EXHIBIT 10.3


                              COMMUNITY BANKS, INC.
                             DIRECTORS STOCK OPTION
                             STOCK OPTION AGREEMENT


TO: ___________________________
         Name

    ---------------------------
         Social Security Number

DATE: ________________________


     You are hereby  granted a  non-qualified  stock option  effective as of the
date hereof, to purchase ____________ shares of Common Stock of Community Banks,
Inc.  ("CBI")  at a price of ______ per share,  pursuant  to the 2000  Community
Banks, Inc. Directors Stock Option Plan (the "Plan").

TIME OF EXERCISE OF OPTION
--------------------------

     A. Your  option  may be  exercised  upon the first to occur of (i) one year
after  the date of this  agreement,  and (ii) a Change  in  Control  of CBI,  as
defined in the Plan.

     B. During your  lifetime,  this option shall be exercisable by only you and
only while you are a director of CBI or one of its  subsidiaries or within three
(3) years after you cease serving as a director.

     C.  If you die  while  this  option  is  exercisable,  this  option  may be
exercised  within three (3) months of your date of death by those entitled under
your will or the laws of descent and distribution, but only if and to the extent
the option was exercisable by you immediately prior to your death.

     D. If you are  removed as a director  for any of the reasons  specified  in
Section  1726(b) of the  Pennsylvania  Business  Corporation  Law of 1988,  this
option shall be forfeited and rendered unexercisable.


     E. Notwithstanding  anything to the contrary in this Agreement,  the option
shall not be  exercised  after and shall  expire ten (10) years from the date of
this Agreement.

METHOD OF EXERCISE
------------------

     You may exercise your option by giving  written  notice to the Secretary of
CBI on forms supplied by CBI at its then principal executive office, accompanied
by payment of the option  price for the total  number of shares you specify that
you wish to  purchase.  The payment may be in any of the  following  forms:  (i)
cash,  which may be evidenced  by a check  (provided,  that any  optionee  whose
employment  has  terminated  and the estate of any deceased  optionee  must make
payment by certified or cashier's check); (ii) certificates  representing shares
of CBI Common  Stock  which will be valued by the  Secretary  of CBI at the fair
market value on the date of exercise,  accompanied by an assignment of the stock
to CBI; or (iii) any combination  thereof. Any assignment of stock shall be in a
form and substance satisfactory to the Secretary of CBI, including guarantees of
signature(s) where he/she deems such guarantees necessary or desirable.


<PAGE>



ADJUSTMENT
----------

     In the event of any change in the outstanding shares of CBI Common Stock by
reason   of  a   stock   dividend,   stock   split,   combination   of   shares,
recapitalization,  merger,  consolidation,  transfer of assets,  reorganization,
conversion,  or what the Compensation  Committee deems in its sole discretion to
be similar  circumstances,  the number and kind of shares subject to this option
and the option price for such shares shall be appropriately adjusted in a manner
to be determined in the sole discretion of the Compensation Committee.

TRANSFERABILITY / RIGHTS PRIOR TO EXERCISE
------------------------------------------

     This option is not  transferable,  except in the event of death as provided
above.  During your lifetime,  this option is exercisable only by you. Until the
option  price has been paid in full  pursuant to due exercise of this option and
the  purchased  shares  are  delivered  to you,  you do not have any rights as a
stockholder  of CBI.  CBI  reserves  the right not to  deliver to you the shares
purchased by virtue of the exercise of this option  during any period of time in
which  CBI  deems,  in its  sole  discretion,  that  such  delivery  may  not be
consummated  without violating a federal,  state,  local, or securities exchange
rule, regulation, or law.

OTHER RESTRICTIONS
------------------

     Notwithstanding  anything to the contrary contained herein,  this option is
not  exercisable  until all the following  events occur and during the following
periods of time:

          (1)  Until  the Plan  pursuant  to which  this  option is  granted  is
               approved by the stockholders of CBI;

          (2)  Until this option and the  optioned  shares are  approved  and/or
               registered with such federal,  state, and local regulatory bodies
               or agencies and securities exchanges as CBI may deem necessary or
               desirable;

          (3)  During   any   period  of  time  in  which  CBI  deems  that  the
               exercisability  of this  option,  the  offer to sell  the  shares
               optioned hereunder,  or the sale thereof,  may violate a federal,
               state, local, or securities exchange rule,  regulation or law, or
               may  cause  CBI to be  legally  obligated  to issue or sell  more
               shares than CBI is legally entitled to issue or sell.

CONFLICTING TERMS
-----------------

     This option shall be subject to the terms of the Plan in effect on the date
this option is granted,  which terms are hereby incorporated herein by reference
and made a part hereof.  In the event of any conflict  between the terms of this
option and the terms of the Plan in effect on the date of this option, the terms
of the Plan shall  govern.  This  option  constitutes  the entire  understanding
between CBI and you with respect to the subject  matter hereof and no amendment,
supplement, or waiver of this option, in whole or in part, shall be binding upon
CBI unless in writing and signed by the President and Chief Executive Officer of
CBI This option and the performances of the parties hereunder shall be construed
in accordance with and governed by the laws of the  Commonwealth of Pennsylvania
applicable to contracts made and to be performed  solely in the  Commonwealth of
Pennsylvania.

ATTEST:                                              COMMUNITY BANKS, INC.

                                            By:
--------------------------------------------    --------------------------------



                                       2
<PAGE>





I hereby acknowledge receipt of a copy of the foregoing Stock Option and, having
read it, hereby signify my understanding of and my agreement with its terms and
conditions.

________________________________________        ________________________________
Witness                                                   (Signature)

______________________
(Date)







                                       3