Letter. Our opinion is not binding on either the IRS or the courts, and there is no assurance that the IRS will not successfully contest any of the conclusions set forth in this opinion. Furthermore, no assurance can be given that future legislation, regulations, judicial decisions or administrative changes, applicable either on a prospective or retroactive basis, will not alter our opinion. Nevertheless, we are under no obligation to supplement or revise our opinion to reflect any new developments

First Heritage Bank

April 12, 2004

Page 3

in the application or interpretation of the United States federal income tax laws (including changes with retroactive effect).

The foregoing opinion does not purport to deal with all aspects of United States federal income taxation and may not be applicable to certain types of shareholders, including individuals who are not United States citizens or residents. We are furnishing this opinion to you in connection with the Merger and this opinion may not be relied upon by any other person or used for any other purpose without our prior written consent. We consent to the inclusion of this opinion as an exhibit to the Registration Statement and to the reference to this firm under the caption “Material United States Federal Income Tax Consequences” in the Proxy Statement/Prospectus.

Very truly yours,

/s/    Cozen O’Connor

EX-23.4

DANIELSON ASSOCIATES INC.

6001 Montrose Road

Suite 405

Rockville, Maryland 20852

Tel: (301) 468-4884

Fax: (301) 468-0013

CONSENT OF DANIELSON ASSOCIATES INC.

We hereby consent to the inclusion of our opinion letter addressed to the Board of Directors of First Heritage Bank dated January 5, 2004, as an appendix to, and to the references to our firm under the caption “Opinion of First Heritage’s Financial Advisor” in, the proxy statement/prospectus which is included in the Form S-4 Registration Statement of Community Bank System, Inc. (File number 333-113581) relating to the registration of shares of common stock of Community Bank System, Inc.

DANIELSON ASSOCIATES INC.
By:	/s/    David G. Danielson
	David G. Danielson President

Date: April 12, 2004