Document:

Employment Agreement

 Exhibit 10.7 
  
 EMPLOYMENT AND CONSULTING AGREEMENT 
  
 AGREEMENT made the 31st day of December, 2004, by and between COMMUNITY BANKS, INC., a Pennsylvania corporation (the
“Company”), and MELVIN PANKUCH, an individual residing in Lancaster County, Pennsylvania (“Pankuch”). 
  
 W I T N E S S E T H: 
  
 WHEREAS, Pankuch has most recently served in senior executive officer positions for PennRock Financial Services Corp. (“PennRock”) and Blue Ball
National Bank (“Blue Ball”); and 
  
 WHEREAS, the
Company and PennRock have entered into an agreement, dated November 16, 2004, pursuant to which, among other things, PennRock will merge with and into the Company (the “Merger”); and 
  
 WHEREAS, Pankuch has advised the Company that he will not be able to continue
to serve as an officer and employee of the Company following the Merger (the “Termination Notice”), other than for a short period of time as an accommodation to the Company and the shareholders of the Company and PennRock, for reasons
described in Section 11(b)(iii) of his existing employment agreement with PennRock and Blue Ball (the “PennRock/Blue Ball Employment Agreement”); and 
  

WHEREAS, at the request of the Company, Pankuch has advised the Company that he is willing to serve in the capacity of an officer and employee of the
Company commencing the moment immediately following the effective time of the Merger through December 31, 2005, and, thereafter, for the remainder of the two-year period commencing the moment immediately following the effective time of the Merger,
as an independent contractor in order to facilitate the smooth transition and assimilation of the operations and customer relationships of PennRock and its subsidiaries with those of the Company and its subsidiaries; and 
  
 WHEREAS, notwithstanding Pankuch’s willingness to continue to render
services to the Company as herein provided, the parties agree that he shall be deemed to have been terminated as an employee of the Company, immediately following the effective time of the Merger, by reason of his giving of his Section 11(b)(iii)
Termination Notice at the closing of the Merger, and then retained hereunder immediately after such termination, so that he shall forthwith be entitled to the severance benefits described in Section 13 of the PennRock/Blue Ball Employment Agreement,
as well as any other benefits to which he is entitled under any other plans, benefits and arrangement of PennRock and/or Blue Ball, in accordance with the terms of such plans, benefits and arrangements, including (i) a lump sum payment of three
times his “then-current annual compensation” as agreed to by the relevant parties and (ii) payment of his COBRA family medical insurance premiums, commencing upon the termination of the Employment Period (as defined below) and lasting
until the contemplated end of the Consulting Period (as defined below). 
  

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 NOW, THEREFORE, in consideration of the premises, and intending to be legally bound hereby, the parties
agree as follows: 
  
 1. Retention of Pankuch and Duties.

  
 (a) Employment Relationship. The
Company hereby retains Pankuch as an officer and employee for the period commencing the moment immediately following the effective time of the Merger and ending on December 31, 2005 (the “Employment Period”). During the Employment Period,
Pankuch shall (i) hold the title of Vice Chairman of the Board of Directors of the Company, (ii) report directly to the Company’s Chairman of the Board of Directors and Chief Executive Officer and (iii) have such reasonable duties as are
commensurate with his position and the stated purposes of his retention hereunder (as set forth above in the Preamble to this Agreement). 
  
 (b) Consulting Relationship. Commencing January 1, 2006 and continuing through the second anniversary of the effective time of the
Merger (the “Consulting Period”), the Company shall retain Pankuch to serve it in the capacity of a consultant and an independent contractor. During the Consulting Period, Pankuch shall be responsible to use his best efforts to develop new
customer business for the Company and its subsidiaries, retain the existing business relationships of PennRock and its affiliates, promote the corporate image of the Company in the market heretofore served by PennRock and its subsidiaries, and
engage in such additional duties as may reasonably be requested by the Board of Directors of the Company (the “Board”). Pankuch shall report, and otherwise be answerable, to the Chairman of the Board (the “Chairman”); provided,
however, that neither the Chairman, nor the Board as a whole, shall be entitled to direct Pankuch as to the means and methods he must use to carry out his duties under this subsection. 
  
 2. Term. Except as otherwise provided herein, the term of this Agreement shall commence the moment immediately
following the Merger and continue for a period of four years thereafter, unless earlier terminated pursuant to Section 8. In the event the Merger is not consummated, this Agreement shall be deemed void and treated as though it had never be executed;
and in such event, neither party shall be responsible to the other hereunder for any damages or costs. 
  
 3. Time Requirements of Employment and Consulting. 
  
 (a) Employment Period. During the Employment Period, Pankuch agrees to devote such time to his employment duties hereunder as may
reasonably be required to discharge the same; provided, however, that in no event shall he be required, on average, to devote services in excess of 25 hours per week to his employment duties hereunder during such period. During the Employment
Period, Pankuch shall refrain from rendering services to other business entities without the written consent of the Company’s Chief Executive Officer; provided, however, that he shall be free to render services to such charitable and civic
organizations as he may desire, so long as the rendering of such services does not materially interfere with the discharge of his employment duties hereunder. 
  

(b) Consulting Period. During the Consulting Period, Pankuch agrees to devote such time to his consulting duties hereunder as
may reasonably be required to discharge the same; provided, however, that in no event shall he be required, on average, 

  

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to render consulting services in excess of (i) 25 hours per week, in the case of that portion of the Consulting Period that ends on the first anniversary of
the effective time of the Merger, and (ii) 15 hours per week, in the case of the remainder of the Consulting Period. During the Consulting Period, Pankuch (or any individual or business controlled by or affiliated with him) may render services to
other business entities as he desires, provided the rendering of such services does not materially interfere with the discharge of his consulting duties hereunder and does not otherwise violate the provisions of Sections 9 and 10. 
  
 (c) Time Off. With due regard to the duties assigned
to him and the reasonable timeframes given to him to perform such duties, Pankuch shall be free to take such time off for vacation or otherwise as he desires; provided, however, that as a matter of courtesy, he agrees to give 20 days prior notice to
the Company’s Chief Executive Officer, during the Employment Period, and the Chairman, during the Consulting Period, of any material period of time that he plans on being unavailable to render services hereunder. 
  
 4. Compensation and Related Matters. 
  
 (a) Employment Period. 
  
 (1) Base Compensation. During the Employment Period,
the Company agrees to pay to Pankuch base compensation at an annualized rate of $200,000. Such compensation shall be paid at such times as the Company pays its executives their base compensation. 
  
 (2) Employee Benefits. During the Employment Period,
Pankuch shall participate in such employee benefit plans as he may qualify for under the terms of such plans, after giving effect to the provisions of the Merger agreement. 
  
 (3) Stock Options. Within 30 days following the Merger, the Company shall grant Pankuch one or more
options to purchase up to 10,000 shares of the Company’s common stock at the fair market value thereof, as determined pursuant to the Company’s stock option plan, on the date of grant. Such stock option(s) shall (i) be incentive stock
options, to the maximum extent permitted by law (unless Pankuch advises the Company of his desire to be awarded more or all nonqualified stock options in lieu thereof), (ii) be vested and shall be exercisable immediately (except that incentive stock
options shall not vest or become exercisable until January 1, 2006, unless Pankuch shall die before January 1, 2006, in which case all incentive stock options shall vest upon Pankuch’s death), (iii) be exercisable for the maximum time permitted
by the stock option plan (but in no event later than the tenth anniversary of the grant date), (iv) subject to any securities law restrictions, be exercisable at any time after vesting and prior to their expiration date, and (v) contain such other
customary provisions as are set forth in stock option awards granted by the Company to its senior executives generally. The options granted under this paragraph are in consideration of Pankuch’s entering into this Agreement (including, without
limitation, his agreement to the provisions of Sections 9 and 10) and shall not be forfeitable; provided, however, that any unexercised options 

  

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shall be immediately forfeited if Pankuch materially breaches Section 9 or 10; and provided further, that if Pankuch materially breaches either of such
sections and exercises any of the options prior to the Company’s discovery of such breach, he shall, upon written demand by the Company, promptly remit to the Company all profit (i.e., the “spread”) realized upon exercise of
such options. 
  
 (b) Consulting Period.
During the Consulting Period, the Company agrees to pay Pankuch compensation at an annualized rate of (i) $200,000 during that portion of the Consulting Period that ends on the first anniversary of the effective time of the Merger, and (ii) $100,000
during the remainder of the Consulting Period. Such amounts shall be paid at such times as the Company pays its exempt employees their salaries. 
  
 5. Expenses. During the Employment and Consulting Periods, the Company shall promptly reimburse Pankuch for all out-of-pocket expenses, including
automobile mileage expenses, reasonably incurred by him in connection with the discharge of his duties hereunder. Such obligation of expense reimbursement shall not exist until Pankuch shall have submitted such detailed information regarding such
expenses as the Company requires of its employees and consultants generally. 
  
 6. Additional Payments. Immediately following the effective time of the Merger and on each of the subsequent four anniversaries thereof, the Company shall pay $75,000 to Pankuch. Each of such advanced payments
shall be in consideration of the contemplated annual compliance by him with his undertakings and agreements set forth in Sections 9 and 10. 
  
 7. Office Space and Secretarial Services. As needed, the Company will provide Pankuch with such office space and secretarial services as may
reasonably be needed by him to discharge his duties hereunder; provided, however, that after the Employment Period, such obligations shall not require the Company to provide permanently dedicated space or services for such purpose. 
  
 8. Early Termination of Agreement. Notwithstanding anything herein to
the contrary, the following provisions shall govern the termination of this Agreement prior to the otherwise scheduled expiration of its term set forth in Section 2. The payments required under this section shall be in lieu of all other payments and
benefits to which Pankuch would otherwise be entitled if this section did not apply. 
  
 (a) Death. This Agreement shall terminate immediately upon the death of Pankuch. In such event, the Company shall forthwith pay or
continue to pay, as provided in Section 15(b) and at the time otherwise due (i) a pro rata portion of his compensation earned through the date of death under Section 4, (ii) expenses incurred by him but not yet reimbursed pursuant to Section 5, and
(iii) provided there was no material breach by him, prior to his death, of the provisions of Section 9 or 10, the payments specified in Section 6. 
  
 (b) Disability. This Agreement shall terminate upon the good faith determination by the Board, after consultation with a physician
mutually satisfactory to the parties or their representatives, that Pankuch has incurred a “permanent and total disability,” as such term is defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as amended (the
“Code”). In such event, the Company shall forthwith pay or 

  

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continue to pay to him (or his surviving spouse or estate, as provided in Section 15(b), if appropriate) at the time otherwise due (i) a pro rata portion of
his compensation earned through the date of termination under Section 4, (ii) expenses incurred by him but not yet reimbursed pursuant to Section 5, and (iii) provided there was no breach by him, prior to his disability (and no breach thereafter),
of the provisions of Section 9 or 10, the payments specified in Section 6. 
  
 (c) Termination for Cause. The Board may terminate the relationships created by this Agreement for Cause. For purposes of this section, the term “Cause” shall mean (i) the willful refusal by Pankuch
to discharge duties reasonably assigned to him pursuant to the provisions of this Agreement after written notice to Pankuch and the failure of Pankuch to resume the discharge of such duties within 30 days after such notice, (ii) the material breach
of any of the provisions of Sections 9 or 10 or (iii) the incarceration of Pankuch for a period of at least 45 days. In such event, the Company shall forthwith pay to him solely (iv) a pro rata portion of his compensation earned through the date of
termination under Section 4 and (v) expenses incurred by him but not yet reimbursed pursuant to Section 5. In the case of a breach of Clause (ii), he shall forthwith repay to the Company a pro rata portion of the annual amount theretofore prepaid
under Section 6 allocable to the portion of the year following such breach (or the first breach, if more than one). 
  
 (d) Termination Without Cause. In the event the Board terminates this Agreement without Cause prior to its scheduled expiration
date, the Company shall forthwith pay to Pankuch, in one lump sum (and without discount), an amount equal to (i) all amounts that would otherwise have been paid under Section 4 had the Agreement not been so terminated, (ii) expenses incurred by him
but not yet reimbursed pursuant to Section 5, and (iii) the remaining payments specified in Section 6. In the event of a subsequent material breach by Pankuch of any of the provisions of Section 9 or 10, he shall forthwith repay to the Company an
allocable portion of the amount paid to him under Clause (iii) that relates to the period of time following such breach. 
  
 (e) Voluntary Termination By Pankuch Without Company Breach. In the event Pankuch voluntarily terminates any relationship created
by this Agreement, other than by reason of a material breach of the same by the Company, the Company shall forthwith pay him (i) a pro rata portion of his compensation earned through the date of termination under Section 4 and (ii) expenses incurred
by him but not yet reimbursed pursuant to Section 5. No amounts previously paid to Pankuch under Section 6 shall be required to be returned to the Company, but no further payments under such section shall be made. Notwithstanding the foregoing,
Pankuch shall remain bound by the provisions of Sections 9 and 10. 
  
 (f) Voluntary Termination By Pankuch Following Company Breach. In the event Pankuch voluntarily terminates any relationship created by this Agreement by reason of a material breach of this Agreement by the
Company, the Company shall forthwith pay, in one lump sum (and without discount), an amount equal to (i) all amounts that would otherwise have been paid under Section 4 had he not so terminated, (ii) expenses incurred by him but not yet reimbursed
pursuant to Section 5, and (iii) the remaining payments specified in Section 6. In the event of a subsequent material breach by Pankuch of any of the provisions of Section 9 or 10, he shall forthwith repay to the 

  

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Company an allocable portion of the amount paid to him under Clause (iii) that relates to the period of time following such breach. 
  
 (g) Employee Benefits. Nothing set forth elsewhere in
this section shall adversely affect Pankuch’s vested rights under any employee benefit plan of the Company in which he is a participant at the time of his termination of employment, unless otherwise provided by law and the relevant plan
document. 
  
 9. Covenants. 
  
 (a) Covenants. Pankuch hereby acknowledges and
recognizes the highly competitive nature of the business of the Company and its affiliated companies and accordingly agrees that, during the original term of this Agreement (as specified in Section 2) and for a period of one year thereafter, he
shall not: 
  
 (i) be engaged, directly or
indirectly, either for his own account or as agent, consultant, employee, partner, officer, director, proprietor, investor (except as an investor owning less than 5% of the stock of a publicly owned company) or otherwise of any person, firm,
corporation, or enterprise engaged, in any line of business in which the Company or any of its affiliated companies are engaged during the term of this Agreement through the date of his termination hereunder (the “Protected Businesses”),
in any state in which the Company or any of its affiliated companies is licensed to do, or otherwise legally engages in, business (the “Non-Competition Area”); 
  
 (ii) provide financial or other assistance to any person, firm, corporation, or enterprise engaged in a
Protected Business in the Non-Competition Area; 
  
 (iii) solicit current or former customers of the Company or any of its affiliated companies in the Non-Competition Area; or 
  
 (iv) solicit for hire or otherwise hire current or former employees of the Company or any of its affiliated companies. 
  
 (b) Judicial Cut-Back. It is expressly understood and
agreed that, although Pankuch and the Company consider the restrictions contained in Section 9(a) reasonable for the purpose of preserving for the Company and its affiliated companies their good will and other proprietary rights, if a final
determination is made by a court or arbitrator having jurisdiction that the time or territory or any other restriction contained in Section 9(a) is an unreasonable or otherwise unenforceable restriction against Pankuch, the provisions of Section
9(a) shall not be rendered void but shall be deemed amended to apply as to such maximum time and territory and to such other extent as such court or arbitrator may determine or indicate to be reasonable. 
  
 10. Unauthorized Disclosure. During the term of this Agreement, or at
any later time, Pankuch shall not, without the written consent of the Board or a person authorized thereby, knowingly disclose to any person, other than an employee of the Company or a person to whom disclosure is reasonably necessary or appropriate
in connection with the performance by Pankuch 

  

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of his duties hereunder, any material confidential information obtained by him while rendering services to or on behalf of the Company with respect to any of
the Company’s or any of its affiliated companies’ services, products, improvements, formulas, designs or styles, processes, customers, methods of business or any business practices the disclosure of which could be or will be damaging to
the Company or any of its affiliated companies; provided, however, that confidential information shall not include any information known generally to the public (other than as a result of unauthorized disclosure by Pankuch or any person with the
assistance, consent or direction of Pankuch) or any information of a type not otherwise considered confidential by persons engaged in the same business or a business similar to that conducted by the Company or its affiliated companies, or any
information that must be disclosed as required by law. 
  
 11.
Notices. Any notice required or permitted to be given under this Agreement shall, to be effective hereunder, be given to the Company, in the case of notices given by Pankuch, and be given by the Company, in the case of notices given to
Pankuch. Any such notice shall be deemed properly given if in writing and if mailed by registered or certified mail, postage prepaid with return receipt requested, to the last known residence of Pankuch, in the case of notices to Pankuch, and to the
principal executive office of Company, in the case of notices to Company. 
  
 12. Waiver. No provision of this Agreement may be modified, waived, or discharged unless such waiver, modification, or discharge is agreed to in writing and signed by Pankuch and an executive officer of the
Company specifically designated by the Board for such purpose. No waiver by any party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. 
  
 13. Assignment. This Agreement shall not be assignable by any party hereto, except by the Company to any successor in interest to its business.

  
 14. Entire Agreement. This Agreement contains the
entire agreement of the parties relating to the subject matters of this Agreement, and it supersedes all prior written or unwritten understandings between the parties (or between or among PennRock, Blue Ball and Pankuch) with respect to such subject
matters. Notwithstanding the preceding sentence, however, the Company acknowledges that, concurrently with the effective date of this Agreement, PennRock and/or Blue Ball will discharge (or make provision for the discharge of) all obligations to
Pankuch due to him pursuant to the provisions of Section 13 of the PennRock/Blue Ball Employment Agreement, as well as all other benefits inuring to him under all plans, arrangements and other contracts by reason of the Change in Control or
otherwise. 
  
 15. Successors, Binding Agreement.

  
 (a) The Company will require any successor
(whether direct or indirect, by purchase, merger, consolidation, or otherwise) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken place. Failure by the Company to obtain such assumption and agreement prior to the effectiveness of any such succession shall constitute a material breach of this
Agreement. As used in this Agreement, the “Company” shall mean the Company as hereinbefore defined and any successor to the 

  

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business and/or assets of the Company as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise. 
  
 (b) This Agreement shall inure to the benefit of and be
enforceable by Pankuch’s personal or legal representatives, executors, administrators, heirs, distributees, devisees, and legatees, as appropriate. If Pankuch should die while any amount or benefit would be payable to him under this Agreement
if he had continued to live, all such amounts and benefits, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to his surviving spouse, if any, and, if there is no surviving spouse, to his estate.

  
 16. Arbitration. The Company and Pankuch recognize that
in the event a dispute should arise between them concerning the interpretation or implementation of this Agreement, lengthy and expensive litigation will not afford a practical resolution of the issues within a reasonable period of time.
Consequently, each party agrees that all disputes, disagreements and questions of interpretation concerning this Agreement (except for any enforcement sought with respect to Section 9 or 10, which may be litigated in court through an action for
injunction or other similar relief) are to be submitted for resolution in Lancaster, Pennsylvania, to the American Arbitration Association (the “Association”) in accordance with the Association’s relevant rules for contracts of this
sort (the “Rules”). The Company or Pankuch may initiate an arbitration proceeding at any time by giving notice to the other in accordance with the Rules. The Company and Pankuch, may, as a matter of right, mutually agree on the appointment
of a particular arbitrator from the Association’s pool. The arbitrator shall not be bound by the rules of evidence and procedure of the courts of the Commonwealth of Pennsylvania but shall be bound by the substantive law applicable to this
Agreement. The decision of the arbitrator, absent fraud, duress, incompetence or gross and obvious error of fact, shall be final and binding upon the parties and shall be enforceable in courts of proper jurisdiction. Following written notice of a
request for arbitration, the Company and Pankuch, shall be entitled to an injunction restraining all further proceedings in any pending or subsequently filed litigation concerning this Agreement, except as otherwise provided in this Agreement or any
enforcement sought with respect to Section 9 or 10, which may be litigated through an action for injunction or other relief. 
  
 17. Legal Expenses. The Company shall pay to Pankuch (or his surviving spouse or estate) all reasonable legal fees and expenses when incurred by
Pankuch (or his surviving spouse or estate) in seeking to obtain or enforce any right or benefit provided by this Agreement; provided he (or his spouse or estate) prevails with respect to any material issue in dispute. 
  
 18. Validity. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 
  
 19. Applicable Law. This Agreement shall be governed by and construed in accordance with the domestic internal laws (but not the law of conflict of
laws) of the Commonwealth of Pennsylvania. 
  
 20.
Headings. The headings of the sections, subsections and paragraphs of this Agreement are for convenience only and shall not control or affect the meaning or construction or limit the scope or intent of any of the provisions of this Agreement.

  

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 21. Service as Board Member. Nothing herein shall modify or otherwise affect the provisions of
Section 1.02(e)(i) of the Merger agreement, which provisions relate to Pankuch’s prospective service as a director of the Board and his designation as Vice-Chairman of the same. Compensation shall be paid by the Company to Pankuch, consistent
with Board policy from time to time in effect, for such services independent of the provisions and term of this Agreement. 
  
 22. Compliance With American Jobs Creation Act of 2004. To the extent any provision of this Agreement is in conflict with the American Jobs
Creation Act of 2004 (the “2004 Act”), the parties agree to modify this Agreement, in good faith and to the extent possible, to mitigate any adverse tax consequences that may otherwise result to Pankuch or the Company under Code Section
409A, as adopted by the 2004 Act. 
  
 IN WITNESS WHEREOF, the
parties hereto have executed, or cause to be executed, this Agreement as of the day and year first above written. 
  

			
	COMMUNITY BANKS, INC.
		
	By:	 	 /s/ Eddie L. Dunklebarger

		
	 Title:
	 	 Chairman and CEO

  

	
	
	 /s/ Melvin Pankuch

	 Melvin Pankuch

  

 9Employment Agreement

 Exhibit 10.8 
  
 EMPLOYMENT AGREEMENT 
  

THIS EMPLOYMENT AGREEMENT (“Agreement”) made this 7th day of January, 2005, by and among COMMUNITY BANKS, INC., a Pennsylvania
corporation, COMMUNITY BANKS, a Pennsylvania bank and trust company (hereinafter collectively referred to as the “Company”), and JOSEPH C. SPADA, an adult individual residing at 1985 Glendower Drive, Lancaster, Pennsylvania 17601
(hereinafter referred to as “Executive”). 
  
 BACKGROUND:

  
 A. On April 13, 2000, Executive entered into an Employment
Agreement with Blue Ball National Bank (“Blue Ball Employment Agreement”). 
  
 B. PennRock Financial Services Corp. (“PRFS”) has entered into an Agreement (“Merger Agreement”) with Community Banks, Inc. (“CMTY”), in which PRFS has agreed to merge with and into CMTY,
with CMTY to be the surviving corporation (“Merger”). Simultaneously, Blue Ball National Bank (“Blue Ball”) has entered into a Bank Plan of Merger, in which Blue Ball has agreed to merge with and into Community Banks
(“CB”), with CB to be the surviving bank. 
  
 C. The
Company wishes to employ Executive, and Executive wishes to be employed by the Company, following the Merger, and the parties desire to set forth the terms and conditions of their agreement herein. 
  
 NOW, THEREFORE, in consideration of the foregoing recitals and the agreements
hereinafter contained, and intending to be legally bound hereby, the parties agree as follows: 
  
 1. Duties as Executive. Company shall employ Executive and Executive shall serve Company as an Executive Vice President of CB and a Senior Vice President of CMTY, or to such comparable executive
positions to which he may be reasonably appointed by the Company’s board of directors in light of his experience and abilities. During his employment by the Company, Executive shall serve Company under the direction of, and in a manner
satisfactory to the CEO and the Board of Directors of the Company. He shall perform his duties faithfully, diligently, and to the best of his ability and shall devote his full time and best efforts to the affairs of the Company. 
  
 2. Compensation as Executive. As compensation for all services
performed by Executive for Company while employed thereby, Company shall: 
  
 a. Pay Executive in regular installments, a salary fixed from time to time by the Company (which, for the first twelve-month period of the Agreement, will not be less than the annual salary Executive received in the
last year of the Blue Ball Employment Agreement); 
  
 b. Pay Executive bonuses as declared from time to time by the Company; and 
  
 c. Provide Executive with such health, accident, disability, life insurance, retirement benefits and such other benefits as are now in
force or as may be authorized by the board of directors. 
  

 3. Reimbursement of Expenses. Company shall reimburse Executive within thirty (30) days
from billing date for necessary and properly documented travel and business expenses, not otherwise reimbursed, incurred by Executive on behalf of Company. 
  
 4. Term of Employment. The initial term of the Executive’s employment under this Agreement shall commence upon the effective date of
this Agreement (as set forth in Section 13 hereof) and shall continue for a period of three (3) years. On each anniversary of the effective date of this Agreement (“Anniversary”), the term of this Agreement and the period of the
Executive’s employment hereunder will be automatically extended for successive two-year periods unless, no later than ninety (90) days prior to an Anniversary, either the Company or the Executive gives written notification to the other of an
intention not to renew this Agreement. Notwithstanding the foregoing provisions, upon the occurrence of a Change of Control (as hereinafter defined), the term of this Agreement shall automatically renew and be extended for two (2) years from the
date thereof. 
  
 5. Termination of Employment.

  
 a. Disability. If the Executive
becomes permanently disabled (as certified by a licensed physician chosen by the Company and the Executive or in the event that the Company and the Executive cannot agree upon a physician, each shall designate a licensed physician, and the licensed
physicians so designated shall appoint a third physician whose decision shall be binding upon the parties) because of sickness, physical or mental disability, or any other reason, and is unable to perform or complete his duties under this Agreement
for a period of ninety (90) consecutive days (or time equal to the elimination period under any disability insurance program provided by the Company to the Executive), the Company shall have the option to terminate this Agreement by giving written
notice of termination to the Executive. Such termination shall be without prejudice to any right the Executive has under any disability insurance program maintained by the Company. 
  
 b. Cause. The Company may terminate this Agreement and the Executive’s employment hereunder for
Cause at any time. For the purposes of this Agreement, the Board shall have “Cause” to terminate the Executive’s employment upon (1) the willful failure by the Executive to substantially perform his duties hereunder, other than any
such failure resulting from the Executive’s incapacity due to physical or mental illness (after the Board’s notice to the Executive and the Executive’s failure to cure same within thirty (30) days of such notice); (2) the engaging by
the Executive in willful misconduct materially injurious to Community; (3) gross negligence, malfeasance, or dishonesty of the Executive in the performance of his duties (after the Board’s notice to the Executive and the Executive’s
failure to cure same within thirty (30) days of such notice); (4) the conviction of the Executive of an act constituting a felony or the conviction of the Executive of a misdemeanor based on dishonesty; (5) the willful and material breach by the
Executive of any of his other obligations under this Agreement (after the Board’s notice to the Executive and the Executive’s failure to cure same within thirty (30) days of such notice); (6) the refusal or failure of the Executive to
carry out reasonable directives of the Board (after the Board’s notice to the Executive and the Executive’s failure to cure same within thirty (30) days of such notice); (7) receipt of a final written directive or order of any governmental
body or entity having jurisdiction over Community requiring termination or removal of the Executive as an officer of the Company; (8) repeated and consistent failure of the Executive to be present and work during normal business hours unless the
absence is due to disability described in Section 7(a) below (after the Board’s notice to the Executive and the Executive’s failure to cure same within thirty (30) days of such notice); or (9) insubordinate, gross incompetence or
misconduct in the performance of, or gross neglect of, the Executive’s duties hereunder (after the Board’s notice to the Executive and the Executive’s failure to cure same within thirty (30) days of such notice). 
  

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 c. Good Reason. The Executive may terminate his employment hereunder for Good
Reason. The term “Good Reason” shall mean (i) any assignment to the Executive, without his consent, of any duties other than those contemplated by Section 1 hereof, or any reduction in the Executive’s duties or responsibilities for
the Company; (ii) any removal of the Executive from any of the positions indicated in Section 1 hereof, except in connection with termination of the Executive’s employment for Cause, a promotion of Executive to a higher position or an
assignment to Executive of a title and duties and responsibilities approximately comparable to the those involved in the positions indicated in Section 1 above; (iii) a reduction of the Executive’s annual salary; (iv) breach by the Company of
its obligations under Section 2 hereof (after the Executive’s notice to the Company and the Company’s failure to cure such breach within thirty (30) days of such notice); (v) without the prior consent of Executive, transfer or relocate the
office in which Executive performs the bulk of his duties to any location more than fifty (50) miles from Executive’s residence address as set forth in the first paragraph of this Agreement or (vi) any other willful and material breach by the
Company of this Agreement (after the Executive’s notice to the Company and the Company’s failure to cure such breach within thirty (30) days of such notice). 
  
 6. Payments Upon Termination. 
  
 a. Death, Disability or for Cause. If the Executive’s employment shall be terminated because of
death, disability or for Cause, the Company shall pay the Executive his full salary through the date of termination at the rate in effect at the time of termination, and other amounts owing to the Executive at the date of termination, and the
Company shall have no further obligations to the Executive under this Agreement. 
  
 b. Unilateral and Good Reason Termination (Not Including Change of Control). If the Executive’s employment is terminated by
the Company (other than for Cause or as a result of disability or nonrenewal of this Agreement), or if the Executive shall terminate his employment for Good Reason (except for a termination by the Executive for Good Reason following a Change of
Control), then the Company shall pay the Executive his full salary from the date of termination for the remaining term of this Agreement, provided that the obligation to pay the compensation provided for in this Section 6(b) shall terminate
immediately upon the Executive’s violation of the terms and conditions of the non-disclosure and non-competition provisions set forth in paragraph 8 of this Agreement. The Company shall not be required to maintain employee benefit plans and
programs to which the Executive was entitled prior to the date of termination. 
  
 c. Termination Following Change of Control. If the Executive terminates his employment for Good Reason following a Change of
Control or the Company, or any successor thereto, terminates Executive’s employment following a Change of Control (both, a “Change of Control Termination”), the Executive shall be entitled to compensation equal to two (2) times the
Executive’s gross salary and bonus compensation for the calendar year preceding the date of such termination. The Executive shall receive the compensation provided for in this Section 6(c) in a lump sum, no later than the thirtieth day
following the date on which the Change of Control Termination shall occur. 
  
 7. Definition of Change of Control. For purposes of this Agreement, the term “Change of Control” shall mean: 
  
 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 

  

 3 

 
securities of the Company representing 24.99% or more of the combined voting power of the Company’s securities then outstanding; 
  
 b. A merger, consolidation or other reorganization of the
Company, except where the resulting entity is controlled, directly or indirectly, by the Company; 
  
 c. A merger, consolidation or other reorganization of the Company, except where shareholders of the Company immediately prior to
consummation of any such transaction continue to hold as 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 the Company’s Board of Directors; 
  
 d. A sale, exchange, transfer or other disposition of substantially all of the assets of the Company to another entity, except to an
entity controlled, directly or indirectly, by the Company or a corporate division involving the Company; 
  
 e. A contested proxy solicitation of the 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 the Company; or 
  
 f. During any period of two (2) consecutive years during the term of this Agreement and any renewal hereof, individuals who at the
beginning of such period constitute the Board of Directors of the Company cease for any reason (other than for health, disability or other medical incapacity or voluntary retirement) to constitute at least a majority thereof. 
  
 8. Non-disclosure and Non-competition. The Executive recognizes
and acknowledges that during the course of his employment with the Company and during the course of his future employment with the Company he has acquired and/or may subsequently acquire privileged and confidential information concerning the
Company’s or its affiliates’ current and prospective customers, their methods and ways of doing business, their plans and goals for future activities, and other confidential or proprietary information belonging to the Company or its
subsidiaries or relating to the Company’s or its affiliates’ affairs (collectively referred to herein as the “Confidential Information”). The Executive further acknowledges and agrees that the Confidential Information is the
property of the Company and that any misappropriation or unauthorized use or disclosure of the Confidential Information would constitute a breach of trust causing irreparable injury to the Company, and it is essential to the protection of the
Company and its goodwill and to the maintenance of the Company’s competitive position that the Confidential Information be kept secret and not be disclosed to others or used to the Executive’s own advantage or the advantage of others.
Accordingly, the Executive agrees that: 
  
 (a)
Non-disclosure of Confidential Information. During his employment and following the termination thereof, Executive shall hold and safeguard the Confidential Information in trust for Company, its successors and assigns, that he shall not
without the prior written consent of the Company misappropriate or disclose or make available to anyone for use outside of the Company at any time, either during his employment or subsequent to the termination of his employment, any of the
Confidential Information whether or not developed by the Executive; and 
  
 (b) Restrictions on Competition. Further, the Executive agrees that he shall not, either during his employment with the Company or during the Restricted Period (as defined below) 

  

 4 

 
following the termination of Executive’s employment for any reason (other than a Change of Control Termination, in which event Executive shall not be
bound by the covenants in this Section 8(b)), without first obtaining the written consent of the Board of Directors of the Company, directly or indirectly, as an officer, director, employee, consultant, agent, partner, joint venturer, proprietary or
otherwise, engage in, become interested in, or assist any business which is in competition with the Company or any of its affiliates or subsidiaries, in the areas of commercial banking, mortgage banking, leasing, or the taking of deposits and is
located or operating in any of the counties in which the Company or any of its present or future subsidiaries may now or at any time prior to the termination of Executive’s employment have offices or any of the counties contiguous thereto,
other than as a shareholder holding not more than one (1%) percent of the outstanding shares of any class of securities registered under the Securities Exchange Act of 1934. “Restricted Period” shall mean the remainder of the term at the
time that the termination occurred. 
  
 9. Not
Salary. Any deferred compensation payable under this agreement shall not be deemed salary or other compensation to the Executive for the purpose of computing benefits to which he may be entitled under any pension plan or other arrangement of
the Company for the benefit of its Executives. 
  
 10. No
Assignment. The right of the Executive or any other person to the payment of deferred compensation or other benefits under this agreement shall not be assigned, transferred, pledged, or encumbered except by will or by the laws of the descent
and distribution. 
  
 11. Binding Effect. This
agreement shall be binding upon and inure to the benefit of the Company, its successors and assigns and the Executive and his heirs, executors, administrators, and legal representatives. 
  
 12. Governing Law. This agreement shall be construed in accordance with and governed by the laws of the
Commonwealth of Pennsylvania. 
  
 13. Severability.
If any provision of this Agreement shall be found by any count of competent jurisdiction to be unenforceable, the parties hereby waive such provision to the extent that it is found to be unenforceable. Such provision may be modified by such court so
that it becomes enforceable, and, as modified, will be enforced as any other provision hereof, all other provisions continuing in full force and effect. 
  
 13. Effective Date of Agreement. This Agreement shall become effective upon the Effective Date (as defined in the Merger Agreement) of the
Merger, provided however, that if Executive delivers written notice to the Company within one business day following the Effective Date that (a) Executive does not wish to be employed by the Company and (b) that Executive wishes to be paid
the severance benefit (“Severance Benefit”) provided for in Section 13 of the Blue Ball Employment Agreement (“Severance Notice”), then (x) the Company shall pay Executive the Severance Benefit, subject to all the terms and
conditions of the Blue Ball Employment Agreement and (y) this Agreement shall terminate immediately, and the parties shall have no further obligation to one another, except for the obligations set forth in this Section 13. Delivery of a Severance
Notice shall be deemed effective upon receipt by the Company, either by hand deliver or facsimile transmission, at the following address: 
  
 Community Banks, Inc. 
 750 East Park Drive 
 Harrisburg, Pennsylvania 17111 
 Attn.: Eddie L. Dunklebarger 
 Fax: 717-920-1683 
  

 5 

 14. Attorney’s Fees and Costs. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorney’s fees, costs, and necessary disbursements in addition to any other relief that may be proper. 
  
 15. Entire Agreement. This Agreement constitutes the entire
agreement between the parties and no prior promises, agreements or warranties, verbal or written, shall be of any force unless embodied herein. This Agreement is intended to supersede and replace the Blue Ball Employment Agreement. No modification
of this agreement shall be of any force or effect unless reduced to writing and signed by both parties. 
  
 IN WITNESS WHEREOF, the Company has caused this agreement to be executed by its duly authorized officers and the Executive has hereunto set his hand and
seal as of the date first above written. 
  

									
	 	 	 	 	 COMMUNITY BANKS, INC.

				
	 /s/ Patricia E. Hoch
	 	 	 	 By
	 	 /s/ Eddie L. Dunklebarger

	 	 	 Witness
	 	 	 	 	 	 Eddie L. Dunklebarger, Chairman President and CEO

			
	 	 	 	 	 COMMUNITY BANKS

				
	 /s/ Patricia E. Hoch
	 	 	 	 By
	 	 /s/ Eddie L. Dunklebarger

	 	 	 Witness
	 	 	 	 	 	 Eddie L. Dunklebarger, President and CEO

			
	 	 	 	 	 EXECUTIVE:

			
	 /s/ Patricia E. Hoch
	 	 	 	 /s/ Joseph C. Spada

	 	 	 Witness
	 	 	 	 Joseph C. Spada

  

 6

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