Exhibit 10.2



                          SALARY CONTINUATION AGREEMENT

     THIS AGREEMENT is made effective this 1st day of JANUARY, 2004, COMMUNITY
BANKS INC. a Pennsylvania corporation (the Company") and DONALD F. HOLT (the
Executive").

                                  Introduction

     To encourage the Executive to remain an employee of the Company, the
Company is willing to provide salary continuation benefits to the Executive. The
Company will pay the benefits from its general assets.

                                   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;

               (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
<PAGE>


          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 Directors;

               (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  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.

          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.

                                       2
<PAGE>

          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" means 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.

          2.1.1 Amount of Benefit.  The annual Normal  Retirement  Benefit under
     this Section 2.1 is  Forty-Eight  Thousand  ($48,000)  Dollars.  The annual
     benefit  amounts on  Schedule A are  calculated  by  amortizing  the annual
     normal

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<PAGE>

     retirement  benefit  using  the  interest  method  of  accounting,  a 6.50%
     discount rate, monthly compounding and monthly payments.


          2.1.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the  Executive in  consecutive  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 consecutive 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.


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<PAGE>

          2.3.1 Amount of Benefit.  The annual benefit under this Section 2.3 is
     the  Disability  Annual  Benefit  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 pay the Disability Annual
     Benefit  to  the  Executive  in  consecutive  equal  monthly   installments
     commencing within 90 days after the date of the Executive's  Termination of
     Employment and continuing for 239 additional months.


     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 Change in Control Annual Benefit set forth in Schedule A.



          2.4.2 Payment of Benefit.  The Company shall pay the annual benefit to
     the  Executive in  consecutive  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.



                                    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


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<PAGE>

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 consecutive  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.


                                    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


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<PAGE>

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;


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<PAGE>

          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.


     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.

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<PAGE>

                                   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

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<PAGE>

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.


                                    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.

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<PAGE>

     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.

     8.7 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


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<PAGE>

are  granted  to the  Executive  by virtue of this  Agreement  other  than those
specifically set forth herein.

     8.9 Administration. The Company shall have powers 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 of  accounting  for the
     Agreement;

          8.9.3 Maintaining a record of benefit payments; and


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


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

                                         COMPANY:
                                         COMMUNITY BANKS, INC.

/s/ Patricia E. Hoch                     By /s/ Eddie L. Dunklebager
--------------------                     ---------------------------
Witness                                     Name:  Eddie L. Dunklebarger
                                            Title:  CEO

                                         EXECUTIVE:


/s/ Patricia E. Hoch                     /s/ Donald F. Holt
--------------------                     ------------------
Witness                                  Donald F. Holt



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<PAGE>



                                   Schedule A

                              Community Banks, Inc.
                          Salary Continuation Agreement

                                Lifetime Benefits

                                 Donald F. Holt

<TABLE>
<CAPTION>

Plan Year                                                 Early Termination  Disability      Change of Control
Ending Jan 1      Vesting Schedule        Accrued Benefit   Annual Benefit  Annual Benefit     Annual Benefit
--------------------------------------------------------------------------------------------------------------

                    <C>                   <C>                <C>              <C>             <C>
2005                   100%                  $23,366            $4935            $2079           $48,000
2006                   100%                  $48,296            $9560            $4298           $48,000
2007                   100%                  $74,896          $13,895            $6665           $48,000
2008                   100%                 $103,278          $17,957            $9190           $48,000
2009                   100%                 $133,560          $21,765          $11,885           $48,000
2010                   100%                 $165,870          $25,334          $14,760           $48,000
2011                   100%                 $200,344          $28,679          $17,828           $48,000
2012                   100%                 $237,127          $31,813          $21,101           $48,000
2013                   100%                 $276,374          $34,751          $24,594           $48,000
2014                   100%                 $318,249          $37,505          $28,320           $48,000
2015                   100%                 $362,928          $40,086          $32,296           $48,000
2016                   100%                 $410,599          $42,504          $36,538           $48,000
2017                   100%                 $461,464          $44,771          $41,064           $48,000
2018                   100%                 $515,734          $46,896          $45,894           $48,000
6/2018                 100%                 $539,406          $48,000          $48,000           $48,000

</TABLE>