EXHIBIT 10.10

                             THE PEOPLES STATE BANK
                              AMENDED AND RESTATED
                          SALARY CONTINUATION AGREEMENT


     THIS  AMENDED AND RESTATED  AGREEMENT  is dated July 1, 1999 and  effective
January 1, 2000, by THE PEOPLES STATE BANK, a Pennsylvania  banking  institution
located in East Berlin,  Pennsylvania  (the "Company") and EDDIE L. DUNKLEBARGER
(the "Executive").

                                  INTRODUCTION

     To  encourage  the  Executive  to remain an  employee of the  Company,  the
Company and  Executive  entered  into a certain  Salary  Continuation  Agreement
("Agreement")  dated March 28, 1997  effective  January 1, 1997. The Company and
Executive desire to amend and restate the Agreement as hereinafter set forth.

                                    AGREEMENT

     The Executive and the Company agree as follows:

                                    Article 1
                                   Definitions

     1.1  Definitions.  Whenever used in this Agreement, the following words and
          phrases shall have the meanings specified:

             1.1.1  "Change of Control" shall mean any of the following:

                    (A) An  acquisition  by any  "person"  or "group"  (as those
               terms are defined or used in Section  13(d) of the Exchange  Act,
               as  enacted  and in  force  on the date  hereof)  of  "beneficial
               ownership"  (within the meaning of Rule 13d-3 under the  Exchange
               Act, as enacted and in force on the date hereof) of securities of
               Company  representing 24.99% or more of the combined voting power
               of Company's securities then outstanding;




<PAGE>



                    (B) A  merger,  consolidation  or  other  reorganization  of
               Company,   except  where  the  resulting  entity  is  controlled,
               directly or indirectly, by Company;

                    (C) A  merger,  consolidation  or  other  reorganization  of
               Company,  except where shareholders of Company  immediately prior
               to consummation of any such transaction continue to hold at least
               a  majority  of  the  voting  power  of  the  outstanding  voting
               securities of the legal entity  resulting  from or existing after
               any  transaction  and a majority  of the  members of the Board of
               Directors of the legal entity  resulting from or existing after a
               transaction are former members of Company's Board of Direc tors;

                    (D) A sale,  exchange,  transfer  or  other  disposition  of
               substantially  all of the assets of  Company  to another  entity,
               except  to an  entity  controlled,  directly  or  indirectly,  by
               Company or a corporate division involving Company;

                    (E) A contested proxy solicitation of Company's shareholders
               that results in the  contesting  party  obtaining  the ability to
               cast  twenty-five  percent (25%) or more of the votes entitled to
               be cast in an election of directors of Company.


          Notwithstanding  anything  else  to the  contrary  set  forth  in this
     Agreement,  if (i) an  agreement  is  executed  by the  Corporation  or the
     Company  providing for any of the  transactions  or events  constituting  a
     Change of Control as defined herein, and the agreement subsequently expires
     or is terminated  without the transaction or event being  consummated,  and
     (ii)  Executive's  employment did not terminate during the period after the
     agreement and prior to such expiration or termination, for purposes of this
     Agreement it shall be as though such  agreement  was never  executed and no
     Change of Control event shall be deemed to have occurred as a result of the
     execution of such agreement.






                                       2
<PAGE>




               1.1.2 "Code" means the Internal Revenue Code of 1986, as amended.

               1.1.3 "Corporation" means Community Banks, Inc.

               1.1.4 "Disability"  means  the Executive  suffering  a  sickness,
                    accident  or injury  which,  in the  judgment of a physician
                    satisfactory  to the Company,  prevents the  Executive  from
                    performing  substantially  all  of  the  Executive's  normal
                    duties  for the  Company  for a period of nine (9) months of
                    any twelve (12) consecutive  month period. As a condition to
                    any  benefits,  the Company may  require  the  Executive  to
                    submit to such physical or mental  evaluations  and tests as
                    the Company's Board of Directors deems appropriate.

               1.1.5 "Early  Termination"  means the  Termination  of Employment
                    before Normal  Retirement  Age for reasons other than death,
                    Disability,  Termination  for Cause or following a Change of
                    Control.

               1.1.6 "Early  Termination  Date" mean the  month, day and year in
                    which Early Termination occurs.

               1.1.7 "Normal  Retirement   Age"  means  the   Executive's   62nd
                    birthday.

               1.1.8 "Normal  Retirement  Date"  means  the  later of the Normal
                    Retirement Age or Termination of Employment.

               1.1.9 "Plan Year" means each  twelve-month period commencing with
                    the effective date of this Agreement.

               1.1.10 "Termination for Cause" See Section 5.2.

               1.1.11  "Termination  of  Employment"  means  that the  Executive
                    ceases  to  be  employed  by  the  Company  for  any  reason
                    whatsoever  other than by reason of a leave of absence which
                    is approved by the Company.  For purposes of this Agreement,
                    if there is a  dispute  over the  employment  status  of the
                    Executive  or the  date of the  Executive's  Termination  of
                    Employment,  the  Company  shall have the sole and  absolute
                    right to decide the dispute.


                                    Article 2
                                Lifetime Benefits

       2.1 Normal Retirement Benefit. Upon Termination of Employment on or after
the Normal Retirement Age for reasons other than death, the Company shall pay to
the Executive the benefit described in this Section 2.1 in lieu of any other
benefit under this Agreement.



                                       3
<PAGE>

               2.1.1 Amount of Benefit.  The annual  Normal  Retirement  Benefit
                    under this Section 2.1 is Eighty Thousand ($80,000) Dollars.
                    The annual  benefit  amounts on Schedule A are calculated by
                    amortizing  the annual normal  retirement  benefit using the
                    interest  method  of  accounting,  a  7.00%  discount  rate,
                    monthly compounding and monthly payments.

               2.1.2 Payment of  Benefit.  The  Company  shall  pay  the  annual
                    benefit to the  Executive in 12 equal  monthly  installments
                    payable on the first day of each month  commencing  with the
                    month following the Executive's  Normal  Retirement Date and
                    continuing for 239 additional months.

     2.2 Early Termination  Benefit.  Upon Early Termination,  the Company shall
pay to the  Executive  the benefit  described in this Section 2.2 in lieu of any
other benefit under this Agreement.

               2.2.1 Amount of Benefit. The annual  benefit  under this  Section
                    2.2 is the Early  Termination  Annual  Benefit  set forth in
                    Schedule A for the Plan Year ending immediately prior to the
                    Early Termination Date.

               2.2.2 Payment of  Benefit.  The  Company  shall  pay  the  annual
                    benefit to the  Executive in 12 equal  monthly  installments
                    payable on the first day of each month  commencing  with the
                    month  following the Executive's  Normal  Retirement Age and
                    continuing for 239 additional months.


     2.3  Disability  Benefit.  If the Executive  terminates  employment  due to
Disability  prior  to  Normal  Retirement  Age,  the  Company  shall  pay to the
Executive the benefit described in this Section 2.3 in lieu of any other benefit
under this Agreement.

               2.3.1 Amount of Benefit.  The annual  benefit  under this Section
          2.3 is the  Disability  Benefit amount set forth in Schedule A for the
          Plan Year ending immediately prior to the date in which Termination of
          Employment occurs.

               2.3.2  Payment of Benefit.  The Company  shall have the option to
          pay the accrued benefit equivalent of the Disability Annual Benefit to
          the  Executive  in a  lump  sum  within  sixty  (60)  days  after  the
          Executive's  termination  of  employment.  The  Company  shall pay the
          benefit to the Executive in 12 equal monthly  installments  commencing
          within  90 days  after  the  date of the  Executive's  Termination  of
          Employment and continuing for 239 additional months.

                                       4
<PAGE>

     2.4 Change of Control Benefit. If the Executive is in the active service of
the  Company at the time of a Change of Control,  the  Company  shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.

               2.4.1 Amount of Benefit.  The annual  benefit  under this Section
          2.4 is the Early Termination Benefit set forth in Schedule A, based on
          three (3) years plus the number of Plan Years completed on the date of
          the Executive's termination of employment, not to exceed fourteen (14)
          years.

               2.4.2  Payment  of  Benefit.  The  Company  shall pay the  annual
          benefit to the Executive in 12 equal monthly  installments  payable on
          the first day of each month  commencing  with the month  following the
          Executive's  Normal  Retirement  Age and continuing for 239 additional
          months or at the Company's option pay the Accrued Benefit set forth on
          Schedule "A" within sixty (60) days after the Executive's  termination
          of employment.




                                    Article 3
                                 Death Benefits

     3.1 Death During Active Service.  If the Executive dies while in the active
service of the Company, the Company shall pay to the Executive's beneficiary the
benefit described in this Section 3.1. This benefit shall be paid in lieu of the
Lifetime Benefits of Article 2.

          3.1.1 Amount of Benefit.  The annual benefit under this Section 3.1 is
     the Normal Retirement Benefit described in Section 2.1.1.

          3.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the beneficiary in 12 equal monthly  installments  payable on the first day
     of each month commencing with the month following the Executive's death and
     continuing for 239 additional months.

     3.2 Death During  Benefit  Period.  If the Executive dies after the benefit
payments  have  commenced  under this  Agreement  but before  receiving all such
payments,  the  Company  shall pay the  remaining  benefits  to the  Executive's
beneficiary  at the same time and in the same  amounts they would have been paid
to the Executive had the Executive survived.

     3.3 Death Following Termination of Employment But Before Benefits Commence.
If the Executive is entitled to benefits under this Agreement, but dies prior to
receiving said benefits,  the Company shall pay to the  Executive's  beneficiary
the  same  benefits,  in the same  manner,  they  would  have  been  paid to the
Executive  had the  Executive  survived;  however,  said benefit  payments  will
commence upon the Executive's death.


                                       5
<PAGE>

                                    Article 4
                                  Beneficiaries

     4.1 Beneficiary  Designations.  The Executive shall designate a beneficiary
by filing a written  designation  with the Company.  The Executive may revoke or
modify  the  designation  at any  time by  filing  a new  designation.  However,
designations  will only be effective if signed by the  Executive and accepted by
the  Company  during  the  Executive's  lifetime.  The  Executive's  beneficiary
designation shall be deemed automatically revoked if the beneficiary predeceases
the  Executive,  or if the  Executive  names a  spouse  as  beneficiary  and the
marriage  is  subsequently  dissolved.  If the  Executive  dies  without a valid
beneficiary designation, all payments shall be made to the Executive's estate.

     4.2  Facility of Payment.  If a benefit is payable to a minor,  to a person
declared incapacitated,  or to a person incapable of handling the disposition of
his or her  property,  the Company may pay such benefit to the  guardian,  legal
representative or person having the care or custody of such minor, incapacitated
person or  incapable  person.  The  Company  may  require  proof of  incapacity,
minority or guardianship as it may deem appropriate prior to distribution of the
benefit.  Such  distribution  shall  completely  discharge  the Company from all
liability with respect to such benefit.


                                    Article 5
                               General Limitations

     Notwithstanding  any  provision  of this  Agreement  to the  contrary,  the
Company shall not pay any benefit under this Agreement:

     5.1 Termination for Cause.  Notwithstanding any provision of this Agreement
to the contrary, the Company shall not pay any benefit under this Agreement,  if
the Company terminates the Executives employment for:

          5.1.1 Gross negligence or gross neglect of duties;

          5.1.2 Commission of a felony or of a gross misdemeanor involving moral
     turpitude; or

          5.1.3 Fraud, disloyalty, dishonesty or willful violation of any law or
     significant  Company policy  committed in connection  with the  Executive's
     employment and resulting in an adverse effect on the Company.

          5.1.4 Removal.  Notwithstanding any provision of this Agreement to the
     contrary, the Company shall not pay any benefit under this Agreement if the
     Executive is subject to a final removal or  prohibition  order issued by an
     appropriate  federal banking agency pursuant to Section 8(e) of the Federal
     Deposit Insurance Act.

                                       6
<PAGE>

     5.2  Competition  After  Termination  of  Employment.  No benefits shall be
payable,  except for benefits paid due to a Change of Control, if the Executive,
without the prior  written  consent of the Company,  engages in conduct which is
deemed to  violate  the  non-competition  clause of the  Executive's  Employment
Contract, which clause is hereby incorporated herein by reference,  both parties
further hereby acknowledging having received, read and understood a copy of said
Employment Contract.

     5.3 Suicide or  Misstatement.  If the Executive  commits suicide within two
years  after the date of this  Agreement,  or if the  insurance  company  denies
coverage  for  material  misstatements  of  fact  made by the  Executive  on any
application  for life insurance  purchased by the company,  or any other reason,
provided however that the Company shall evaluate the reason for the denial,  and
upon  advice  of  Counsel  and  in  its  sole  discretion,  consider  judicially
challenging any denial.


                                    Article 6
                          Claims and Review Procedures

     6.1 Claims  Procedure.  The Company  shall notify any person or entity that
makes a claim against the Agreement (the  "Claimant") in writing,  within ninety
(90)  days  of  Claimant's  written  application  for  benefits,  of  his or her
eligibility or noneligibility  for benefits under the Agreement.  If the Company
determines that the Claimant is not eligible for benefits or full benefits,  the
notice shall set forth (1) the specific reasons for such denial,  (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim,  and a description of why it is needed,  and (4) an
explanation of the  Agreement's  claims review  procedure and other  appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed.  If the  Company  determines  that  there  are  special  circumstances
requiring  additional  time to make a  decision,  the Company  shall  notify the
Claimant  of the  special  circumstances  and the  date by which a  decision  is
expected to be made, and may extend the time for up to an additional ninety- day
period.

     6.2 Review  Procedure.  If the Claimant is determined by the Company not to
be eligible for benefits, or if the Claimant believes that he or she is entitled
to greater or different  benefits,  the Claimant  shall have the  opportunity to
have such claim reviewed by the Company by filing a petition for review with the
Company  within  sixty  (60) days  after  receipt  of the  notice  issued by the
Company.  Said  petition  shall state the  specific  reasons  which the Claimant
believes  entitle him or her to benefits  or to greater or  different  benefits.
Within sixty (60) days after receipt by the Company of the petition, the Company
shall afford the Claimant (and counsel, if any) an opportunity to present his or
her position to the Company orally or in writing,  and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing  within the  sixty-day  period,  stating
specifically  the basis of its  decision,  written in a manner  calculated to be
understood by the Claimant and the specific provisions of the Agreement on which
the  decision is based.  If,  because of the need for a hearing,  the  sixty-day
period  is not  sufficient,  the  decision  may be  deferred  for up to  another
sixty-day  period at the  election of the Company,  but notice of this  deferral
shall be given to the Claimant.


                                       7
<PAGE>

                                    Article 7
                           Amendments and Termination

     This  Agreement  may be amended or terminated  only by a written  agreement
signed by the Company and the Executive.


                                    Article 8
                                  Miscellaneous

     8.1  Binding  Effect.  This  Agreement  shall  bind the  Executive  and the
Company,   and   their   beneficiaries,    survivors,   executors,   successors,
administrators and transferees.

     8.2 No Guarantee of Employment.  This Agreement is not an employment policy
or contract.  It does not give the  Executive the right to remain an employee of
the Company,  nor does it interfere  with the  Company's  right to discharge the
Executive.  It also does not require  the  Executive  to remain an employee  nor
interfere with the Executive's right to terminate employment at any time.

     8.3  Non-Transferability.  Benefits  under this  Agreement  cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

     8.4 Tax Withholding. The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.

     8.5  Applicable  Law.  The  Agreement  and all  rights  hereunder  shall be
governed by the laws of the Commonwealth of  Pennsylvania,  except to the extent
preempted by the laws of the United States of America.

     8.6  Unfunded  Arrangement.  The  Executive  and  beneficiary  are  general
unsecured  creditors  of the  Company  for the  payment of  benefits  under this
Agreement.  The benefits  represent  the mere promise by the Company to pay such
benefits.  The rights to benefits are not subject in any manner to anticipation,
alienation,  sale, transfer,  assignment,  pledge,  encumbrance,  attachment, or
garnishment  by creditors.  Any insurance on the  Executive's  life is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.

                                       8
<PAGE>

     8.7 Recovery of Estate Taxes. If the  Executive's  gross estate for federal
estate tax  purposes  includes  any amount  determined  by  reference  to and on
account of this Agreement,  and if the beneficiary is other than the Executive's
estate,  then the  Executive's  estate  shall be  entitled  to recover  from the
beneficiary  receiving such benefit under the terms of the Agreement,  an amount
by which the total estate tax due by the Executive's  estate,  exceeds the total
estate tax which  would have been  payable if the value of such  benefit had not
been included in the Executive's  gross estate. If there is more than one person
receiving such benefit, the right of recovery shall be against each such person.
In the event the  beneficiary  has a liability  hereunder,  the  beneficiary may
petition  the  Company  for a lump sum  payment  in an amount  not to exceed the
beneficiary's liability hereunder.

     8.8 Entire  Agreement.  This  Agreement  constitutes  the entire  agreement
between the Company and the Executive as to the subject matter hereof. No rights
are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     8.9  Administration.  The Company  shall have power which are  necessary to
administer this Agreement, including but not limited to:

          8.9.1 Interpreting the provisions of the Agreement;

          8.9.2  Establishing  and  revising  the  method o  accounting  for the
     Agreement;

          8.9.3 Maintaining a record of benefit payments; and

          8.9.4  Establishing  rules  and  prescribing  an  forms  necessary  or
     desirable to administer the Agreement.

       IN WITNESS WHEREOF, the Executive and a duly authorized Company officer
have signed this Agreement.

EXECUTIVE:                                         COMPANY:
                                                   THE PEOPLES STATE BANK

/S/ Eddie L. Dunklebarger                     By /S/ Ernest L. Lowe
-----------------------------------           ----------------------------------
Eddie L. Dunklebarger                         Title Chairman
                                                    ----------------------------


                                       9
<PAGE>

          By execution  hereof,  Community Banks, Inc. consents to and agrees to
     be bound by the terms and condition of this Agreement.


ATTEST:                                            CORPORATION:
                                                   COMMUNITY BANKS, INC.

 /S/ Patricia E. Hoch                         By /S/ Ernest L. Lowe
-----------------------------------           ----------------------------------
                                              Title   Chairman
                                                      --------------------------





                                       10
<PAGE>






                AGREEMENT TO MODIFY SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT TO MODIFY SALARY CONTINUATION AGREEMENT  ("Modification") is
entered into on this 15th day of January,  2002, by COMMUNITY  BANKS, a bank and
trust  company  organized  and existing  under the laws of the  Commonwealth  of
Pennsylvania,   formerly  known  as  The  Peoples  State  Bank  and  located  in
Millersburg, Pennsylvania ("Bank"), and EDDIE L. DUNKLEBARGER (the "Executive").

                                   BACKGROUND
A. Bank and Executive  entered into an Amended and Restated Salary  Continuation
Agreement on or about January 1, 2000 (the "Agreement").

B. Bank and Executive wish to clarify that the definition of "Change of Control"
in the Agreement applies to Community Banks, Inc. ("Corporation").

     NOW, THEREFORE, in consideration of the foregoing premises and intending to
be legally bound, the parties hereby agree as follows:

1. Modification of Change of Control Definition.  The term "Company", as used in
the  definition  of "Change of Control" in Section  1.1.1 of the  Agreement,  is
hereby changed to "Corporation" and shall be deemed to refer to Community Banks,
Inc.

2. Effective Date. This  Modification  shall be deemed to be effective as of the
date on which the parties first entered into the Agreement.

3. No Other  Changes.  Except as  specifically  modified  herein,  all terms and
conditions of the Agreement shall remain in full force and effect.

     IN WITNESS WHEREOF, the Executive and a duly authorized Bank officer have
signed this Modification.

EXECUTIVE:                                                COMMUNITY BANKS

/S/ Eddie L. Dunklebarger                            By /S/ Patricia E. Hoch
--------------------------------                     ---------------------------
Eddie L. Dunklebarger                                Title Corp. Secretary
                                                     ---------------------------


     By execution  hereof,  Community Banks,  Inc.  consents to and agrees to be
bound by the terms and condition of this Modification.


WITNESS/ATTEST:                                          COMMUNITY BANKS, INC.

 /S/ Anthony N. Leo                                  By /S/ Patricia E. Hoch
-------------------------                            ---------------------------
                                                     Title   Corp. Secretary
                                                     ---------------------------



                                       11