DAUPHIN DEPOSIT CORP, DEF 14A, 1996-03-08

DAUPHIN DEPOSIT CORP
DEF 14A, 1996-03-08
STATE COMMERCIAL BANKS

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SCHEDULE 14A INFORMATION

PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
(AMENDMENT NO. )

Filed by the Registrant [X]

Filed by a Party other than the Registrant [_]

Check the appropriate box:

[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12

DAUPHIN DEPOSIT CORPORATION
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

DAUPHIN DEPOSIT CORPORATION
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.

[_] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-
6(i)(3).

[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.

(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

[_] Fee paid previously with preliminary materials.

[_] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.

(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:

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[LOGO OF DAUPHIN DEPOSIT CORP APPEARS HERE]

213 MARKET STREET
HARRISBURG, PENNSYLVANIA 17101

PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 15, 1996
APPROXIMATE DATE OF MAILING PROXY STATEMENT AND
PROXY TO SHAREHOLDERS:
MARCH 8, 1996

USE OF PROXY AND GENERAL INFORMATION

A Proxy for use in connection with the Annual Meeting of Shareholders of
Dauphin Deposit Corporation (herein called the "Corporation") to be held on
Monday, April 15, 1996, at 9:00 A.M., at the Harrisburg Hilton & Towers, One
North Second Street, Harrisburg, Pennsylvania, is enclosed. This Proxy is
solicited by the Board of Directors of the Corporation, and costs of
solicitation will be borne by the Corporation. The Corporation has engaged
Corporate Investor Communications, Inc., Carlstadt, New Jersey, a proxy
solicitation firm, to solicit proxies for the Annual Meeting from brokers and
nominees holding Corporation common stock. This solicitation is estimated to
cost $4,750 plus reasonable out-of-pocket expenses incurred by the
solicitation firm. The Proxy is revocable by the person giving it, by filing
with the Secretary of the Corporation either a written notice revoking the
Proxy or a duly executed Proxy bearing a later date. Shares of stock of the
Corporation represented by properly executed and filed Proxies will be voted
in accordance with the specifications of the Proxies. If not otherwise
specified, the Proxy will be voted FOR the election as Directors of the 19
nominees named in this Proxy Statement, FOR approval of an amendment to the
Corporation Employee Stock Purchase Plan increasing the number of shares of
Common Stock which may be issued under the Plan, as described on pages 17 to
20 hereof, and FOR approval of the Corporation 1996 Non-Employee Directors'
Stock Plan, as described on pages 20 to 22 hereof, and upon the transaction of
such other business as properly may come before the meeting, in accordance
with the best judgment of the persons appointed as Proxies.

OUTSTANDING STOCK AND PRINCIPAL HOLDERS THEREOF

As of February 26, 1996, there were 30,600,985 shares of common stock of the
Corporation issued and outstanding and entitled to vote, having a par value of
$5.00 per share (the "Common Stock"). Only those shareholders of record at the
close of business on February 26, 1996 will be entitled to receive notice of,
and to vote at the Annual Meeting of Shareholders of the Corporation. Each
outstanding share is entitled to one vote on all matters. Shareholders do not
have the right to vote their shares cumulatively in the election of Directors.
A majority of the outstanding Common Stock present in person or by proxy
constitutes a quorum for the transaction of business at the Annual Meeting. In
the case of the election of Directors, the nominees receiving the highest
number of votes, up to the number of Directors to be elected, shall be elected
to the Board of Directors. The affirmative vote of the holders of a majority
of the shares of Common Stock present in person or by proxy and entitled to
vote at the Annual Meeting is required to approve the amendment to the
Employee Stock Purchase Plan and the 1996 Non-Employee Directors' Stock Plan.
Abstentions and broker non-votes will not constitute or be counted as votes
cast for purposes of the Annual Meeting.
<PAGE>

As of February 26, 1996, Dauphin Deposit Bank and Trust Company ("Dauphin
Bank"), which includes the Bank of Pennsylvania Division, the Valleybank
Division, and the Farmers Bank Division, all of the outstanding stock of which
is held by the Corporation, held, either directly or by way of its nominees,
an aggregate of approximately 6.91% or approximately 2,115,576 shares, of the
outstanding Common Stock in its trust department as fiduciary for numerous
separate trusts, estates and agency accounts which beneficially own such
shares. Of these shares, Dauphin Bank had sole voting power with respect to
1,761,871 shares, shared voting power with respect to 353,705 shares, sole
investment power with regard to 997,304 shares and shared investment power
with regard to 1,118,272 shares. Pursuant to provisions of the applicable
governing instruments and/or in accordance with applicable principles of
fiduciary law, Dauphin Bank, as fiduciary, has the right and power exercisable
either alone or in conjunction with a co-fiduciary, to vote such shares,
either in person or by proxy, for the election, as Directors, of the Board of
Directors' nominees, for approval of the amendment to the Employee Stock
Purchase Plan and for approval of the 1996 Non-Employee Directors' Stock Plan,
so long as such votes are in the best interest of any such trust, estate or
agency account and the beneficiaries or principals thereof. Dauphin Bank
intends to vote such shares in favor of the election of the Board of
Directors' nominees as Directors, for approval of the amendment to the
Employee Stock Purchase Plan and for approval of the 1996 Non-Employee
Directors' Stock Plan.

To the best of the Corporation's information and belief, no other person
holds beneficially or of record, directly or indirectly, five percent (5%) or
more of the outstanding shares of Common Stock.

SECURITY OWNERSHIP OF MANAGEMENT

The following table sets forth, as of February 26, 1996, information
relating to beneficial ownership of shares of Common Stock by each of the
Corporation's present Directors, each nominee for Director, each named
executive officer of the Corporation set forth in the executive compensation
tables and all of the Corporation's Directors and executive officers as a
group.

<TABLE>
<CAPTION>
NAME OF BENEFICIAL OWNER NUMBER OF SHARES (1)
------------------------ --------------------
<S> <C> <C>
J. Edward Beck, Jr.................................... 5,264 (2)
John R. Buchart....................................... 10,730 (3)
Robert L. Fryer, Jr................................... 13,577
James O. Green........................................ 45,574 (4)
Derek C. Hathaway..................................... 1,039
Alfred G. Hemmerich................................... 1,886
Lee H. Javitch........................................ 23,860 (5)
Christopher R. Jennings............................... 80,947
Richard E. Jordan, II................................. 3,309 (6)
William J. King....................................... 194,689 (7)
William T. Kirchhoff.................................. 42,433 (8)
Lawrence J. LaMaina, Jr............................... 85,812 (9)
Andrew Maier, II...................................... 7,048 (10)
James E. Marley....................................... 1,030
Robert F. Nation...................................... 42,000 (11)
Elmer E. Naugle....................................... 41,688
Richard W. Payne...................................... 500 (12)
Walter F. Raab........................................ 10,000
Paul C. Raub.......................................... 30,113 (13)
Henry W. Rhoads....................................... 48,458 (14)
Jean D. Seibert....................................... 150,565 (15)
Paul B. Shannon....................................... 38,444 (16)
R. Champlin Sheridan, Jr.............................. 17,711 (17)
L. Andrew Zausner..................................... 173,600 (18)
All Directors and Executive Officers as a Group
(29 in number, including those listed above)......... 1,142,394
</TABLE>

2
<PAGE>

- --------
(1) Except as otherwise stated in the following notes, each named individual
has sole voting and investment power over the shares listed opposite his
or her name. Each Director and executive officer owns less than 1% of the
Corporation's outstanding Common Stock. All Directors and executive
officers as a group owned 3.71% of the outstanding Common Stock. The
amounts shown include the following shares of Common Stock which the
named executive officers and all executive officers as a group have the
right to acquire within 60 days of February 26, 1996 through the exercise
of stock options granted pursuant to the Corporation's Stock Option Plan
of 1986: Mr. Jennings (69,048), Mr. Fryer (-0-), Mr. LaMaina (37,810),
Mr. Shannon (28,981), Mr. Payne (-0-) and all executive officers as a
group (186,414). Non-employee Directors are not eligible to participate
in the Stock Option Plan of 1986.
(2) Includes 3,836 shares held jointly with spouse and 1,000 shares held in
trust for benefit of Mr. Beck.
(3) Includes 500 shares held directly by spouse and 7,374 shares held by a
corporation of which Mr. Buchart is a controlling person.
(4) Includes 37,300 shares held in trust for benefit of Mr. Green.
(5) Includes 1,260 shares held as co-trustee.
(6) Includes 3,148 shares held in trust for benefit of Mr. Jordan.
(7) Includes 2,014 shares held directly by spouse and 143,200 shares which
Mr. King may acquire upon the exercise of outstanding stock options.
(8) Includes 1,206 shares held directly by spouse and 30,000 shares held by
profit sharing plan of a corporation of which Mr. Kirchhoff is a
controlling person.
(9) Includes 48,002 shares held jointly with spouse.
(10) Includes 4,000 shares held in trust for benefit of Mr. Maier and his
spouse.
(11) Includes 10,500 shares held directly by spouse.
(12) Shares listed are held by spouse for benefit of children under Uniform
Gifts to Minors Act.
(13) Includes 15,057 shares held directly by spouse.
(14) Includes 4,148 shares held directly by spouse and 24,200 shares held as
co-trustee.
(15) Includes 7,814 shares held for benefit of children under Uniform Gifts to
Minors Act.
(16) Includes 9,463 shares held jointly with spouse.
(17) Includes 1,809 shares held jointly with spouse and 2,531 shares held
directly by spouse.
(18) Includes 169,200 shares held as co-trustee.

ELECTION OF DIRECTORS

The By-Laws of the Corporation authorize the Board of Directors to fix the
number of Directors to be elected each year, provided that such number will
not be less than 5 nor more than 30. In accordance with the By-Laws, the Board
of Directors has fixed the number of Directors to be elected at 19. The
persons named in the enclosed Proxy intend to exercise the authority conferred
therein to vote in favor of the election as Directors of the 19 nominees
listed below (or a lesser number if any named nominees are unavailable for
election) if no contrary instruction is given on the Proxy. The Board of
Directors does not know of any reason for such unavailability by a nominee.
All nominees presently are Directors of the Corporation, except for Messrs.
Beck, Buchart, Jordan and Zausner, each of whom presently is a member of the
Dauphin Bank Board of Directors. Each Director elected at the Annual Meeting
of Shareholders will, in the absence of resignation, removal or
disqualification, serve for one year from the Annual Meeting and until his or
her successor is duly elected and qualifies. There are no present Directors of
the Corporation whose terms of office extend beyond the Annual Meeting of
April 15, 1996 and each Director of the Corporation stands for election each
year. The information given below has been furnished by the nominees for the
benefit of the shareholders.

3
<PAGE>

<TABLE>
<CAPTION>
POSITION WITH CORPORATION (OTHER
THAN AS DIRECTOR), IF ANY, PRESENT
DIRECTOR PRINCIPAL OCCUPATION AND PRINCIPAL
NAME AND AGE SINCE* OCCUPATION FOR PAST FIVE YEARS
------------ -------- ------------------------------------------------
<C> <C> <S>
John R. Buchart.......... President (1992 to date) of Space Leasing, Inc.,
57 formerly, Chairman of the Board of Rotz
Associates, Inc. (commercial real estate
broker).
Robert L. Fryer, Jr...... 1995 President and Chief Operating Officer (February,
47 1995 to date) of the Corporation; Chairman of
the Board, President and Chief Executive Officer
(1991 to date) of Hopper Soliday & Co., Inc.;
formerly, President, W. H. Newbold's Son &
Co./Hopper Soliday & Co., Inc.
James O. Green........... 1984 Retired, formerly Chairman of the Board (1983 to
71 1986) Green's Dairy Inc.
Derek C. Hathaway........ 1995 Chairman of the Board, President and Chief
51 c Executive Officer (1994 to date) and President
and Chief Operating Officer (1991 to 1994) of
Harsco Corporation (diversified products
manufacturer); Director, PP&L Resources, Inc.
and Pennsylvania Power & Light Company.
Alfred G. Hemmerich...... 1983 Retired October 1, 1993, formerly President
67 a,b (1990 to October, 1993) Green Hills Management
Company (real estate development); Vice
President (1977 to 1990), Gilbert/Commonwealth,
Inc. (consulting engineers).
Lee H. Javitch........... 1982 Private Investor; formerly Chairman of the Board
64 b,c and Chief Executive Officer of Giant Food
Stores, Inc., Carlisle, Pennsylvania.
Christopher R. Jennings.. 1987 Chairman of the Board, Chief Executive Officer
52 and Chairman of the Executive Committee
(January, 1995 to date) of the Corporation and
Dauphin Bank; President (1987 to 1994) and Chief
Operating Officer (May, 1992 to January, 1995)
of the Corporation.
Richard E. Jordan, II.... Chairman of the Board (1992 to date) of L. B.
48 Smith, Inc. (heavy equipment distributor and
auto dealership) and President (1986 to 1992) of
Smith Land & Improvement Corp.
William J. King.......... 1980 Retired, January, 1995, formerly Chairman of the
66 Board (1987 to 1994), Chief Executive Officer
(1986 to 1994), Chairman of Executive Committee
(1982 to 1994) of Dauphin Bank and the
Corporation.
William T. Kirchhoff..... 1979 Executve Vice President, Cleveland Brothers
54 Equipment Company, Inc. (sale of construction
equipment).
Lawrence J. LaMaina, Jr.. 1992 Vice Chairman of the Corporation (1992 to date),
61 President of the Southern Division of Dauphin
Bank (1994 to date), formerly, Chairman,
President and Chief Executive Officer of Farmers
Bank and Trust Company.
</TABLE>

4
<PAGE>

a. Member of Audit Committee.
b. Member of Management Development and Compensation Committee.
c. Member of Corporate Governance Committee.

Among the functions of the Audit Committee of the Corporation are to: Review
and recommend to the Board of Directors the selection of independent auditors
of the Corporation; attend meetings with external auditors to review the scope
of and the findings of the annual independent audit of the Corporation; review
with independent auditors and internal auditors the adequacy and effectiveness
of internal accounting and financial controls; review and monitor the
activities and reports of the internal auditors; and review reports of
regulatory agencies having jurisdiction over the Corporation and its
subsidiaries. The Committee held 5 meetings in 1995.

Among the functions of the Management Development and Compensation Committee
of the Corporation are to: Evaluate the performance of the Chief Executive
Officer of the Corporation and present its assessment to the full Board of
Directors; establish and recommend to the Board of Directors compensation
plans and programs for management which clearly align management and
shareholder interests; approve stock and cash awards for senior management;
evaluate the competitiveness of the stock and cash incentive compensation
programs for non-employee directors and management; review the competitiveness
and appropriateness of compensation and benefits offered to executives and
other employees; and review the adequacy of management development and
succession plans. The Committee held 5 meetings in 1995.

Among the functions of the Corporate Governance Committee of the Corporation
are to: Act as the nominating committee of the Corporation and Dauphin Bank;
perform an annual evaluation of director performance; review director
compensation and retirement policy; evaluate the nature and quality of
information flowing between the Board of Directors, management and the
shareholders; recommend the

5
<PAGE>

responsibility and function of the Board of Directors and its committees; and
advise the Chairman of the Board on the appointment of Committee chairmen. The
Committee held 4 meetings in 1995.

The Board of Directors of the Corporation held 8 meetings during 1995. All
of the Directors of the Corporation attended at least 75 percent of the
aggregate of (1) the total number of meetings of the Board of Directors of the
Corporation (held during the period which they served as a Director) and (2)
the total number of meetings held by all committees of the Board of Directors
of the Corporation on which they served (during the periods that they served),
except Mr. Walter F. Raab, who attended 73.68% of the meetings held.

EXECUTIVE COMPENSATION

The following table shows, for the fiscal years ending December 31, 1993,
1994 and 1995, the cash compensation paid or accrued, as well as certain other
compensation paid or accrued for those years, to the Chief Executive Officer
of the Corporation and to each of the other four most highly compensated
executive officers of the Corporation in all capacities in which they served:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
- ------------------------------------------------------ ------------------- -------
(A) (B) (C) (D) (E) (F) (G) (H) (I)
OTHER ALL
NAME ANNUAL RESTRICTED OTHER
AND COMPEN- STOCK OPTIONS/ LTIP COMPEN-
PRINCIPAL YEAR SALARY BONUS SATION AWARD(S) SARS PAYOUTS SATION
POSITION (1) ($) ($) (2) ($) ($) (#) (3) ($) (4) ($)
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Christopher R.
Jennings,.............. 1995 375,000 126,323 -- -- 30,000 -- 3,884(5)
Chairman of the Board, 1994 322,875 118,644 -- -- 25,000 -- 4,056
Chairman of the
Executive 1993 307,500 108,228 -- -- 20,000 -- 4,012
Committee and Chief
Executive Officer of
Dauphin Bank and the
Corporation
Robert L. Fryer, Jr.,... 1995 340,944 117,902 -- -- 25,000 -- 4,069(6)
President and Chief 1994 -- -- -- -- -- -- --
Operating Officer of the 1993 -- -- -- -- -- -- --
Corporation and
Chairman of the Board,
President and Chief
Executive Officer of
Hopper Soliday & Co.,
Inc.
Lawrence J. LaMaina,
Jr.,................... 1995 255,000 74,441 -- -- 15,000 -- 4,178(7)
Vice Chairman of the 1994 250,000 91,865 -- -- 13,000 -- 3,899
Corporation and 1993 240,750 97,314 -- -- 13,000 -- 4,272
President of the
Southern Division of
Dauphin Bank
Paul B. Shannon,........ 1995 218,000 58,735 -- -- 15,000 -- 3,264(8)
Vice Chairman and 1994 210,000 77,167 -- -- 15,000 -- 3,429
Chief Credit Policy 1993 200,000 70,392 -- -- 15,000 -- 3,363
Officer of the
Corporation and
President of Dauphin
Bank
Richard W. Payne,....... 1995 160,289 77,083 -- -- 5,000 -- 1,457(9)
President and 1994 -- -- -- -- -- -- --
Chief Executive 1993 -- -- -- -- -- -- --
Officer of Eastern
Mortgage Services, Inc.
</TABLE>

6
<PAGE>

- --------
(1) Mr. Fryer and Mr. Payne were not executive officers of the Corporation in
1993 or 1994 and compensation information for those years is not reported.
(2) Reflects bonus earned during the calendar year listed and paid during the
next calendar year. $33,333 of the bonus paid to Mr. Payne was paid in
1995 as a one time signing bonus in connection with his employment as an
executive officer of Eastern Mortgage Services, Inc.
(3) Non-qualified options to acquire shares of Common Stock.
(4) The Corporation's only long-term incentive plan, other than the Stock
Option Plan of 1986, is the 1995 Stock Incentive Plan, which was approved
by the shareholders at the 1995 Annual Meeting and is intended to (a)
provide competitive incentives that will enable the Corporation to
attract, retain, motivate and reward key employees, and (b) give key
employees an interest parallel to the shareholders generally. During 1995,
the Corporation entered into Performance Share Agreements with certain
officers of the Corporation and its subsidiaries, including the named
executive officers, which provide for a three year performance cycle. The
performance shares granted are subject to certain performance based and
continued serviced based conditions on vesting. See the Long Term
Incentive Plan Awards Table for the number of performance shares granted
to the named executive officers.
(5) Consists of $2,310 in Corporation contributions to the Corporation's
401(k) Savings Plan, $948 in premiums on a term life insurance policy for
Mr. Jennings' benefit, and $626, which represents the economic benefit to
Mr. Jennings under the Corporation's split dollar life insurance program.
(6) Consists of $2,310 in Corporation contributions to the Corporation's
401(k) Savings Plan and $1,759 in premiums on a term life insurance policy
for Mr. Fryer's benefit.
(7) Consists of $2,310 in Corporation contributions to the Corporation's
401(k) Savings Plan, $645 in premiums on a term life insurance policy for
Mr. LaMaina's benefit, and $1,223, which represents the economic benefit
to Mr. LaMaina under the Corporation's split dollar life insurance
program.
(8) Consists of $2,310 in Corporation contributions to the Corporation's
401(k) Savings Plan, $552 in premiums on a term life insurance policy for
Mr. Shannon's benefit, and $402, which represents the economic benefit to
Mr. Shannon under the Corporation's split dollar life insurance program.
(9) Consists of $1,235 in Corporation contributions to the Corporation's
401(k) Savings Plan and $222 in premiums on a term life insurance policy
for Mr. Payne's benefit.

Stock Options.

The following table contains information concerning the grant of stock
options under the Corporation's Stock Option Plan of 1986 to the Chief
Executive Officer and the other four highest compensated executive officers of
the Corporation during the year ending December 31, 1995.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
RATES OF STOCK PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM (1)
- ------------------------------------------------------------------- ---------------------
(A) (B) (C) (D) (E) (F) (G)
NO. OF % OF
SECURITIES TOTAL
UNDER- OPTIONS
LYING GRANTED TO EXERCISE
OPTIONS EMPLOYEES OR BASE EXPIRA-
GRANTED IN FISCAL PRICE TION
NAME (#) (2) YEAR ($/SH) (3) DATE (4) 5% ($) 10% ($)
---- ---------- ---------- ---------- -------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Christopher R. Jennings. 30,000 16.76% $24.00 5/01/05 $ 452,804 $ 1,147,495
Robert L. Fryer, Jr..... 25,000 13.97% $24.00 5/01/05 $ 377,337 $ 956,245
Lawrence J. LaMaina,
Jr..................... 15,000 8.38% $24.00 5/01/05 $ 226,402 $ 573,747
Paul B. Shannon......... 15,000 8.38% $24.00 5/01/05 $ 226,402 $ 573,747
Richard W. Payne........ 5,000 2.79% $24.00 5/01/05 $ 75,467 $ 191,249
</TABLE>

7
<PAGE>

- --------
(1) Illustrates value that would be realized upon exercise of the options
immediately prior to the expiration of their term, assuming the specified
compounded rates of appreciation on the Common Stock over the term of the
options.
(2) The date of grant for all options is May 1, 1995. All options granted are
non-qualified stock options without SAR's. The options vest over a five
year period with 20% of the options becoming exercisable for shares each
year on the anniversary of the date of grant. To the extent not already
exercisable, the options become automatically exercisable in the event of
a merger or consolidation of the Corporation in which the Corporation is
not the surviving entity, or the sale of all or substantially all of the
assets of the Corporation, or an offer to purchase made by a party, other
than the Corporation, to all stockholders of the Corporation for at least
35% of the outstanding stock. In addition, the Management Development and
Compensation Committee of the Board of Directors may, in its discretion,
accelerate the vesting schedule, upon such terms and conditions as it may
impose.
(3) The exercise price of all options granted is equal to the market price of
the Common Stock on the date of grant. The exercise price may be paid in
cash, or in shares of Common Stock owned by the option holder prior to
exercising the option, provided such shares have a fair market value on
the date of payment equal to the option exercise price for the shares of
Common Stock being purchased, or partly in cash and partly in such shares
of Common Stock.
(4) All options expire 10 years from the date of grant. Notwithstanding the
foregoing: (1) In the event of normal or early retirement prior to the end
of the option term, the option shall remain exercisable for a period of
three years from the date of retirement (but not later than the end of the
option term) to the extent the option was vested, by acceleration or
otherwise, at the time of retirement; (2) in the event an option holder
ceases to be employed by reason of death or disability prior to the end of
the option term, the option shall remain exercisable for one year from the
date of cessation of employment (but not later than the end of the option
term) to the extent the option was vested, by acceleration or otherwise,
at the time of cessation of employment; and (3) in the event an option
holder ceases to be employed other than by reason of death or disability,
the option shall remain exercisable for three months from the date of
cessation of employment (but not later than the end of the option term) to
the extent the option was exercisable at the time of cessation of
employment.

8
<PAGE>

Option/SAR Exercises and Holdings.
----------------------------------

The following table sets forth information with respect to the Chief
Executive Officer and the other four highest compensated executive officers of
the Corporation concerning the exercise of options and/or stock appreciation
rights ("SARs") during the year ending December 31, 1995 and unexercised
options and SARs held as of the end of 1995.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR
VALUE

<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
VALUE OF
NUMBER OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
--------------- ----------------
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED ($)(1) UNEXERCISABLE UNEXERCISABLE(2)
---- --------------- --------------- --------------- ----------------
<S> <C> <C> <C> <C>
Christopher R. Jennings. 0 $ 0 69,048/71,960 $650,823/
$271,207
Robert L. Fryer, Jr..... 0 $ 0 0/25,000 $ 0/
$100,000
Lawrence J. LaMaina, 2,074 $ 39,178 34,606/38,964 $389,726/
Jr.....................
$164,669
Paul B. Shannon......... 10,639 $136,585 28,981/43,000 $209,849/
$159,350
Richard W. Payne........ 0 $ 0 0/5,000 $ 0/
$ 20,000
</TABLE>
- --------
(1)Fair market value of Common Stock at exercise, minus the exercise price.

(2)Fair market value of Common Stock at year-end ($28.00 per share).

The following table sets forth information concerning performance shares
awarded to the named executive officers in 1995 under the Corporation's 1995
Stock Incentive Plan:

LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR (1) (2)

<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS UNDER
NON-STOCK PRICE-BASED PLANS (4)
-------------------------------------
(A) (B) (C) (D) (E) (F)
NUMBER OF PERFORMANCE OR
SHARES, UNITS OTHER PERIOD UNTIL TARGET
OR OTHER MATURATION OR THRESHOLD PAYOUT MAXIMUM
NAME RIGHTS (3) PAYOUT ($ OR #) ($ OR #) ($ OR #)
---- ------------- ------------------ ----------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Christopher R. Jennings. 6,300 shares 1/1/95-12/31/97 n/a n/a n/a
Robert L. Fryer, Jr..... 5,880 shares 1/1/95-12/31/97 n/a n/a n/a
Lawrence J. LaMaina,
Jr..................... 4,284 shares 1/1/95-12/31/97 n/a n/a n/a
Paul B. Shannon......... 3,662 shares 1/1/95-12/31/97 n/a n/a n/a
Richard W. Payne........ 2,562 shares 1/1/95-12/31/97 n/a n/a n/a
</TABLE>
- --------
(1) The shares reported are performance shares granted pursuant to the stock
performance awards provisions of the Corporation's 1995 Stock Incentive
Plan.

(2) Up to 100% of the performance shares granted will be earned at the
completion of the three year performance period (December 31, 1997),
depending upon if, and the extent to which, the Corporation achieves
certain performance goals measured as of the end of the performance
period. Performance shares earned shall be paid by issuing an equivalent
number of shares of Common Stock, except that the Management Development
and Compensation Committee of the Board of

9
<PAGE>

Directors may, in its discretion, permit the payment of cash in lieu of up
to 50% of the fair market value of such shares of Common Stock, upon a
request in writing from the grantee.

(3) The performance shares granted do not constitute shares of Common Stock and
do not entitle the holders to dividends, dividend equivalents or voting
rights with regard to shares of Common Stock. Outstanding performance
shares automatically are deemed to be fully earned and payable upon the
occurrence of a change in control. A change in control under the 1995 Stock
Incentive Plan occurs upon (a) the acquisition by any person or group,
directly or indirectly, of securities of the Corporation representing more
than 20% of the combined voting power of the Corporation's then outstanding
securities or (b) the approval by the Corporation's shareholders of (i) an
agreement for the sale or disposition of all or substantially all of the
Corporation's assets, (ii) a plan of complete liquidation, or (iii) a
reorganization, consolidation or merger of the Corporation in which the
Corporation is not the continuing or surviving corporation, or pursuant to
which shares of Corporation Common Stock would be converted into cash,
securities or other property, other than a reorganization, consolidation or
merger where the holders of the Corporation's Common Stock immediately
prior to the transaction will, following such transaction, beneficially own
more than 50% of the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors of the
Corporation resulting from the transaction, or (c) the persons who are
members of the Board of Directors of the Corporation immediately before a
reorganization, merger, consolidation, contested election or tender or
exchange offer, cease to constitute a majority of the Board of Directors as
a result of such transaction or transactions. The Committee may also cause
any performance shares outstanding at the time of a change in control to be
assumed or new rights of equivalent value to be substituted therefore by
the successor or surviving corporation in the change in control.

(4) Up to 60% of the performance shares awarded may be earned based solely on
appreciation in the fair market value of the Common Stock over the three
year performance period. An increase in the fair market value of the Common
Stock of approximately 43% over the three year performance period is
required to earn the full 60% of the performance shares granted. Up to 40%
of the performance shares awarded may be earned based on the Corporation's
performance as measured against seven equally weighted corporate
performance measures established by the Management Development and
Compensation Committee. Failure to achieve required performance goals at
the completion of the performance period or termination of employment for
any reason prior to completion of the first 12 months of the performance
period will result in the forfeiture of outstanding performance shares.

Pension Plans.
--------------

The Corporation maintains the Dauphin Deposit Corporation Pension Plan (the
"Pension Plan") which is a non-contributory defined benefit pension plan. The
Pension Plan provides benefits for all eligible employees, including the named
executive officers.

The Pension Plan's current benefit formula provides plan participants with a
normal retirement benefit equal to 1.375% of a participant's average
compensation not in excess of a participant's covered compensation multiplied
by the participant's applicable benefit service credited after July 1, 1985
plus 1.625% of a participant's average compensation in excess of a
participant's covered compensation multiplied by the participant's applicable
benefit service, not in excess of 35 years, credited after July 1, 1985.
Different benefit formulas apply for service prior to July 1, 1985 depending on
the retirement plan in which the employee participated prior to 1985. A
participant's average compensation is computed using the five consecutive plan
years which produce the highest average. A participant's covered compensation
is the average of the Social Security taxable wage bases in effect during the
35 years ending with the year in which an individual attains Social Security
retirement age. The covered compensation figure is adjusted each year until the
participant reaches Social Security retirement age in order to reflect changes
in the Social Security taxable wage base. For purposes of the Pension Plan,

10
<PAGE>

compensation is defined as a participant's annual rate of earnings as of
January 1st, exclusive of overtime and bonuses, subject, however, to a maximum
compensation limit for 1995 of $150,000, as adjusted. Generally, the Plan also
provides a death benefit in the form of a survivor annuity to the surviving
spouse of a vested active or vested former participant who dies prior to the
commencement of retirement benefits.

The Corporation and Dauphin Bank also have entered into a non-qualified
Supplemental Pension Agreement with Mr. Jennings. Under the Supplemental
Pension Agreement, Mr. Jennings is generally entitled upon retirement to a
benefit equal to 55% of his highest five year average compensation reduced by
his applicable benefit under the Pension Plan, his applicable social security
benefit and the applicable benefit from his prior employer's qualified
retirement plan.

The following table sets forth the projected pension benefits payable to a
covered participant upon normal retirement in 1995 under the Pension Plan
based on various levels of average compensation and assuming the current
benefit formulas were in effect for the entire period of credited service. The
narrative immediately below the table sets forth the additional pension
benefits payable to Mr. Jennings under his non-qualified Supplemental Pension
Agreement based on certain assumptions set forth in the narrative.

PENSION PLAN TABLE

<TABLE>
<CAPTION>
YEARS OF SERVICE
-------------------------------
AVERAGE
COMPENSATION 10 15 25 35
- ------------ ------- ------- ------- -------
<S> <C> <C> <C> <C>
$ 20,000........................................ $ 2,750 $ 4,125 $ 6,375 $ 9,625
50,000........................................ 7,477 11,216 18,693 26,170
80,000........................................ 12,352 18,528 30,880 43,232
100,000........................................ 15,602 23,403 39,005 54,607
150,000*....................................... 23,727 35,591 59,318 83,045
200,000........................................ 23,727 35,591 59,318 83,045
250,000........................................ 23,727 35,591 59,318 83,045
300,000........................................ 23,727 35,591 59,318 83,045
350,000........................................ 23,727 35,591 59,318 83,045
400,000........................................ 23,727 35,591 59,318 83,045
450,000........................................ 23,727 35,591 59,318 83,045
500,000........................................ 23,727 35,591 59,318 83,045
550,000........................................ 23,727 35,591 59,318 83,045
600,000........................................ 23,727 35,591 59,318 83,045
650,000........................................ 23,727 35,591 59,318 83,045
700,000........................................ 23,727 35,591 59,318 83,045
</TABLE>

Mr. Jennings' yearly supplemental pension benefit, commencing at his normal
retirement and payable in equal monthly installments for his lifetime, is
$188,729 (assumes 1995 compensation for supplemental pension purposes remains
constant at $481,226 to normal retirement).
- --------
* Benefits payable from the Pension Plan are subject to maximums prescribed in
the Employee Retirement Income Security Act of 1974 ("ERISA"), as amended,
and by the Internal Revenue Code of 1986, as amended. A maximum compensation
limit under the Pension Plan for 1995 of $150,000 must be applied by law in
calculating benefits. Figures in the Pension Plan Table above show normal
retirement benefits payable under the Pension Plan assuming normal
retirement in 1995.

The projected benefit amounts set forth in the table are not subject to
reduction for social security benefits. Incentive payments made under the
Annual Management Performance Incentive Plan do not

11
<PAGE>

qualify as compensation covered under the Pension Plan. Compensation utilized
for purposes of determining benefits under the Pension Plan as of December 31,
1995 is as follows: Mr. Jennings $375,000, Mr. LaMaina $255,000 and Mr.
Shannon $218,000. Mr. Fryer and Mr. Payne did not participate in the Pension
Plan during 1995. For purposes of the Pension Plan at December 31, 1995, Mr.
Jennings had 8 years and 5 months of service, Mr. Shannon had 16 years and 3
months of service and Mr. LaMaina had 3 years and 6 months of service.

The Pension Plan costs are based on actuarial assumptions, and cannot be
specifically allocated to any one individual. No contribution to the Pension
Plan was required or made for 1995.

Change in Control and Employment Agreements.

The Corporation and Dauphin Bank have entered into Change in Control
Agreements with Messrs. Jennings, Shannon and Payne. In addition, the
Corporation and Dauphin Bank have entered into an employment contract with Mr.
LaMaina.

Where change in control benefits are provided under an Agreement, the
agreements generally provide that if the executive officer's employment with
the Corporation or Dauphin Bank, respectively, and, with regard to Mr. Payne,
Eastern Mortgage Services, Inc., is terminated pursuant to a change in
control, the executive officer's base salary in effect on the date of
termination, plus an amount equal to bonuses, if any, earned by the executive
officer for the immediately preceding year will continue for a period of two
years, but not beyond the date on which the respective executive officer
attains age 65 or dies. Each payment made following termination, however, will
be reduced by the executive officer's earned income from all sources during
the corresponding pay period. Mr. Jennings' Agreement provides that an amount
equal to slightly less than three times his average annual compensation for
the prior 5 years will be paid to him in a lump sum upon termination pursuant
to a change in control and also provides for a one year consulting agreement
following termination at his annual base salary on the date of termination.
The Agreements with Messrs. Jennings, Shannon and Payne also provide the
executive officer with available insurance coverages in effect at the time of
the executive officer's termination pursuant to a change in control. Such
benefits will continue for a period of two years or until the executive
officer attains the age of 65, depending on the particular agreement.
Depending on the particular Agreement, the executive officer also may be
entitled to pre-retirement death benefits. A termination pursuant to a change
in control may occur in connection with a merger, consolidation, acquisition,
reorganization, sale of assets or significant stock acquisition of the
Corporation or Dauphin Bank.

In connection with the merger of FB&T Corporation into the Corporation on
July 1, 1992, the Corporation and Farmers Bank and Trust Company of Hanover
(which merged into Dauphin Bank on July 1, 1994) entered into an
employment/consulting agreement with Mr. LaMaina for a minimum of three (3)
years. The terms of Mr. LaMaina's Agreement include a base annual salary of
$240,750 (subject to increase upon merit review), and also provide for a one
year consulting agreement following termination of full time employment at his
annual base for the final year of full time employment. The employment
agreement also provides that Mr. LaMaina is entitled to participate in all
incentive compensation plans and other benefit plans normally available to
executive officers of the Corporation, including the Annual Management
Performance Incentive Plan, stock option plans, Employee Stock Purchase Plan
and Pension Plan. The employment/consulting agreement with Mr. LaMaina has
been amended to extend the term of full time employment until December 31,
1996.

The benefits provided under the Agreements are unfunded and will be paid out
of the general assets of the Corporation or Dauphin Bank and, with respect to
Mr. Payne, Eastern Mortgage Services, Inc., at such time as the benefits
become payable.

12
<PAGE>

BOARD MANAGEMENT DEVELOPMENT AND COMPENSATION COMMITTEE REPORT
ON EXECUTIVE COMPENSATION

Set forth below is a report submitted by the Management Development and
Compensation Committee of the Board of Directors (the "Compensation
Committee") addressing the Corporation's executive compensation policies for
1995. The Compensation Committee is composed of the following non-employee
Directors of the Corporation: Robert F. Nation--Chairman, Alfred G. Hemmerich,
Lee H. Javitch, James E. Marley, Walter F. Raab and R. Champlin Sheridan, Jr.

The key elements of the Corporation's executive compensation package consist
of base salary, annual incentive bonus, stock options and performance shares.
In addition to the programs discussed herein, the Compensation Committee takes
into account the full compensation package afforded by the Corporation to the
executive officers, including pension benefits, supplemental retirement
benefits, insurance and other benefits.

The Corporation's executive compensation program, particularly the annual
incentive bonus and performance shares, is designed to be closely linked to
corporate performance and returns to shareholders. To this end, the
Corporation, in conjunction with its independent compensation consultants, has
developed an overall compensation strategy and specific compensation plans
that tie a significant portion of executive compensation to the Corporation's
success in meeting specified performance goals and appreciation in the price
of the Common Stock. The overall objectives of this strategy are to attract
and retain the best possible executive talent, to motivate these executives to
achieve the goals inherent in the Corporation's business strategy, to link
executive and shareholder interests through equity based plans and finally to
provide a compensation package that recognizes individual contributions as
well as overall business results.

The Compensation Committee is composed entirely of independent non-employee
Directors of the Corporation. The Compensation Committee is responsible for
setting and administering the policies which cover both annual compensation
(base salary and annual bonus) and grants pursuant to the Corporation's Stock
Option Plan of 1986, as amended (the "Stock Option Plan") and the
Corporation's 1995 Stock Incentive Plan (the "1995 Plan"). Each year the
Compensation Committee conducts a full review of the Corporation's executive
compensation program. This review includes a report from management as to
corporate performance for the prior year, as well as the preparation and
presentation to the Compensation Committee of a financial plan for the current
year. This review in 1995 also included recommendations from David N. Smith,
of Buck Consultants, Inc., Cleveland, Ohio ("Buck Consultants"), the
Corporation's independent compensation consultants, as to bonus award
opportunities under the Corporation's Annual Management Performance Incentive
Plan (the "Incentive Bonus Plan") and the grant of options pursuant to the
Stock Option Plan and the grant of performance shares under the 1995 Plan. The
Compensation Committee considered the Corporation's business plan and expected
results and the Corporation's strategic initiatives and results achieved. The
Compensation Committee also compares the Corporation's compensation program
with the compensation programs of a list of peer group companies compiled by
Buck Consultants which is composed of regional banks of varying asset size
located both within and outside of the Corporation's traditional central and
south central Pennsylvania market area. For purposes of determining
appropriate levels of stock option grants, the Compensation Committee also
considers a separate list of peer group companies with stock option plans
compiled by the Corporation's independent compensation consultants using long
term incentive plan surveys. The peer group companies listed represent the
Corporation's direct and indirect competitors for executive talent in the
financial services industry. With respect to comparisons with peer group
companies, the Compensation Committee considers both the performance and
compensation levels of these comparable companies in establishing the
Corporation's executive compensation levels. For 1995, the compensation
amounts of the Corporation's named executive officers fell within the median
range of compensation paid by the other peer group companies. The peer group
lists reviewed by the Compensation Committee represent only a small portion of
those companies

13
<PAGE>

comprising the Nasdaq Bank Stocks Index which the Corporation uses as its
industry index in the Performance Graph set forth elsewhere in this Proxy
Statement. The Nasdaq Bank Stocks Index includes all commercial banks and bank
holding companies the stock of which is traded on the Nasdaq National Market
and the Nasdaq Small Cap Market.

The Compensation Committee meets without the Chief Executive Officer present
to evaluate his performance under the Corporation's executive compensation
program and reports on that evaluation to the full Board of Directors. With
regard to the other four highest paid executive officers not including the
Chief Executive Officer, the Compensation Committee considers the
recommendations of the Chief Executive Officer as to base salary, performance
under the Incentive Bonus Plan and grants of options under the Stock Option
Plan and the grant of stock incentives, including performance shares, under
the 1995 Plan.

Base Salary.
------------

The Compensation Committee approves annual base salary adjustments for all
members of the executive management committee of the Corporation. Salary
adjustments are determined by reference to the competitive market place for
executive talent, including a comparison to base salaries for comparable
positions at the financial institutions included in the list of peer group
companies compiled by Buck Consultants. The base salary of the named executive
officers is reviewed and approved each year by the Compensation Committee
prior to approval by the full Board of Directors.

Typically, annual salary adjustments for executive officers are determined
by evaluating the performance of the Corporation and its executive officers,
and by taking into account any additional or new responsibilities assumed by
individual executive officers in connection with promotions or organizational
changes. It has been the practice of the Corporation, upon recommendation from
the Chief Executive Officer, to treat overall corporate performance as the
primary factor in the amount of salary adjustments for executive officers. In
measuring corporate performance, the Committee considers return on equity,
return on assets, earnings per share and total return to shareholders.

With respect to the base salary granted to Mr. Jennings in 1995, the
Compensation Committee took into account the Corporation's performance during
1994, his appointment as Chief Executive Officer in January, 1995, and also
compared Mr. Jennings' base salary with the base salaries of the chief
executive officers of the peer companies referred to above. Particular
emphasis was placed upon Mr. Jennings' individual performance. Mr. Jennings
was granted a base salary of $375,000 for 1995, an increase of 16.1% over his
$322,875 base salary for 1994.

Annual Incentive Bonus.
-----------------------

The Compensation Committee reviews the tentative award payments and
performance levels for participants in the Incentive Bonus Plan in February of
each year. Under the Incentive Bonus Plan, bonus awards are calculated based
on corporate and individual performance in accordance with a formula
previously approved by the Compensation Committee. As for named executive
officers, the corporate performance measures typically account for 75% of the
award payment while the individual performance measures are accorded a weight
of 25%. The corporate performance measures under the Incentive Bonus Plan for
1995 were return on equity, return on assets and earnings per share. These
measures also will be used under the Incentive Bonus Plan for 1996 and 1997.
For each year of participation, the Compensation Committee determines those
executive officers eligible to participate in the Incentive Bonus Plan and
establishes target bonus awards based on a percentage of the respective
officer's base salary for the year in question. Actual bonus awards under the
Incentive Bonus Plan formula are tied to actual corporate and individual
performance and may be higher or lower than the pre-set target bonus awards.
In no event, however, can a participant's actual bonus award exceed 150% of
the participant's target bonus award. The Compensation Committee approves
annual corporate performance targets and individual performance targets at the
beginning of each year and bonus award recommendations based on these targets
made by senior management at the close of the year.

14
<PAGE>

In 1995, the Corporation achieved 49.83% of its corporate performance
targets for executive management committee participants. In addition, during
1995 Mr. Jennings achieved 120% of his previously established individual
performance objectives. Based on these results, Mr. Jennings was awarded a
bonus of $126,323, a 18.9% increase over the bonus paid to him in 1995. In
awarding this bonus, the Compensation Committee also considered Mr. Jennings'
role in promoting the long-term strategic growth of the Corporation. Mr.
Jennings' actual bonus award for 1995 amounted to approximately 67.37% of the
pre-set target bonus award.

Stock Option Plan.
------------------

Under the Stock Option Plan, which was approved by the shareholders at the
1987 Annual Meeting, incentive stock options, non-qualified stock options and
stock appreciation rights in conjunction with such options, may be granted to
executive officers of the Corporation or its subsidiaries. The Compensation
Committee sets guidelines for the size of stock option awards based on a
recommendation each year from the Corporation's independent compensation
consultants and management. Although the size of awards is largely a
subjective determination based on the particular executive officer, factors
considered include competitive compensation data from the list of peer group
companies compiled by Buck Consultants, the amount of options previously
awarded to an executive officer and the value of unexercised in-the-money
options at year end. In the event of poor corporate performance, the
Compensation Committee can elect not to award options. In 1995, the stock
option award to the Chief Executive Officer fell below the median level for
such compensation as determined by reference to peer group companies reviewed.

Stock options during 1995 were granted with an exercise price equal to 100%
of the fair market value of the Common Stock on the date of grant and vest
over a five year vesting schedule (20% vested per year). All options granted
were non-qualified stock options. No stock appreciation rights were granted
during 1995.

In 1995, Mr. Jennings received options to purchase 30,000 shares of Common
Stock with an exercise price of $24.00 per share. Mr. Jennings presently is
the beneficial owner, directly and indirectly, of 11,899 shares of Common
Stock and also holds presently exercisable options to purchase an additional
69,048 shares. The Compensation Committee believes that significant equity
interests in the Corporation held by the Corporation's senior management are
beneficial to the common interests of shareholders and management.

1995 Plan.
----------

Under the 1995 Plan, which was approved by the shareholders at the 1995
Annual Meeting, the Compensation Committee may grant to executive officers of
the Corporation or its subsidiaries, incentive stock options, non-qualified
stock options, restricted stock awards, performance share awards and other
awards that provide a participant with the right to purchase or otherwise
acquire Common Stock or that are valued by reference to the market value of
Common Stock. In 1995, the Corporation entered into Performance Share
Agreements with the named executive officers and other executive officers as
permitted under the 1995 Plan. The Performance Share Agreements entitle the
executive officers to a grant of Common Stock at the completion of a three
year performance period (January 1, 1995 to December 31, 1997), depending upon
if, and the extent to which, the Corporation achieves certain performance
goals measured as of the end of the performance period.

Up to 60% of the performance shares awarded may be earned based solely on
appreciation in the fair market value of the Common Stock over the three year
performance period. Up to 40% of the performance shares awarded may be earned
based on the Corporation's performance as measured against seven equally
weighted corporate performance measures established by the Compensation
Committee.

15
<PAGE>

The size of performance share awards is largely a subjective determination
based on the particular executive officer. No shares of Common Stock will be
issued at the completion of the performance period unless the performance
goals are achieved. In 1995, Mr. Jennings was granted 6,300 performance
shares.

MANAGEMENT DEVELOPMENT AND
COMPENSATION COMMITTEE
Robert F. Nation--Chairman
Alfred G. Hemmerich
Lee H. Javitch
James E. Marley
Walter F. Raab
R. Champlin Sheridan, Jr.

Performance Graph.
------------------

The following graph compares the yearly percentage change in the cumulative
total stockholder return on the Common Stock during the five years ended
December 31, 1995 with the cumulative total return on (i) a broad equity
market index, the S&P 500 Index, and (ii) a published industry index, the
Nasdaq Bank Stocks Index. The comparison assumes $100 was invested on December
31, 1990 in the Common Stock and in each of the indices and assumes
reinvestment of dividends.

FIVE YEAR CUMULATIVE TOTAL RETURN

[PERFORMANCE GRAPH APPEARS HERE]

<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Dauphin Deposit................................... 100 139 187 208 202 256
S&P 500........................................... 100 130 140 154 156 215
Nasdaq Bank Stocks................................ 100 164 239 272 271 404
</TABLE>

16
<PAGE>

Directors' Fees.
----------------

Directors of the Corporation who are not officers of the Corporation receive
an annual retainer fee of $7,500 and are paid $425 for attendance at the
Annual Meeting and at each Board Meeting and $450 for attendance at each
meeting of the Executive Committee of the Board, $275 for attendance at each
meeting of the Audit Committee of the Board and $250 for attendance at each
meeting of any other committee of the Board. Directors of Dauphin Bank who are
not officers of Dauphin Bank are paid $325 for attendance at each meeting of
the Board, $450 for attendance at each meeting of the Executive Committee of
the Board, $275 for attendance at each meeting of the Trust Committee of the
Board and $250 for attendance at each meeting of any other committee of the
Board. Non-officer Directors who serve on bank Advisory Boards receive
attendance fees ranging from $200 to $350 per meeting, depending upon the
particular Advisory Board.

PROPOSAL TO APPROVE AMENDMENT TO EMPLOYEE STOCK PURCHASE PLAN

General Description.
--------------------

The purpose of the Employee Stock Purchase Plan is to increase employee
stock ownership of the Corporation, to align more closely employee interests
with those of the shareholders and to build employee loyalty. Under the
Employee Stock Purchase Plan, which was approved by the shareholders at the
1981 Annual Meeting, eligible employees of the Corporation or its wholly-owned
subsidiary companies are provided with the opportunity to subscribe to
purchase shares of the Corporation's Common Stock. Under the Employee Stock
Purchase Plan, each eligible employee may be granted an option to purchase
shares of Common Stock by means of payroll deductions made during successive
yearly offerings. Yearly offerings commence each July 1 and end on the
following June 30 until the Employee Stock Purchase Plan is terminated or
until the total number of shares authorized to be offered under the Employee
Stock Purchase Plan have been issued. Each July 1 is an offering date and each
June 30 is an exercise date for each yearly offering.

One hundred thousand (100,000) shares of Common Stock originally were
authorized to be offered under the Employee Stock Purchase Plan. The Employee
Stock Purchase Plan provides that the authorized number of shares may be
adjusted by the Corporation in the event of a change in capitalization of the
Corporation arising out of any stock dividend, split-off, spin-off,
recapitalization, merger, consolidation, exchange of shares or similar event
which causes shares of any class to be issued in respect to the outstanding
shares of Common Stock. As a result of various stock splits and stock
dividends that have occurred since the Employee Stock Purchase Plan was
initially adopted, as of the date of this Proxy Statement there were 840,000
shares of the Corporation's Common Stock authorized for issuance under the
Employee Stock Purchase Plan.

The Board of Directors of the Corporation may terminate or amend the
Employee Stock Purchase Plan at any time provided that no such amendment may
affect options to purchase shares previously granted under a yearly offering
nor may an amendment make any change to an option previously granted which
adversely affects the rights of any participant, nor may any amendment be made
without the prior approval of the shareholders of the Corporation, if such
amendment would (a) require the sale of more shares than are authorized to be
offered under the Employee Stock Purchase Plan, or (b) permit payroll
deductions to be made in excess of 10% of a participant's compensation.

The Employee Stock Purchase Plan is intended to be an "Employee Stock
Purchase Plan" as defined in Section 423 of the Internal Revenue Code of 1986,
as amended (the "Code"). It is not intended to be qualified under Section
401(a) of the Code. The Employee Stock Purchase Plan is not subject to the
provisions of the Employee Retirement Income Security Act of 1974.

Eligibility and Extent of Participation.
----------------------------------------

The eligibility provisions of the Employee Stock Purchase Plan generally
provide that any employee, including an officer of the Corporation or any of
its wholly-owned subsidiaries, who has

17
<PAGE>

completed six months of employment and is customarily employed for more than
20 hours per week and more than five months in a calendar year, is eligible to
participate in the Employee Stock Purchase Plan. No employee, however, may be
granted an option to purchase shares (a) if, immediately after the grant of
such option, the employee would own shares and/or hold outstanding options to
purchase stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Corporation, or (b) if such option would
permit the employee's rights to purchase stock under the Employee Stock
Purchase Plan (and under any other employee stock purchase plans of the
Corporation and its subsidiaries which may be in effect) to accrue at a rate
in excess of $25,000 per calendar year determined by the fair market value of
such stock at the time such option is granted.

Granting and Exercise of Options.
---------------------------------

An eligible employee may become a participant in an offering by submitting,
prior to the applicable offering date, a completed form which authorizes
payroll deductions to be made from his or her compensation beginning on the
offering date. The payroll deductions are maintained in a statement savings
account at Dauphin Bank, a wholly-owned subsidiary of the Corporation. A
participant may choose to have deductions made from his or her compensation at
the rate of two, three, four, five, six, seven, eight, nine or ten percent of
his or her compensation on each pay day during the time he or she is a
participant in the offering. The participant may withdraw sums from his or her
statement savings account at any time except that the participant is entitled
to purchase no more than the largest number of full shares with the aggregate
sum of payroll deductions made during the offering. No payroll deductions
received, held or made by the Corporation may be used by the Corporation or
any of its wholly-owned subsidiaries for any corporate purposes.

On the offering date, each participant is granted an option to purchase as
many full shares as he or she will be able to purchase with the aggregate sum
of the payroll deductions deposited into his or her account during his or her
participation in the offering. The option price per share for each offering
will be established by the Committee which administers the Employee Stock
Purchase Plan (see, "Administration of the Plan") at least 30 days prior to
the offering date, according to the Committee's designation of percentages
within the following ranges so that the option price per share will be the
lower of:

(1) Not less than 85% or more than 100% of the average of the actual high
and low sales prices of the Common Stock quoted by the National Association of
Securities Dealers, Inc. on the offering date (or the first prior trading day
if the offering date is not a trading day); or

(2) Not less than 85% or more than 100% of the average of the actual high
and low sales prices of the Common Stock quoted by the National Association of
Securities Dealers, Inc. on the exercise date (or the first prior trading day
if the exercise date is not a trading day).

It has been the practice of the Committee to set the option price at the lower
of 85% of the average of the actual high and low sales prices on either the
offering date or the exercise date.

Administration of the Plan.
---------------------------

The Employee Stock Purchase Plan is administered by a Committee consisting
of not less than three members who are appointed by the Board of Directors of
the Corporation. Members of the Committee must be Directors of the Corporation
who are not eligible for participation in the Employee Stock Purchase Plan.
The Committee acts as the manager of the Employee Stock Purchase Plan and is
vested with full authority to make, administer and interpret such rules and
regulations as the Committee deems necessary to administer the Plan.

18
<PAGE>

Description of Amendment.
-------------------------

The maximum number of shares of Common Stock which has been reserved for
issuance under the Employee Stock Purchase Plan is 840,000 shares, after
adjustment for the two-for-one stock splits on April 29, 1983 and August 16,
1985, the 5% stock dividend on October 24, 1988 and the two-for-one stock
split on December 7, 1992. As of December 31, 1995, 726,974 shares of Common
Stock had been issued pursuant to the Employee Stock Purchase Plan.
Consequently, the Board of Directors approved on June 19, 1995, subject to
approval by the shareholders, an amendment to the Employee Stock Purchase Plan
increasing the number of authorized shares of Common Stock available for
issuance by 1,660,000, thereby increasing the total number of shares which may
be issued under the Plan from the current 840,000 to 2,500,000.

The Board of Directors believes that the above described amendment to the
Employee Stock Purchase Plan is appropriate and consistent with the
Corporation's objectives of attracting and retaining competent and dedicated
employees and providing incentives for such employees to improve the long
range profitability of the Corporation. Accordingly, the Board believes that
approval of the amendment by the Corporation's shareholders is in the best
interest of the Corporation and its shareholders.

Federal Income Tax Consequences.
--------------------------------

The following is a brief description of the federal income tax consequences
generally arising with respect to options that may be granted and acquisitions
of Common Stock under the Employee Stock Purchase Plan. This discussion is
intended for the information of stockholders considering how to vote at the
Annual Meeting and not as tax guidance to employees who participate in the
Employee Stock Purchase Plan.

The Employee Stock Purchase Plan is intended to be an "Employee Stock
Purchase Plan" as defined in Section 423 of the Code. An employee who is
continuously employed by the Corporation or a subsidiary during an offering
period and who makes no disposition of the shares received by him or her with
respect to such offering period within one year after the date of transfer of
the shares to him or her or within two years after the offering date, will not
realize taxable income upon the subscription or when he or she completes
payment or receives delivery of the shares. Under these circumstances, there
will be no tax effect upon the Corporation (it will not be entitled to any
deduction from income by reason of the employee's subscription or purchase,
nor will it recognize gain or loss upon the transfer of the shares to the
employee).

If the option price of a share acquired by a participant pursuant to the
Employee Stock Purchase Plan was less than 100% of the fair market value of
such shares at the time such option was granted, then, in the event of any
disposition of such share by the participant which meets the holding period
requirement set forth above, or in the event of the participant's death while
owning such share, there is included as compensation income of the participant
for the taxable year of such disposition or death, an amount equal to the
lesser of (1) the excess of the fair market value of the share at the time of
such disposition or death over the amount paid for the share, or (2) the
excess of the fair market value of the share at the time the option was
granted over the amount paid for the share. If the option price is not fixed
or determinable at the time the option is granted, then the option price is
determined as if the option were exercised at such time. Gain in excess of
such amount or any loss on disposition will be treated as a capital gain or
loss to the individual.

A disposition of shares by a participant prior to the expiration of the
required holding period will result in any excess of the fair market value of
such shares at the time of exercise of the option over the option price being
treated as compensation income to the employee in the year in which the
disposition occurs, in which event the Corporation will be entitled to a
corresponding deduction from income.

19
<PAGE>

Vote Required.
--------------

Adoption of the proposal to approve the amendment to the Employee Stock
Purchase Plan requires the affirmative vote of holders of a majority of the
shares present in person or by proxy and entitled to vote at the Annual
Meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN INCREASING THE NUMBER OF SHARES
OF COMMON STOCK AUTHORIZED FOR ISSUANCE THEREUNDER.

PROPOSAL TO APPROVE 1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN

On October 16, 1995, upon recommendation of the Corporate Governance
Committee, the Board of Directors of the Corporation adopted, subject to
stockholder approval, the 1996 Non-Employee Directors' Stock Plan (the
"Directors' Plan"). The Directors' Plan is intended to promote ownership by
non-employee Directors of a greater proprietary interest in the Corporation,
thereby aligning such Directors' interests more closely with the interests of
stockholders of the Corporation, and to assist the Corporation in attracting
and retaining highly qualified persons to serve as non-employee Directors.

The Directors' Plan provides for an automatic annual grant, to each non-
employee Director of the Corporation or Dauphin Bank, of an option to purchase
1,000 shares of the Corporation's Common Stock. In addition, the Board
concluded that non-employee Directors who might desire to increase their
proprietary interest in the Corporation should be permitted to elect to defer
cash fees in the form of deferred stock. The Directors' Plan, therefore, also
provides non-employee Directors of the Corporation or Dauphin Bank and
Advisory Board Directors of Dauphin Bank, with the ability to defer cash fees
into a deferred stock account, as described below.

The following summary of the material terms of the Directors' Plan is
qualified in its entirety by reference to the full text of the Directors'
Plan, a copy of which is attached as Exhibit A to this Proxy Statement.

The Directors' Plan generally provides for an annual grant to each Director
of the Corporation or Dauphin Bank, who is not an employee of the Corporation
or any subsidiary, of a stock option to purchase 1,000 shares of Common Stock,
subject to adjustment (as described below). Such grants will be made
automatically on the first business day of May, beginning in 1996. If the
nominees for election as Director named in this Proxy Statement are reelected,
16 Directors would qualify as non-employee Directors under the Directors'
Plan.

Stock options granted under the Directors' Plan are non-qualified stock
options having an exercise price equal to 100% of the fair market value of the
Common Stock at the date of grant. Directors are not required to pay any cash
consideration at the time of grant of options. A Director may pay the exercise
price of an option in cash or by surrendering previously acquired shares of
Common Stock. On February 26, 1996, the reported closing price of the
Corporation's Common Stock in the Nasdaq National Market System was $29.25 per
share.

Stock options granted under the Directors' Plan become exercisable one year
after the date of grant, although a Directors' option will become immediately
exercisable if the optionee ceases serving as a Director for any reason. Such
options will expire at the earlier of ten years after the date of grant or
five years after the optionee ceases serving as a Director for any reason,
except that, if the optionee dies during the five year post-termination
period, such period shall be extended until the date five years after the
optionee's death (but in no event more than ten years after the date of
grant). Options generally are not transferable by the optionee other than by
will or by the laws of descent and distribution or to a designated beneficiary
in the event of death, and are exercisable during the Director's lifetime only
by the Director, except that transfers of options for estate planning purposes
generally will be permitted if Securities and Exchange Commission regulations
are modified (as currently proposed) to permit such transfers.

20
<PAGE>

The Directors' Plan also permits a non-employee Director of the Corporation
or Dauphin Bank and Advisory Board Directors of Dauphin Bank to elect to defer
receipt of fees otherwise payable in cash in the form of "deferred stock." The
Director may make such election for up to 100% of the fees otherwise payable
to him or her, including annual retainer fees, fees for service on a Board
committee and fees for service as chairman of a Board committee. See
"Directors' Compensation." If a Director elects to receive fees in the form of
deferred stock, the Corporation will credit a deferral account established for
the Director with a number of shares of deferred stock equal to the number of
shares (including fractional shares) having an aggregate fair market value at
that date equal to the fees that otherwise would have been payable at such
date but for the Director's election to receive deferred stock instead. When,
as, and if dividends are declared and paid on Common Stock, dividend
equivalents will be credited on deferred stock then credited to a Director's
account, which amounts generally will be either paid to the Director in cash
or deemed to be reinvested in additional deferred stock. A Director's deferred
stock account will be settled, at such time or times as may be elected by the
Director in his or her original deferral election form, by delivering one
share of Common Stock for each share of deferred stock then credited to the
account and subject to such settlement, together with cash in lieu of any
fractional share. Shares of deferred stock acquired under the Directors' Plan
are non-forfeitable.

A total of 150,000 shares of Common Stock are reserved and available for
issuance under the Directors' Plan. Such shares may be authorized and unissued
shares or treasury shares. If any stock option expires without having been
exercised in full, the shares subject to the unexercised portion of the option
will again be available for issuance under the Directors' Plan. The aggregate
number and kind of shares issuable under the Directors' Plan, the number and
kind of shares subject to each automatic annual option grant, the number and
kind of shares subject to outstanding options and the exercise price thereof
and the number and kind of shares to be issued in settlement of deferred stock
will be appropriately adjusted by the Board or the Executive Committee in the
event of a recapitalization, reorganization, merger, consolidation, spin-off,
combination, repurchase, exchange of shares or other securities of the
Corporation, stock split or reverse split, stock dividend, certain other
extraordinary dividends, liquidation, dissolution, or other similar corporate
transaction or event affecting Common Stock, in order to prevent dilution or
enlargement of Directors' rights under the Directors' Plan.

The Directors' Plan will be administered by the Board of Directors or the
Executive Committee of the Board, provided that any action by the Board or
such Committee shall be taken only if approved by vote of a majority of the
Directors who are not then eligible to participate in the Directors' Plan. The
Directors' Plan may be amended, altered, suspended, discontinued or terminated
by the Board without further stockholder approval, unless such approval is
required by law or regulation or under the rules of the National Association
of Securities Dealers, Inc. (or other stock exchange or automated quotation
system on which the Common Stock is then listed or quoted). Thus, stockholder
approval will not necessarily be required for amendments which might increase
the cost of the Plan or broaden eligibility. Stockholder approval will not be
deemed to be required under laws or regulations that condition favorable
treatment of participants on such approval, although the Board may, in its
discretion, seek stockholder approval in any circumstances in which it deems
such approval advisable.

The Directors' Plan will become effective upon its approval by stockholders.
Unless earlier terminated by the Board, the Directors' Plan will terminate
when no shares remain available under the Directors' Plan and the Corporation
and Directors have no further rights and obligations under the Directors'
Plan.

21
<PAGE>

New Plan Benefits Table.
------------------------

The following table sets forth the number of options that would have been
automatically granted to non-employee Directors as a group under the
Directors' Plan in 1995 had the Directors' Plan been in effect during that
year:

NEW PLAN BENEFITS

NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

<TABLE>
<CAPTION>
NAME AND POSITION NUMBER OF OPTIONS
----------------- -----------------
<S> <C>
Non-employee Director Group (16 in number).................... 16,000
</TABLE>

It is not possible at present to predict the number of shares that will be
issuable under the Directors' Plan to non-employee Directors upon exercise of
stock options or in connection with deferred stock in payment of fees.

Federal Income Tax Consequences.
--------------------------------

The following is a brief description of the federal income tax consequences
generally arising with respect to options that may be granted and acquisitions
of deferred stock in payment of fees under the Directors' Plan. This
discussion is intended for the information of stockholders considering how to
vote at the Annual Meeting and not as tax guidance to Directors who
participate in the Directors' Plan.

The grant of an option will create no tax consequences for the optionee or
the Corporation. Upon exercise of an option, the optionee must generally
recognize ordinary income equal to the fair market value of the Common Stock
acquired on the date of exercise minus the exercise price, and the Corporation
will be entitled to a deduction equal to the amount recognized as ordinary
income by the optionee. A disposition of shares acquired upon the exercise of
an option generally will result in short-term or long-term capital gain or
loss measured by the difference between the sale price and the participant's
tax basis (such basis is generally the exercise price plus the amount
recognized as ordinary income) in such shares. Generally, there will be no tax
consequences to the Corporation in connection with a disposition of option
shares.

If a Director acquires deferred stock in payment of cash fees, he or she
will not recognize ordinary income at the date the fees would otherwise have
been paid or as a result of the crediting of deferred stock to his or her
account (including upon deemed reinvestment of dividend equivalents). The
Director will, however, at the date of settlement of the deferred stock by
issuance of Common Stock to the Director, recognize ordinary income equal to
the fair market value of the Common Stock acquired at that date, and any
dividend equivalents paid in cash will constitute ordinary income as well. The
Corporation generally will be entitled to a tax deduction equal to any amount
that constitutes ordinary income to the Director.

Vote Required.
--------------

Adoption of the proposal to approve the Directors' Plan requires the
affirmative vote of holders of a majority of the shares present in person or
by proxy and entitled to vote at the Annual Meeting.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE
1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN.

22
<PAGE>

TRANSACTIONS WITH MANAGEMENT

Dauphin Bank has had in the past, and expects to have in the future,
transactions in the ordinary course of its business, with Directors and
officers of Dauphin Bank, the Corporation and their associates, on
substantially the same terms, including interest rates and collateral on
loans, as those prevailing at the same time for comparable transactions with
other persons, which do not involve more than the normal risk of
collectibility or present other unfavorable features.

Henry W. Rhoads, a Director and member of the Management Development and
Compensation Committee of the Corporation and Dauphin Bank, is a partner in
the law firm of Rhoads & Sinon, which the Corporation and its subsidiaries
retained in past years and have retained for the present year as general
counsel. Dauphin Bank and the Corporation paid the law firm approximately
$885,000 in 1995 as compensation for legal services to the Corporation,
Dauphin Bank and other subsidiaries. In addition, the Rhoads & Sinon law firm
entered into a 15 year lease with Dauphin Bank in 1989 pursuant to which the
firm occupies a portion of Dauphin Bank's office building on Market Square,
Harrisburg, Pennsylvania, at an annual base rent of $345,085. The law firm has
the option to renew the lease for two (2) consecutive additional terms.

SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Securities Exchange Act of 1934 requires that directors
and certain officers of the Corporation file reports of ownership and changes
in ownership with the Securities and Exchange Commission as to the shares of
Corporation Common Stock beneficially owned by them.

Based solely on its review of copies of such forms received by it, the
Corporation believes that during the Corporation's fiscal year ending on
December 31, 1995, all filing requirements applicable to its directors and
officers were complied with in a timely fashion, except for one late Form 4
filing by each of Messrs. Beck, Gold and Jordan.

RELATIONS WITH INDEPENDENT AUDITORS

KPMG Peat Marwick LLP was the appointed independent auditor for the
Corporation in 1995. It is anticipated that the same firm will be selected for
the current year. The firm is a member of the SEC Practice Section of the
American Institute of Certified Public Accountants and has submitted a copy of
its peer review results to the Corporation.

During 1995, the Corporation's independent auditors, KPMG Peat Marwick LLP,
performed certain non-audit services which are in addition to its basic
engagement for the examination of the Corporation's financial statements. The
Audit Committee of the Board of Directors of the Corporation approved the
audit and non-audit services performed by the Corporation's independent
auditors and considered the possible effect of the non-audit services on the
independence of the auditors, prior to granting approval for each service.

A representative of the auditing firm will be present at the Shareholders
Meeting to make a statement if he desires to do so and to respond to
appropriate questions.

SHAREHOLDER PROPOSALS

The Corporation must receive by November 17, 1996 any shareholder proposals
for such proposals to be considered for inclusion in the Corporation's Proxy
Statement and Proxy for the 1997 Annual Meeting of Shareholders.

23
<PAGE>

OTHER BUSINESS

The Board of Directors of the Corporation does not intend to present any
business at the Annual Meeting other than the matters hereinabove referred to,
and the Board does not know of any other matters to be presented for action at
the meeting. Discretionary authority to vote on any other matters that may
come before the meeting will be conferred by such Proxies upon the person
voting them, unless a shareholder specifically indicates in such Proxy that
such authority is withheld. It is the intention of the persons designated as
proxies to vote in accordance with their best judgment on such matters.

It is important that proxies be returned promptly. Shareholders are urged to
vote, sign, date and return the accompanying form of Proxy in the enclosed
envelope.

By Order of the Board of Directors,

/s/ George W. King

George W. King, Secretary

March 8, 1996

THE CORPORATION IS FURNISHING EACH PERSON SOLICITED A COPY OF ITS 1995 ANNUAL
REPORT TO SHAREHOLDERS WHICH INCLUDES A COPY OF THE CORPORATION'S ANNUAL
REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995, AS FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION PURSUANT TO THE SECURITIES EXCHANGE ACT OF
1934.

24
<PAGE>

EXHIBIT "A"

DAUPHIN DEPOSIT CORPORATION

1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN

1. PURPOSE. The purpose of this 1996 Non-Employee Directors' Stock Plan (the
"Plan") of Dauphin Deposit Corporation (the "Company") is to advance the
interests of the Company and its stockholders by providing a means to attract
and retain highly qualified persons to serve as non-employee directors of the
Company and its wholly-owned subsidiary, Dauphin Deposit Bank and Trust
Company (the "Bank), and to promote ownership by non-employee directors of a
greater proprietary interest in the Company, thereby aligning such directors'
interests more closely with the interests of stockholders of the Company.

2. DEFINITIONS. In addition to terms defined elsewhere in the Plan, the
following terms shall be defined as set forth below:

(a) "Code" means the Internal Revenue Code of 1986, as amended from time to
time. References to any provision of the Code include regulations thereunder
and successor provisions and regulations thereto.

(b) "Deferred Stock" means the credits to a Participant's deferral account
under Section 7, each of which represents the right to receive one share of
Stock upon settlement of the deferral account. Deferral accounts, and Deferred
Stock credited thereto, are maintained solely as bookkeeping entries by the
Company evidencing unfunded obligations of the Company.

(c) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
References to any provision of the Exchange Act include rules thereunder and
successor provisions and rules thereto.

(d) "Fair Market Value" of Stock means, as of any given date, the average of
the high and the low sale prices of a share of common stock reported in the
table entitled "NASDAQ NATIONAL MARKET ISSUES" contained in The Wall Street
Journal (or an equivalent successor table) for such date or, if no such prices
are reported for such date, on the most recent trading day prior to the date
of grant with respect to which such prices were reported.

(e) "Option" means the right, granted to a Participant under Section 6, to
purchase Stock at the specified exercise price for a specified period of time
under the Plan.

(f) "Participant" means a director of the Company or the Bank who is granted
Options or who defers fees in the form of Deferred Stock under the Plan and an
advisory board director of the Bank who defers fees in the form of Deferred
Stock under the Plan.

(g) "Stock" means the Common Stock, $5.00 par value, of the Company and such
other securities as may be substituted for Stock or such other securities
pursuant to Section 8.

3. SHARES AVAILABLE UPON THE PLAN. Subject to adjustment as provided in
Section 8, the total number of shares of Stock reserved and available for
delivery under the Plan is 150,000. Such shares may be authorized but unissued
shares, treasury shares, or shares acquired in the market for the account of
the Participant. If any Option expires or terminates for any reason without
having been exercised in full, the shares subject to the unexercised portion
of such Option will again be available for delivery under the Plan.

4. ADMINISTRATION OF THE PLAN. The Plan will be administered by the Board of
Directors of the Company and the Executive Committee thereof, provided that
any action by the Board or Committee relating to the Plan will be taken only
if, in addition to any other required vote, approved by the affirmative vote
of a majority of the directors who are not then eligible to participant under
the Plan.

A-1
<PAGE>

5. ELIGIBILITY.

(a) Each director of the Company or the Bank who, on any date on which an
Option is to be granted under Section 6 or on which fees are to be paid, is
not an employee of the Company or any subsidiary of the Company will be
eligible, at such date, to receive a grant of Options under Section 6 or defer
fees in the form of Deferred Stock under Section 7.

(b) Each advisory board director of the Bank who, on any date on which fees
are to be paid, is not an employee of the Company or any subsidiary of the
Company will be eligible, at such date, to defer fees in the form of Deferred
Stock under Section 7.

No person other than those specified in this Section 5 will participate in the
Plan.

6. STOCK OPTIONS. An Option to purchase 1,000 shares of Stock will be
granted on the first business day of May in each year to each director of the
Company who is then eligible to receive an Option grant and to each director
of the Bank, who is not also a director of the Company, who is then eligible
to receive an Option grant. Options granted under the Plan will be non-
qualified stock options which will be subject to the following terms and
conditions:

(a) Exercise Price. The exercise price per share of Stock purchasable under
---------------
an Option will be equal to 100% of the Fair Market Value of Stock on the date
of grant of the Option.

(b) Option Term. Each Option will expire at the earlier of (i) ten years
------------
after the date of grant or (ii) five years after the Participant ceases to
serve as a director of the Company or the Bank, as the case may be, for any
reason, provided that, if the Participant dies during such five-year post-
termination exercise period, such period shall be extended until not later
than the date five years after the Participant's death (but in no event more
than ten years after the date of grant).

(c) Exercisability. Each Option will become fully exercisable one year after
---------------
the date of grant of the Option; provided, however, that an Option previously
granted to a Participant will be fully exercisable after the Participant
ceases to serve as a director of the Company or the Bank for any reason.

(d) Method of Exercise. Each Option may be exercised, in whole or in part,
-------------------
at such time as it is exercisable and prior to its expiration by giving
written notice of exercise to the Company specifying the Option to be
exercised and the number of shares to be purchased, and accompanied by payment
in full of the exercise price in cash (including by check) or by surrender of
shares of Stock of the Company already owned by the Participant (except for
shares acquired from the Company by exercise of an option less than six months
before the date of surrender) having a Fair Market Value at the time of
exercise equal to the exercise price, or a combination of a cash payment and
such surrender of Stock.

7. DEFERRED STOCK IN LIEU OF FEES. Each director of the Company or Bank and
advisory board directors of the Bank may, in lieu of receipt of fees in his or
her capacity as a director or an advisory board director (including annual
retainer fees for service on the Board, fees for attendance at Board meetings,
fees for service on a Board committee, and fees for service as chairman of a
Board committee) in cash, defer receipt of such fees in the form of Deferred
Stock in accordance with this Section 7, provided that such director or
advisory board director is eligible under Section 5 to defer fees in the form
of Deferred Stock at the date any such fee is otherwise payable.

(a) Elections. Each director or advisory board director who elects to defer
----------
fees in the form of Deferred Stock for any calendar year must file an
irrevocable written election with the Secretary of the Company no later than
the June 30 of the preceding year; provided, however, that, with respect to
1996, directors and advisory board directors may file such election at any
time prior to the effective date of the Plan, and that any newly elected or
appointed director or advisory board director may file an election for any
year not later than 30 days after the date such person first became a director
or advisory

A-2
<PAGE>

board director. An election by a director or advisory board director shall be
deemed to be continuing and therefore applicable to subsequent Plan years
unless the director or advisory board director revokes or changes such
election by filing a new election form by the due date for such form specified
in this Section 7(a). The election must specify the following:

(i) A percentage, not to exceed an aggregate of 100% of the Participant's
fees, to be deferred in the form of Deferred Stock under the Plan;

(ii) Whether dividend equivalents on Deferred Stock credited to the
Participant's deferral account will be paid directly to the Participant in
cash or credited to his or her deferral account and deemed to be reinvested
in additional Deferred Stock; and

(iii) The period during which settlement of the Deferred Stock will be
deferred.

In the event directors' fees or advisory board directors' fees are increased
during any year, a Participant's elections in effect for such year will apply
to the amount of such increase.

(b) Deferral of Fees in the Form of Deferred Stock. The Company will
-----------------------------------------------
establish a deferral account for each Participant who elects to defer fees in
the form of Deferred Stock under this Section 7. At any date on which fees are
payable to a Participant who has elected to defer fees in the form of Deferred
Stock, the Company will credit such Participant's deferral account with a
number of shares of Deferred Stock equal to the number of shares of Stock
having an aggregate Fair Market Value at that date equal to the fees that
otherwise would have been payable at such date but for the Participant's
election to defer receipt of such fees in the form of Deferred Stock. The
amount of Deferred Stock so credited shall include fractional shares
calculated to at least three decimal places.

(c) Payment or Crediting of Dividend Equivalents. Whenever dividends are
---------------------------------------------
paid or distributions made with respect to Stock, a Participant to whom
Deferred Stock is then credited in a deferred account shall be entitled to be
paid an amount equal in value to the amount of the dividend paid or property
distributed on a single share of Stock multiplied by the number of shares of
Deferred Stock (including any fractional share) credited to his or her
deferral account as of the record date for such dividend or distribution. Such
dividend equivalents shall be credited to the Participant's deferral account
as a number of shares of Deferred Stock equal to the number of shares of Stock
having an aggregate Fair Market Value at the payment date of the dividend or
distribution equal to the value of such dividend equivalents.

(d) Settlement of Deferral Account. The Company will settle the
-------------------------------
Participant's deferral account in the manner and at the time elected by the
Participant on forms provided by the Company by delivering to the Participant
(or his or her beneficiary) the number of shares of Stock equal to the number
of whole shares of Deferred Stock then credited to the deferral account (or a
specified portion in the event of any partial settlement), together with cash
in lieu of a fractional share remaining at a time that less than one whole
share of Deferred Stock is credited to such deferral account.

(e) Designation of Beneficiary. Each Participant may designate one or more
---------------------------
beneficiaries to receive the amounts distributable from the Participant's
deferral account under the Plan in the event of such Participant's death, on
forms provided by the Company. The Company may rely upon the beneficiary
designation last filed in accordance with the terms of the Plan.

(f) Delayed Effectiveness of Elections in Order to Comply with Rule 16b-3.
----------------------------------------------------------------------
Other provisions of this Section 7 notwithstanding, if any deferral of fees
in the form of Deferred Stock would occur less than six months after the
Participant filed the irrevocable election which would result in such payment
or deferral and at a time that the Company's employee benefit plans are being
operated in conformity with Rule 16b-3 as adopted and in effect on and after
May 1, 1991, such payment shall be made in cash and on a non-deferral basis.

(g) Vesting. The interest of each Participant in any fees paid in the form
--------
of Deferred Stock (and any deferral account relating thereto) shall be at all
times fully vested and non-forfeitable.

A-3
<PAGE>

8. ADJUSTMENT PROVISIONS. In the event any recapitalization, reorganization,
merger, consolidation, spin-off, combination, repurchase, exchange of shares
or other securities of the Company, stock split or reverse split,
extraordinary dividend having a value in excess of 150% of the quarterly
dividends paid during the preceding 12-month period, liquidation, dissolution,
or other similar corporate transaction or event affects Stock such that an
adjustment is determined by the Board of Directors or Executive Committee to
be appropriate in order to prevent dilution or enlargement of Participants'
rights under the Plan, then the Board or Committee will, in a manner that is
proportionate to the change to the Stock and is otherwise equitable, adjust
(i) any or all of the number or kind of shares of Stock reserved for issuance
under the Plan, (ii) the number or kind of shares of Stock to be subject to
each automatic grant of Options under Section 6, (iii) the number and kind of
shares of Stock issuable upon exercise of outstanding Options, and/or the
exercise price per share thereof (provided that no fractional shares will be
issued upon exercise of any Option), and (iv) the number or kind of shares of
Stock to be delivered upon settlement of Deferred Stock under Section 7. The
foregoing notwithstanding, no adjustment may be made hereunder except as shall
be necessary to maintain the proportionate interest of a Participant under the
Plan and to preserve, without exceeding, the value of outstanding Options and
potential grants of Options. If at any date an insufficient number of shares
are available for the automatic grant of Options or the deferral of fees in
the form of Deferred Stock at that date, Options will first be automatically
granted under Section 6 proportionately to Participants, to the extent shares
are available, and then, if any shares remain available, fees shall be
deferred in the form of Deferred Stock proportionately among Participants
under Section 7, to the extent shares are available.

9. CHANGES TO THE PLAN. The Board of Directors may amend, alter, suspend,
discontinue, or terminate the Plan or authority to grant Options or pay fees
in the form of Deferred Stock under the Plan without the consent of
stockholders or Participants, except that any such action will be subject to
the approval of the Company's stockholders at the next annual meeting of
stockholders having a record date after the date such action was taken if such
stockholder approval is required by any federal or state law or regulation or
the rules of any stock exchange or automated quotation system on which the
Stock may then be listed or quoted, or if the Board of Directors determines in
its discretion to seek such stockholder approval; provided, however, that,
without the consent of an affected Participant, no such action may impair the
rights of such Participant with respect to any previously granted Option or
any previous deferral of fees in the form of Deferred Stock; and provided
further, that any Plan provision that specifies the directors who may receive
grants of Options, the amount and price of securities to be granted to such
directors, and the timing of grants to such directors, or is otherwise a "plan
provision" referred to in Rule 16b-3(c)(2)(ii)(B) under the Exchange Act,
shall not be amended more than once every six months, other than to comport
with changes in the Code or the rules thereunder.

10. GENERAL PROVISIONS.

(a) Consideration; Agreements. Options will be granted under the Plan in
--------------------------
order to obtain for the Company the benefit of the services of Participants
and, except for the payment of the exercise price of an Option, no other
consideration shall be required in connection with Options. The consideration
for Stock issued or delivered in settlement of Deferred Stock will be the
director's or advisory board director's services during the period to which
the fees paid in the form of Deferred Stock related. Grants of Options will be
evidenced by agreements executed by the Company and the Participant containing
the terms and conditions set forth in the Plan together with such other terms
and conditions not inconsistent with the Plan as the Board of Directors or
Executive Committee may from time to time approve.

(b) Compliance with Laws and Obligations. The Company will not be obligated
-------------------------------------
to issue or deliver Stock in connection with any Option, or in settlement of
Deferred Stock in a transaction subject to the registration requirements of
the Securities Act of 1933, as amended, or any other federal or state

A-4
<PAGE>

securities law, any requirement under any listing agreement between the
Company and any national securities exchange or automated quotation system, or
any other law, regulation, or contractual obligation of the Company, until the
Company is satisfied that such laws, regulations, and other obligations of the
Company have been complied with in full. Certificates representing shares of
Stock delivered under the Plan will be subject to such stop-transfer orders
and other restrictions as may be applicable under such laws, regulations, and
other obligations of the Company, including any requirement that a legend or
legends be placed thereon.

(c) Limitations on Transferability. Options, Deferred Stock, and any other
-------------------------------
right under the Plan that may constitute a "derivative security" as generally
defined in Rule 16a-1(c) under the Exchange Act will not be transferred by a
Participant except by will or the laws of descent and distribution (or to a
designated beneficiary in the event of a Participant's death), and will be
exercisable during the lifetime of a Participant only by such Participant or
his or her guardian or legal representative; provided, however, that Options,
Deferred Stock, and such other rights may be transferred to one or more trusts
or other beneficiaries during the lifetime of the Participant in connection
with the Participant's estate planning, and may be exercised by such
transferees in accordance with the terms of such Option or Deferred Stock, but
only if and to the extent then permitted under Rule 16b-3 and consistent with
the registration of the offer and sale of Stock on Form S-8 or a successor
registration form of the Securities and Exchange Commission. Options, Deferred
Stock, and other rights under the Plan may not be pledged, mortgaged,
hypothecated, or otherwise encumbered, and shall not be subject to the claims
of creditors.

(d) Compliance with Rule 16b-3. It is the intent of the Company that this
---------------------------
Plan comply in all respects with applicable provisions of Rule 16b-3 under the
Exchange Act in connection with any grant of Options or deferral of fees in
the form of Deferred Stock. Accordingly, if any provision of this Plan or any
agreement hereunder does not comply with the requirements of Rule 16b-3 as
then applicable to any such transaction by a Participant, or would cause any
Participant to no longer be deemed a "disinterested person" within the meaning
of Rule 16b-3, such provision will be construed or deemed amended to the
extent necessary to conform to such requirements with respect to such
Participant. In addition, the Board of Directors and Executive Committee shall
have no authority to make any amendment, alteration, suspension,
discontinuation, or termination of the Plan or any agreement hereunder, to
make any adjustment under Section 8, or take other action if and to the extent
such authority would cause such transactions by a Participant not to be
exempt, or would cause a Participant no longer to be deemed a "disinterested
person" under Rule 16b-3 under the Exchange Act.

(e) Continued Service as an Employee. If a Participant ceases serving as a
---------------------------------
director or an advisory board director and, immediately thereafter, is
employed by the Company or any subsidiary, then, solely for purposes of
Sections 6(b) and (c) of the Plan, such Participant will not be deemed to have
ceased service as a director or an advisory board director at that time, and
his or her continued employment by the Company or any subsidiary will be
deemed to be continued service as a director or an advisory board director;
provided, however, that such former director or an advisory board director
will not be eligible for additional grants of Options or deferral of fees in
the form of Deferred Stock under the Plan.

(f) No Right to Continue as a Director. Nothing contained in the Plan or any
-----------------------------------
agreement hereunder will confer upon any Participant any right to continue to
serve as a director of the Company or the Bank or as an advisory board
director of the Bank.

(g) No Stockholder Rights Conferred. Nothing contained in the Plan or any
--------------------------------
agreement hereunder will confer upon any Participant any rights of a
stockholder of the Company unless and until shares of Stock are in fact issued
or transferred to such Participant upon the valid exercise of an Option or in
accordance with Section 7.

(h) Governing Law. The validity, construction, and effect of the Plan and
--------------
any agreement hereunder will be determined in accordance with the laws of the
Commonwealth of Pennsylvania, without giving effect to principles of conflicts
of laws, and applicable federal law.

A-5
<PAGE>

11. STOCKHOLDER APPROVAL, EFFECTIVE DATE, AND PLAN TERMINATION. The Plan
will be effective if, and at such time as, the stockholders of the Company
have approved it by the affirmative votes of the holders of a majority of the
voting securities of the Company present, or represented, and entitled to vote
on the subject matter at a duly held meeting of stockholders, provided that
such approval is obtained not later than the final adjournment of the first
annual meeting of stockholders of the Company held after the date the Board of
Directors adopted the Plan. Unless earlier terminated by action of the Board
of Directors or Executive Committee, the Plan will remain in effect until such
time as no Stock remains available for delivery under the Plan and the Company
has no further rights or obligations under the Plan with respect to
outstanding Options or Deferred Stock under the Plan.

As recommended by the Corporate Governance Committee and adopted by the
Board of Directors on October 16, 1995.

A-6
<PAGE>

PROXY

DAUPHIN DEPOSIT CORPORATION

Annual Meeting April 15, 1996

The undersigned hereby appoints F. Richard Cook, Larry A. Hartman and Linda R.
Schroeder, or any of them, my true and lawful attorney(s) with full power of
substitution for me and in my name, place and stead, to vote all stock of the
undersigned at the Annual Meeting of Shareholders of Dauphin Deposit
Corporation, to be held at the Harrisburg Hilton and Towers, One North Second
Street, Harrisburg, Pennsylvania, on Monday, April 15, 1996 at 9:00 a.m., and at
all adjournments thereof. IF NO DIRECTIONS ARE GIVEN, THE PROXIES WILL VOTE FOR
THE ELECTION AS DIRECTORS OF THE 19 NOMINEES NAMED ON THE REVERSE SIDE, FOR
APPROVAL OF AN AMENDMENT TO THE CORPORATION EMPLOYEE STOCK PURCHASE PLAN
INCREASING THE NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE ISSUED UNDER THE
PLAN, FOR APPROVAL OF THE CORPORATION 1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN,
AND UPON THE TRANSACTION OF SUCH OTHER BUSINESS AS PROPERLY MAY COME BEFORE THE
MEETING, IN ACCORDANCE WITH THE BEST JUDGMENT OF THE PERSONS APPOINTED AS
PROXIES HEREIN.

(Please mark, sign, date and return this proxy in the enclosed postage paid
envelope)

<PAGE>

1. ELECTION OF DIRECTORS

FOR
all nominees listed (except as marked to the contrary) [_]

WITHHOLD AUTHORITY
to vote for all nominees listed [_]

J. Edward Beck, Jr., John R. Buchart, Robert L. Fryer, Jr., James O. Green,
Derek C. Hathaway, Alfred G. Hemmerich, Lee H. Javitch, Christopher R. Jennings,
Richard E. Jordan, II, William J. King, William T. Kirchhoff, Lawrence J.
LaMaina, Jr., Andrew Maier, II, Robert F. Nation, Elmer E. Naugle, Walter F.
Raab, Jean D. Seibert, R. Champlin Sheridan, Jr. and L. Andrew Zauener

(Instructions: To withhold authority to vote for any individual, strike a line
through the nominee's name in the list above.)

2. TO APPROVE AN AMENDMENT TO THE CORPORATION EMPLOYEE STOCK PURCHASE PLAN
INCREASING THE NUMBER OF SHARES OF COMMON STOCK WHICH MAY BE ISSUED UNDER THE
PLAN BY 1,660,000 SHARES.

FOR AGAINST ABSTAIN
[_] [_] [_]

3. TO APPROVE THE CORPORATION 1996 NON-EMPLOYEE DIRECTORS' STOCK PLAN.

FOR AGAINST ABSTAIN
[_] [_] [_]

4. IN THE DISCRETION OF THE PERSONS NAMED IN THIS PROXY, TO VOTE UPON THE
TRANSACTION OF SUCH OTHER BUSINESS AS PROPERLY MAY COME BEFORE THE MEETING
AND ANY ADJOURNMENTS THEREOF.

The undersigned acknowledges receipt of notice of the aforesaid Annual Meeting
of Shareholders.

DATED______________________________________________, 1996

____________________________________________________(SEAL)

Note: The signature(s) on this Proxy must correspond with the name(s) as
written upon the face of the share certificate. Executors, administrators,
trustees, guardians, and other fiduciaries please so indicate when signing.

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF DAUPHIN DEPOSIT
CORPORATION.

"PLEASE MARK INSIDE BLUE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD
YOUR VOTES"