KEYSTONE FINANCIAL INC, DEF 14A, 2000-04-07

KEYSTONE FINANCIAL INC
DEF 14A, 2000-04-07
NATIONAL COMMERCIAL BANKS

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

SCHEDULE 14A

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
RULE 14A-6(E)(2))

[X] Definitive Proxy Statement

[_] Definitive Additional Materials

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

KEYSTONE FINANCIAL, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)

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

Payment of Filing Fee (Check the appropriate box):

[X] No fee required.

[_] 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:

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

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(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:

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[_] 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:

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

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(3) Filing Party:

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(4) Date Filed:

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Notes:

Reg. (S) 240.14a-101.

SEC 1913 (3-99)

<PAGE>

[Logo of KEYSTONE FINANCIAL]

April 7, 2000

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of
Keystone Financial, Inc., to be held on Thursday, May 25, 2000 at 10:00 a.m.,
local time, at the Harrisburg Hilton Hotel, Market Square, Harrisburg,
Pennsylvania. A Notice and Proxy Statement for the meeting follow, and a proxy
card and return envelope are enclosed. Your Corporation's 1999 Annual Report
is also enclosed.

At this meeting the Executive Management of Keystone will review the results
of your Corporation for 1999 and comment on plans and strategies for the
current year and the future. The agenda for the annual meeting includes
election of directors, the ratification of the appointment of independent
auditors, a vote on two stock plans and, if presented, two shareholder
proposals opposed by the Board.

The 2000 Employee Stock Purchase Plan is available to all employees of the
Corporation and its subsidiaries and is designed to provide a stock incentive
for performance by permitting employees to purchase Common Stock at a discount
from market price through payroll deductions.

The 2000 Non-Employee Directors' Stock Option Plan provides for limited
annual grants of stock options to the Corporation's outside directors. It is
designed to increase the mutuality of interests between the outside directors
and the shareholders and to provide an inducement to permit the Corporation to
attract and retain able persons to serve as outside directors.

Your participation as a shareholder in the affairs of the Corporation is
encouraged. It is important that your stock be represented at the Meeting,
whether or not you are personally able to be present. IF VOTING BY PROXY CARD,
PLEASE PROMPTLY SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE POSTAGE
PAID ENVELOPE PROVIDED FOR YOUR CONVENIENCE. YOU MAY ALSO VOTE BY INTERNET
USING THE PROXY VOTING LINK FOUND AT WWW.KEYFIN.COM. THIS LINK WILL TAKE YOU
DIRECTLY TO THE WEB PAGE LISTED ON YOUR PROXY CARD. You are urged to do so
even if you plan to attend the meeting. Your prompt cooperation and support
will be greatly appreciated.

I hope that you will be able to attend this year's meeting and look forward
to seeing you there.

Sincerely,

/s/ Carl L. Campbell
Carl L. Campbell
Chairman, President and Chief
Executive Officer
<PAGE>

[Logo of KEYSTONE FINANCIAL, INC.]
One Keystone Plaza
Front and Market Streets
P.O. Box 3660
Harrisburg, Pennsylvania 17105-3660
------------

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held on May 25, 2000
------------

TO THE SHAREHOLDERS:

Notice is hereby given that the Annual Meeting of Shareholders of Keystone
Financial, Inc. will be held on Thursday, May 25, 2000 at 10:00 a.m., local
time, at the Harrisburg Hilton Hotel, Market Square, Harrisburg, Pennsylvania,
for the purpose of considering and acting upon the following:

1. Election of five directors to serve for terms expiring in 2003;

2. Approval of the Corporation's 2000 Employee Stock Purchase Plan;

3. Approval of the Corporation's 2000 Non-Employee Directors' Stock Option
Plan;

4. Ratification of the appointment of Ernst & Young LLP as the independent
auditors for the Corporation for 2000;

5. If presented, two shareholder proposals opposed by the Board of
Directors; and

6. Such other matters as may properly come before the meeting or any
adjournment thereof.

Only shareholders of record at the close of business on March 31, 2000 are
entitled to notice of and to vote at the Annual Meeting.

ALL SHAREHOLDERS ARE URGED TO COMPLETE, SIGN, DATE AND RETURN THE ENCLOSED
PROXY CARD PROMPTLY, OR VOTE BY INTERNET USING THE PROXY VOTING LINK FOUND AT
WWW.KEYFIN.COM WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. If you attend
the meeting, you may, if you wish, withdraw your proxy and vote your shares in
person.

By Order of the Board of Directors

/s/ Ben G. Rooke
Ben G. Rooke, Secretary
<PAGE>

[Logo of KEYSTONE FINANCIAL, INC.]

One Keystone Plaza
Front and Market Streets
Post Office Box 3660
Harrisburg, PA 17105-3660
------------
PROXY STATEMENT
Annual Meeting of Shareholders--May 25, 2000
------------

INTRODUCTION

This Proxy Statement is furnished in connection with the solicitation by the
Board of Directors of Keystone Financial, Inc. (the "Corporation") of proxies
to be voted at the 2000 Annual Meeting of Shareholders of the Corporation
which will be held at 10:00 a.m., local time, on Thursday, May 25, 2000, at
the Harrisburg Hilton Hotel, Market Square, Harrisburg, Pennsylvania, and at
any adjournment thereof. The approximate date on which this Proxy Statement
will first be mailed to the shareholders is April 7, 2000.

All properly executed proxies not previously revoked will be voted at the
Annual Meeting as specified thereon. If no specification is made, proxies will
be voted in favor of the election as directors of the nominees named below, in
favor of the approval of the 2000 Employee Stock Purchase Plan, in favor of
the approval of the 2000 Non-Employee Directors' Stock Option Plan, in favor
of the ratification of the appointment of Ernst & Young LLP as independent
auditors for the Corporation for 2000, and against approval of the two
shareholder proposals described below. A proxy may be revoked at any time
before it is voted by written notice to the Secretary of the Corporation, or
by attending the meeting and voting in person.

The Board of Directors has fixed the close of business on March 31, 2000 as
the record date for determining the shareholders entitled to notice of and to
vote at the Annual Meeting. At that date, approximately 48,889,912 shares of
Common Stock, par value $2.00 per share ("Common Stock"), were issued and
outstanding. Each share entitles its holder of record at the close of business
on the record date to one vote on each matter properly submitted to the
shareholders for action at the Annual Meeting. The Restated Articles do not
permit cumulative voting.

As of March 31, 2000 the trust department of the Corporation's bank
subsidiary, acting in a fiduciary capacity for various trusts and estates,
held an aggregate of 2,931,021 shares of Common Stock (approximately 6% of the
outstanding shares). Of these shares, the bank has sole voting power over
1,342,514 shares, shares voting power with other persons over 276,290 shares,
has sole investment power over 1,965,904 shares and shares investment power
with other persons over 297,980 shares. The Corporation does not know of any
other person who has or shares voting and/or investment power over more than
5% of the outstanding Common Stock.

MANAGEMENT PROPOSAL

Proposal No. 1
ELECTION OF DIRECTORS

By a vote of the Board of Directors, the size of the Board was fixed at 18
members. Five directors will be elected at the Annual Meeting to serve for
terms expiring at the Annual Meeting in 2003. Each director elected will
continue in office until a successor has been elected. The Board of Directors
recommends that the shareholders vote "FOR" the election of the five nominees
listed below. Each nominee has consented to be named as a nominee and to serve
if elected. If for any reason any nominee named is not a candidate (which is
not expected) when the election occurs, proxies will be voted for a substitute
nominee determined by the Board of Directors (the "Board").
<PAGE>

The following table sets forth certain information about the nominees, all of
whom are presently members of the Board, and about the other directors whose
terms of office will continue after the Annual Meeting./1/

<TABLE>
<CAPTION>
Shares Percent of
Year First Beneficially Common
Name, Principal Occupations Became Owned as of Stock
During the Past Five Years, Age Director March 30, 2000(1) Outstanding
------------------------------- ---------- ----------------- -----------
<S> <C> <C> <C>
Nominees for terms expiring in
2003:
Harold L. Brake; Chairman, Chief
Financial and Executive Officer of
Charles E. Brake Company
(construction, excavating &
trucking company); Age 64......... 2000 157,091 .32%
Gerald E. Field; President of
Weiner Iron and Metal Corp.
(recycling company); Age 65....... 1986 89,333 .18%
Philip C. Herr, II; Partner of
Herr, Potts & Herr (law firm);
Age 63............................ 1994 568,343(2)(3) 1.16%
William L. Miller; President and a
Director of Ebinger Iron Works,
Inc. (steel fabricator); Age 51... 1986 33,914 .07%
Ray L. Wolfe; Retired Chairman of
the Board of the Corporation; Age
61 (4)............................ 1997 65,940 .13%
Continuing Directors with terms
expiring in 2001:
George T. Brubaker; Partner of
Hartman, Underhill & Brubaker (law
firm); Age 57..................... 1998 6,777(2) .01%
Carl L. Campbell; Chairman,
President and Chief Executive
Officer of the Corporation; Age 57
(6)............................... 1986 475,122(2)(5)(7) .97%
Paul I. Detwiler, Jr.; Chairman of
the Board of New Enterprise Stone
and Lime Co., Inc. (quarrying and
construction company); Age 66..... 1988 28,545(2) .06%
James I. Scheiner; President and
Chief Operating Officer of Benetec
Associates, Inc. (engineering,
architectural & environmental
services firm); Director of Harsco
Corporation; Age 55............... 1998 1,450 .003%
Ronald C. Unterberger; Partner of
Harper & Driver (law firm); Age
64................................ 1994 22,590 .05%
G. William Ward; Chairman of the
Board of Ward Trucking Corp.
(motor carrier); Age 68........... 1984 54,744(2) .11%
Continuing Directors with terms
expiring in 2002:
A. Joseph Antanavage; Partner of
Bear, Antanavage & Moyer (law
firm); Partner of North Berks
Abstract (title insurance agency);
Age 53............................ 1986 36,117(2) .07%
Donald Devorris; President of
Blair Electric Service Co.
(electrical construction company);
President of Blair Sign Co., Inc.
(sign manufacturing company);
President of Blair Design &
Construction Co. (general
construction company); Age 65..... 1984 115,785 .24%
/1/Allan W. Holman will be retiring as a member of the Board of Directors on
the day of the Annual Meeting. As of March 30, 2000, Mr. Holman beneficially
owned 15,031 shares of Common Stock.
</TABLE>
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2
<PAGE>

<TABLE>
<CAPTION>
Shares Percent of
Year First Beneficially Common
Name, Principal Occupations Became Owned as of Stock
During the Past Five Years, Age Director March 30, 2000(1) Outstanding
------------------------------- ---------- ----------------- -----------
<S> <C> <C> <C>
Richard G. King; President and Chief
Operating Officer of Utz Quality
Foods, Inc. (manufacturer of salted
snacks); Age 55....................... 1997 14,383 .03%
Uzal H. Martz, Jr.; President,
Publisher and Treasurer of J. H.
Zerbey Newspapers, Inc. (publisher of
newspapers and operator of radio
stations) and President of its
subsidiary corporations, WMBT
Broadcasting, Inc., WQIN Broadcasting,
Inc., Shenandoah Evening Herald
Publishing Company, Inc. and Hazelton
Easy to Read Telephone Directory,
Inc.; Age 65.......................... 1986 40,534(2) .08%
Max A. Messenger; Chairman of Wood
Products, Inc. (hardwood lumber & dry
kilns); Chairman of Global Hardwoods,
Inc. (foreign export sales); General
Partner of Messenger Limited
Partnership (land holding company);
Age 64................................ 1994 32,891 .07%
Don A. Rosini; President of Shamokin
Filler Co., Inc. (manufacturer of
carbon additives); Age 61............. 1986 48,464(5) .10%
F. Dale Schoeneman; President of
Schoeneman Beauty Supply, Inc.
(wholesale distributor); Age 58....... 1986 31,212 .06%
All nominees, directors and executive
officers as a group
(25 persons)......................... 2,323,105(7) 4.67%
</TABLE>
- --------
(1) Unless otherwise indicated in the other footnotes below, each director or
nominee has sole voting power and sole investment power over the shares
indicated opposite his or her name in the table, and a member of the group
has sole voting power and sole investment power over the shares indicated
for the group. The number of shares includes the following shares which
each director or nominee, except for Mr. Brubaker, Mr. Campbell, and Mr.
Scheiner, has the right to acquire through stock options which are or will
become exercisable within 60 days under the Corporation's Non-Employee
Directors' Stock Option Plans or the stock option plans of previously
acquired companies: Mr. Antanavage, 21,034 shares; Mr. Brake, 241 shares;
Mr. Herr, 11,248 shares; Mr. Holman, 3,537 shares; Mr. King, 4,021 shares;
Mr. Messenger, 8,380 shares; Mr. Unterberger, 14,578 shares; Mr. Wolfe,
11,754 shares; Messrs. Detwiler, Martz and Schoeneman, 19,684 shares each;
and each remaining director, 22,496 shares.

(2) Includes the following shares as to which voting and investment power is
shared with other persons: Mr. Antanavage, 1,210 shares; Mr. Brubaker,
3,000 shares; Mr. Campbell, 65,719 shares; Mr. Detwiler, 5,850 shares; Mr.
Martz, 1,000 shares; Mr. Rosini, 4,489 shares; and Mr. Ward, 24,901
shares.

(3) Includes 346,478 shares held in estates for which Mr. Herr is an executor.
Mr. Herr shares voting and investment power with other persons over
328,004 shares. Mr. Herr disclaims beneficial ownership over 182,476
shares.

(4) From May 1998 to December 1998, Mr. Wolfe served as Chairman of the Board
of Financial Trust Company. From May 1997 to May 1998, he served as
Chairman of the Board of the Corporation and Chairman, President and Chief
Executive Officer of Financial Trust Company. Prior to May 30, 1997, Mr.
Wolfe was Chairman and Chief Executive Officer of Financial Trust Corp,
which was acquired by the Corporation on that date.

(5) Includes the following shares held by spouses and/or children as to which
beneficial ownership is disclaimed: Mr. Campbell, 45,893 shares; and Mr.
Rosini, 4,489 shares.

3
<PAGE>

(6) From May 1998 through November 1999, Mr. Campbell was Chairman and Chief
Executive Officer of the Corporation. Prior to May 1998, Mr. Campbell was
President and Chief Executive Officer of the Corporation.

(7) Includes the following shares which executive officers have the right to
acquire through stock options: Mr. Campbell, 328,298 shares; and all other
executive officers as a group, 312,276 shares. Also includes the following
shares held in 401(k) plan accounts, as to which the executive officers
have voting power only: Mr. Campbell, 4,575 shares; and all other
executive officers as a group, 16,517 shares.

Additional information concerning the nominees and the other members of the
Board is set forth below under the caption "Other Information Concerning
Directors and Executive Officers."

Vote Required

The five candidates receiving the highest numbers of votes cast at the
Annual Meeting by the holders of Common Stock voting in person or by proxy
will be elected as directors. A proxy vote indicated as withheld from a
nominee will not be cast for such nominee but will be counted in determining
whether a quorum exists for the meeting. The Corporation's Restated Articles
do not permit cumulative voting in the election of directors.

MANAGEMENT PROPOSAL

Proposal No. 2
2000 EMPLOYEE STOCK PURCHASE PLAN

The 2000 Employee Stock Purchase Plan (the "Plan") was adopted by the Board
of Directors on March 23, 2000. The Plan is intended to replace the 1995
Employee Stock Purchase Plan (the "1995 Plan"), which was approved by the
shareholders at the 1995 Annual Meeting and which will expire by its terms on
June 30, 2000. The Board of Directors recommends that the shareholders vote
"FOR" approval of adoption of the Plan.

The principal features of the Plan, which are essentially the same as those
of the 1995 Plan, are summarized below.

General

The purposes of the Plan are to provide eligible employees of the
Corporation and its subsidiaries a convenient opportunity to purchase shares
of Common Stock of the Corporation through annual offerings financed by
payroll deductions and to provide a stock ownership incentive for such
employees to promote the continued success of the Corporation.

The aggregate number of shares which may be issued and sold under the Plan
is 1,000,000 shares of Common Stock, subject to proportionate adjustment in
the event of stock splits and similar events.

Administration

The Plan will be administered by the Human Resources Committee (the
"Committee") of the Board of Directors. The Committee will have the power to
interpret the Plan and to prescribe rules, regulations and procedures in
connection with the operations of the Plan.

Eligibility of Employees

All employees of the Corporation and of any subsidiary designated by the
Committee are eligible to participate in the Plan if (a) their customary
employment is more than 20 hours per week and five months per year and (b)
they have 90 days' continuous service with the Corporation or a subsidiary
immediately prior to the first day of a Purchase Period (defined below). As of
March 23, 2000, the number of employees who would be eligible to participate
in the Plan is approximately 2,600.

4
<PAGE>

No employee will be eligible to participate in the Plan during a Purchase
Period if the employee owns shares which, when added to the maximum number of
shares the employee may purchase under the Plan and any outstanding stock
options, would exceed 5% of the voting power or value of the Corporation's
outstanding stock.

Purchase Periods and Payroll Deductions

It is anticipated that there will be five annual 12-month Purchase Periods
for the purchase of Common Stock under the Plan. Each Purchase Period will
begin on July 1 and end on the following June 30, with the first Purchase
Period under the new Plan to begin on July 1, 2000 immediately following the
termination of the final Purchase Period under the 1995 Plan. The Committee
has the power to change the number or duration of the Purchase Periods, but no
Purchase Period may be longer than 27 months, and no Common Stock may be sold
under the Plan after June 30, 2005. The Committee may also authorize special
Purchase Periods for employees of companies acquired by the Corporation after
the commencement of the regular Purchase Period.

An eligible employee may participate in the Plan during any Purchase Period
by filing a payroll deduction authorization form by the enrollment deadline
established for the Purchase Period. A participant may authorize a payroll
deduction of between 1% and 20%, in whole percentages, of the employee's
regular compensation (including overtime, bonuses, incentive compensation and
similar additional compensation) to be deducted for each pay period ending
during the Purchase Period and credited to a stock purchase account to be
applied at the end of the Purchase Period to the purchase of Common Stock.
Unless otherwise elected prior to the enrollment deadline, an employee who is
a participant in the Plan at the end of a Purchase Period will automatically
be enrolled for the succeeding Purchase Period at the same level of payroll
deductions. Interest on payroll deductions will be credited to participating
employees' stock purchase accounts at such rate as may be determined from time
to time by the Committee. An employee may increase, decrease or suspend
payroll deductions at any time, but unless otherwise determined by the
Committee, payroll deductions may be changed only once during a Purchase
Period.

At any time prior to the last day of a Purchase Period an employee may
withdraw from the Plan and receive the balance in the employee's stock
purchase account, including accrued interest. If an employee withdraws,
payroll deductions are terminated, and no Common Stock may be purchased by the
employee under the Plan during that Purchase Period. Partial withdrawals are
not permitted.

Purchase of Common Stock

The purchase price of shares of Common Stock purchased under the Plan will
be the lower of (a) 85% of the fair market value of the Common Stock as of the
first day of the Purchase Period or (b) 85% of the fair market value of the
Common Stock as of the last day of the Purchase Period. Fair market value for
this purpose will generally be the mean between the publicly reported high and
low sales prices per share of the Common Stock for the date as of which fair
market value is to be determined. On March 30, 2000, the fair market value of
a share of Common Stock, as so computed, was $16.91.

On the last day of a Purchase Period, the balance in each participating
employee's stock purchase account will automatically be applied to the
purchase of a number of whole shares of Common Stock equal to the balance in
the account divided by the purchase price. Unless otherwise requested by the
employee, any fractional share amount will remain in the employee's stock
purchase account for the following Purchase Period.

The maximum number of shares which may be purchased for any employee for any
Purchase Period is limited to the lesser of (a) $25,000 divided by the fair
market value of a share of Common Stock as of the first day of the Purchase
Period or (b)(1) 30% of the employee's regular compensation for the 12 months
preceding the first day of the Purchase Period, divided by (2) 85% of the fair
market value of a share of Common Stock on the first day of the Purchase
Period. Any amount not applied to the purchase of shares because of these
limitations will be refunded to the employee.

Termination of Employment

Participation in the Plan shall terminate as of the date of termination of
employment of a participating employee, whether by death, retirement,
disability or otherwise. In the event of a participating employee's

5
<PAGE>

termination of employment on or before the last day of a Purchase Period,
payroll deductions shall be terminated, no shares shall be purchased for the
employee at the end of the Purchase Period and the balance in the employee's
stock purchase account will be paid as soon as practicable to the employee or,
in the event of death, to the employee's estate.

Amendment and Termination

The Board of Directors may amend or terminate the Plan at any time, provided
that without shareholder approval no amendment may (a) increase the total
number of shares which may be issued and sold under the Plan, (b) lower the
minimum purchase price of shares under the Plan or (c) permit shares to be
purchased under the Plan by employees of any corporation other than the
Corporation and its subsidiaries.

Unless sooner terminated by the Board, the Plan will terminate on the
earlier of (a) June 30, 2005 or (b) the last day of the Purchase Period that
participating employees become entitled to purchase a number of shares equal
to or greater than the number of shares remaining available for purchase under
the Plan.

If on the last day of a Purchase Period the number of shares purchasable by
employees is greater than the number of shares remaining available, the
Committee will allocate the available shares among the participating employees
in such manner as it deems fair and which complies with the requirements of
Section 423 of the Internal Revenue Code. If during a Purchase Period it
appears that at the end of the Purchase Period the shares purchasable with
authorized payroll deductions may exceed the shares remaining available for
purchase, the Committee may in a similar manner reduce the payroll deductions
authorized by participating employees. Following any termination of the Plan,
any balances in employees' stock purchase accounts not applied to the purchase
of shares will be refunded to the participating employees.

1995 Plan Participation

The following table shows the number and market value of the shares of
Common Stock purchased under the 1995 Plan during the Purchase Period ending
June 30, 1999 by the Named Officers, all executive officers of the Corporation
as a group and all other employees as a group:

<TABLE>
<CAPTION>
Number of Aggregate
Shares Purchased Market Value
---------------- ------------
<S> <C> <C>
Carl L. Campbell.................................. 688 $ 20,640
Mark L. Pulaski................................... 688 $ 20,640
Ben G. Rooke...................................... 688 $ 20,640
James M. Deitch................................... 688 $ 20,640
Robert E. Leech................................... 688 $ 20,640
Robert R. Wozniewicz.............................. 188 $ 5,640
All executive officers as a group (9 persons)..... 5,465 $ 163,950
All other employees............................... 98,247 $2,947,410
</TABLE>

For the Purchase Period ended June 30, 1999, the purchase price of shares of
Common Stock purchased under the 1995 Plan was $25.50, and the fair market
value per share on the date of purchase was $30.00.

Federal Income Tax Consequences

The following is a brief summary of the principal Federal income tax
consequences under present law of the purchase of shares of Common Stock under
the Plan and certain dispositions of shares acquired under the Plan.

For Federal income tax purposes, participants in the Plan are viewed as
having been granted a stock option on the first day of a Purchase Period and
as having exercised the stock option by the automatic purchase of shares

6
<PAGE>

under the Plan on the last day of the Purchase Period. A participant will not
recognize taxable income either at the time of grant of the option (that is,
the first day of a Purchase Period) or on the date of exercise of the option
(that is, the last day of a Purchase Period). As described below, with the
exception of interest income, a participant will generally recognize taxable
income only upon disposition of Common Stock acquired under the Plan or upon
death.

With limited exceptions including a disposition upon death, if a participant
disposes of shares of Common Stock acquired under the Plan by sale, gift or
otherwise within the later of two years from the first day of the Purchase
Period during which the shares were acquired or within one year from the last
day of such Purchase Period (that is, makes a "disqualifying disposition"),
the participant will recognize ordinary income in the year of such
disqualifying disposition equal to the amount by which the fair market value
of the stock on the last day of such Purchase Period exceeded the purchase
price of the shares. The amount of such ordinary income will be added to the
participant's basis in the shares, and any additional gain or resulting loss
recognized on the disqualifying disposition of the shares after such basis
adjustment will be a capital gain or loss.

With limited exceptions, if the participant disposes of shares of Common
Stock acquired under the Plan more than two years after the first day of the
Purchase Period during which the shares were acquired and more than one year
after the last day of such Purchase Period, the participant will recognize
ordinary income in the year of such disposition equal to the lesser of (i) the
excess of the fair market value of the shares on the date of disposition over
the purchase price of the shares or (ii) 15 percent of the fair market value
of the shares on the first day of such Purchase Period. The amount of such
ordinary income will be added to the participant's basis in the shares, and
any additional gain recognized on the disposition of the shares after such
basis adjustment will be a capital gain. If the fair market value of the
shares on the date of disposition is less than the purchase price, no ordinary
income will be recognized and any loss recognized will be a capital loss.

If the participant still owns the shares of Common Stock acquired under the
Plan at the time of the participant's death, regardless of the period for
which the participant has held the shares, the lesser of (i) the excess of the
fair market value of the shares on the date of death over the purchase price
of the shares or (ii) 15 percent of the fair market value of the shares on the
first day of the Purchase Period during which the shares were acquired will
constitute ordinary income in the year of death.

Interest credited to employees' accounts under the Plan will be taxable
income to them, and the Corporation will be entitled to a corresponding
deduction.

The Corporation or one of its subsidiaries will generally be entitled to a
deduction in the year of a disqualifying disposition equal to the amount of
ordinary income recognized by the participant as a result of the disqualifying
disposition. In all other cases, no deduction with respect to options granted
or shares of Common Stock issued under the Plan is allowed to the Corporation
or one of its subsidiaries.

Vote Required

Approval of the adoption of the Plan requires the affirmative vote of a
majority of the votes cast on the proposal at the Annual Meeting by the
holders of Common Stock voting in person or by proxy. An abstention or broker
non-vote is not a vote cast and will not be counted in determining the number
of votes required for approval, though it will be counted in determining the
presence of a quorum.

MANAGEMENT PROPOSAL

Proposal No. 3
2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

The 2000 Non-Employee Directors' Stock Option Plan (the "Plan") was adopted
by the Board of Directors on March 23, 2000. The Plan is intended to replace
the 1995 Non-Employee Directors' Stock Option Plan (the "1995 Plan"), which
was approved by the shareholders at the 1995 Annual Meeting and which expired
by its terms on January 4, 2000. The Board of Directors recommends that the
shareholders vote "FOR" approval of adoption of the Plan.

7
<PAGE>

The principal features of the Plan are summarized below. The 2000 Plan is
essentially the same as the 1995 Plan, except that the number of shares to be
covered by the annual stock option grants has been increased from 2,812 shares
to 5,000 shares of Common Stock per director.

General

The purposes of the Plan are to promote the long-term success of the
Corporation by creating a long-term mutuality of interests between the non-
employee directors and shareholders of the Corporation, to provide an
additional inducement for such directors to remain with the Corporation and to
provide a means through which the Corporation may attract able persons to
serve as directors.

The aggregate net number of shares which may be issued under the Plan is
limited to 500,000 shares of Common Stock, subject to proportionate adjustment
in the event of stock splits and similar events. If a stock option is
exercised by delivering previously owned shares of Common Stock in payment of
the option price, the number of shares so delivered to the Corporation shall
again be available for purposes of the Plan. If a stock option is canceled by
mutual consent or terminates or expires for any reason without having been
exercised in full, the number of shares subject thereto shall again be
available for purposes of the Plan.

Administration

The Plan will be administered by the Human Resources Committee (the
"Committee") of the Board of Directors. The Committee has the power to
interpret the Plan and to prescribe rules, regulations and procedures in
connection with the operations of the Plan.

Notwithstanding the discretion to administer the Plan granted to the
Committee, the selection of the directors to whom stock options are to be
granted under the Plan, the timing of such grants, the number of shares
subject to any stock option, the exercise price of any stock option, the
periods during which any stock option may be exercised and the term of any
stock option will be as set forth in the Plan, and the Committee will have no
discretion as to such matters. Participation in the Plan does not disqualify a
director from serving as a member of the Committee.

Stock Options

On January 2 or, if January 2 is not a day on which the principal market for
the Common Stock is open for trading, then on the first such trading day, of
each of the years 2000 through 2005, each person who is then a member of the
Board of Directors of the Corporation and who is not then an employee of the
Corporation or any of its subsidiaries (a "non-employee director") will be
granted a "nonstatutory stock option" (i.e., a stock option which does not
qualify under Section 422 of the Internal Revenue Code of 1986) to purchase
5,000 shares of Common Stock. If the number of shares then remaining available
for the grant of stock options under the Plan is not sufficient for each non-
employee director to be granted an option for 5,000 shares, then each non-
employee director shall be granted an option for a number of whole shares
equal to the number of shares then remaining available divided by the number
of non-employee directors, disregarding any fractions of a share.

The option price for each stock option will be the fair market value of the
Common Stock on the date the stock option is granted. Fair market value, for
this purpose, will generally be the mean between the publicly reported high
and low sale prices per share of the Common Stock for the date as of which
fair market value is to be determined. On March 30, 2000, the fair market
value of a share of Common Stock, as so computed, was $16.91.

No stock option may be exercised while the grantee remains a director prior
to the second anniversary of the date of grant, unless the exercise date has
been accelerated upon the occurrence of one or more of the events described
under "Acceleration of Options in Certain Events" below. No stock option may
be exercised after the expiration of ten years from the date of grant. A stock
option to the extent exercisable at any time may be exercised in whole or in
part.

If a grantee's service as a director terminates for any reason other than
resignation or removal for cause, any unexpired option will be exercisable for
a period of one year following the date of termination, whether or

8
<PAGE>

not the option was exercisable at the date of termination. If a director
resigns or is removed from office for cause, any option which is not yet
exercisable will be forfeited, and any exercisable option must be exercised
within 90 days. In no event may an option be exercised during the first six
months of its term, except in cases of death or disability or unless the
exercise date has been accelerated upon the occurrence of one or more of the
events described under "Acceleration of Options in Certain Events" below.

The option price for each stock option will be payable in full in cash at
the time of exercise. In lieu of cash, the person exercising the stock option
may pay the option price in whole or in part by delivering to the Corporation
shares of Common Stock having a fair market value (determined as provided
above) on the date of exercise of the stock option equal to the option price
for the shares being purchased, except that any portion of the option price
representing a fraction of a share must be paid in cash and no shares of
Common Stock which have been held less than six months may be delivered in
payment of the option price.

Except to the extent otherwise determined by the Committee, no stock option
granted under the Plan is transferable other than by Will or by the laws of
descent and distribution, and a stock option may be exercised during a
grantee's lifetime only by the grantee or the grantee's guardian or legal
representative.

Subject to the foregoing and the other provisions of the Plan, stock options
granted under the Plan may be subject to such restrictions and other terms and
conditions, if any, as shall be determined, in its discretion, by the
Committee and set forth in the stock option agreement.

Reload Options

The Plan provides that if a stock option is exercised by delivering
previously owned shares of Common Stock in payment of the option price, the
person exercising the stock option will automatically be granted a new option
(a "reload option") (1) for a number of shares of Common Stock equal to the
number of shares used to pay the option price of the original option, (2) with
an option price equal to the market price on the date the original option is
exercised and (3) having the same expiration date as the original option.
Reload options will generally have the same other terms as the original
option, except that a reload option would become exercisable six months,
rather than two years, after its date of grant. The Plan provides for
successive reloads, meaning that a reload option would also be granted upon a
share-for-share exercise of a prior reload option. No reload option would be
granted if an option is exercised after the original grantee has ceased to be
a director or if the option price is paid in cash rather than in shares of
Common Stock.

Because reload options will be granted only for the number of shares used to
pay the option price of the prior option, the grant of reload options will not
increase the net number of shares a director may receive from an option above
the 5,000 shares covered by an original option grant. Further, since the
option price of a reload option will be equal to the fair market value on the
date of exercise of the prior option, the grant of reload options will not
increase the total appreciation above the original option price that the
director may realize from the original option grant. However, by permitting a
director to realize market price appreciation in stages, reload options will
encourage earlier option exercises, thereby promoting the identification with
shareholder interests which results from increased share ownership by
directors.

Acceleration of Options in Certain Events

The Plan provides for acceleration of the exercisability of stock options
upon the occurrence of one or more events described in Section 6 of the Plan
("Section 6 Events"). Such an event is deemed to have occurred when (1) the
Corporation acquires actual knowledge that any person (other than the
Corporation, a subsidiary or an employee benefit plan sponsored by the
Corporation) has acquired beneficial ownership of securities representing 10%
or more of the voting power of the Corporation, (2) a tender offer is made to
acquire securities representing 20% or more of the voting power of the
Corporation, (3) a person other than the Corporation solicits proxies relating
to the election or removal of 50% or more of any class of the Board of
Directors or (4) the shareholders of the Corporation approve a merger,
consolidation, share exchange, division or sale or other disposition of assets
of the Corporation as a result of which the shareholders of the Corporation
immediately prior to the transaction will not own a majority of the voting
power of the surviving or resulting corporation or any corporation which
acquires the stock of the Corporation or more than 10% of its consolidated
assets.

9
<PAGE>

Notwithstanding any other provision contained in the Plan, in case any
Section 6 Event occurs all outstanding stock options will become immediately
and fully exercisable whether or not otherwise exercisable by their terms. The
provision of the Plan for the acceleration of the exercise date of stock
options upon the occurrence of a Section 6 Event may be considered as having
an anti-takeover effect.

Miscellaneous

No original stock option may be granted under the Plan subsequent to January
4, 2005. However, reload options may continue to be granted after that date
during the terms of stock options then outstanding.

The Board of Directors may amend or terminate the Plan at any time except
that (1) without shareholder approval, no outstanding stock option may be
amended to reduce the exercise price, and (2) no other amendment of the Plan
may be made without shareholder approval if shareholder approval of the
amendment is at the time required by law or by the rules of the NASDAQ
National Market System. No amendment or termination of the Plan may, without
the written consent of the holder of a stock option theretofore awarded under
the Plan, adversely affect the rights of such holder with respect thereto.

Federal Income Tax Consequences

The following is a brief summary of the principal Federal income tax
consequences of the grant and exercise of nonstatutory stock options under
present law.

A director will not recognize any taxable income for Federal income tax
purposes upon receipt of a nonstatutory stock option.

Upon the exercise of a nonstatutory stock option, the amount by which the
fair market value of the shares received, determined as of the date of
exercise, exceeds the option price is generally treated as compensation
received by the optionee on the date of exercise. If the option price is paid
in whole or in part in shares, no income, gain or loss is recognized on the
receipt of shares equal in value on the date of exercise to the shares
delivered in payment of the option price. The fair market value of the
remainder of the shares received upon exercise of the nonstatutory stock
option, determined as of the date of exercise, less the amount of cash, if
any, paid upon exercise, is treated as compensation received on the date of
exercise of the nonstatutory stock option. Special rules apply upon the
exercise by a director of a nonstatutory stock option in certain limited
circumstances if there is a Section 16(b) restriction period following the
date of exercise.

The Corporation generally will be entitled to a deduction for compensation
paid in the same amount treated as compensation received.

The acceleration of the exercise date of stock options or the exercise of a
stock option following the occurrence of a Section 6 Event, in certain
circumstances, may result in (i) a 20% Federal excise tax (in addition to
Federal income tax) to the director on certain amounts associated with the
stock option and (ii) the loss of the compensation deduction which would
otherwise be allowable to the Corporation.

Vote Required

MANAGEMENT PROPOSAL

Proposal No. 4
RATIFICATION OF APPOINTMENT OF AUDITORS

Pursuant to the recommendation of the Audit Committee, the Board of
Directors has appointed the firm of Ernst & Young LLP as independent auditors
for the Corporation for 2000.

10
<PAGE>

Although the appointment of independent auditors is not required to be
approved by the shareholders, the Board of Directors believes the shareholders
should participate in the selection of independent auditors through the
ratification process. The Board of Directors recommends that the shareholders
vote "FOR" ratification of the appointment of Ernst & Young LLP. A vote of the
shareholders not to ratify the appointment of Ernst & Young LLP will be
considered as a direction to the Audit Committee to recommend other
independent auditors for appointment for the following year.

Representatives of Ernst & Young LLP are expected to be present at the
Annual Meeting and to be available to respond to appropriate questions.

Approval of this proposal requires the affirmative vote of a majority of the
votes cast on the proposal at the Annual Meeting by the holders of Common
Stock voting in person or by proxy. An abstention is not a vote cast and will
not be counted in determining the number of votes required for approval,
though it will be counted in determining the presence of a quorum.

EXECUTIVE COMPENSATION

Summary Compensation Table

The following table is a summary of the compensation for the years 1999,
1998 and 1997 awarded or paid to, or earned by, the Corporation's Chief
Executive Officer, the Corporation's four other most highly compensated
executive officers in 1999 and one additional individual who would have been
among the five highest paid executive officers for 1999 but for the fact that
he was no longer serving as an executive officer at the end of the year (the
"Named Officers"):

<TABLE>
<CAPTION>
Long-Term Compensation
------------------------------
Annual Compensation Awards Payouts
----------------------------- --------------------- --------
Other Restricted Shares All
Annual Stock Underlying LTIP Other
Bonus Compen- Awards Options Payouts Compen-
Name and Principal Position Held Year Salary($) ($)(1) sation ($) (2) (#)(3) ($)(1) sation ($)(4)
- -------------------------------- ---- --------- -------- ---------- ---------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Carl L. Campbell (5).... 1999 $461,787 $ 0 $ 0 125,255 $ 0 $ 74,056
Chairman and 1998 426,693 128,177 -- 0 21,786 121,720 54,975
Chief Execuive Officer 1997 401,549 168,505 -- 0 25,500 0 67,445
Mark L. Pulaski (5)..... 1999 $351,358 $ 0 $ 0 90,000 $ 0 $ 38,461
President and 1998 322,491 30,876 -- 0 10,379 66,458 28,920
Chief Operating Officer 1997 301,154 83,964 -- 0 13,500 0 40,609
Ben G. Rooke............ 1999 $261,000 $ 0 $ 0 60,894 $ 0 $ 30,905
Vice Chairman, General 1998 217,057 31,799 -- 0 5,000 43,114 26,387
Counsel and Secretary 1997 205,790 57,531 -- 0 9,240 0 38,192
James M. Deitch (5)..... 1999 $241,337 $ 0 $ 0 42,500 $ 0 $468,568
Executive Vice President 1998 202,654 107,300 -- 0 3,500 33,824 14,175
Robert E. Leech (5)..... 1999 $200,781 $ 0 $ 0 32,500 $ 0 $ 22,542
Executive Vice President 1998 189,431 36,146 -- 0 3,500 33,824 19,990
Robert R. Wozniewicz
(5).................... 1999 $210,810 $ 0 $ 0 32,500 $ 0 $ 72,479
Executive Vice President 1998 183,528 26,064 -- 0 3,500 33,824 20,498
</TABLE>
- --------
(1) Bonus and LTIP payout information is reported by year in which earned.

(2) The Corporation has made no restricted stock awards.

11
<PAGE>

(3) Options are reported in the year in which granted. The number of options
granted includes reload options as follows: Mr. Campbell, 5,255 shares in
1999 and 6,786 shares in 1998; Mr. Pulaski, 1,379 shares in 1998 and 801
shares in 1997; Mr. Rooke 894 shares in 1999 and 240 shares in 1997.

(4) The 1999 amounts reported in this column consist of the loan value of the
actual premium paid by the Corporation for a split-dollar insurance
policy for the Named Officers as follows: Mr. Campbell, $18,774; Mr.
Pulaski, $8,458; Mr. Rooke, $11,041; Mr. Deitch, $6,095; Mr. Leech,
$10,762; and Mr. Wozniewicz $10,032; imputed interest income for 1999 on
loans to the Named Officers under the Corporation's Management Stock
Ownership Program as follows: Mr. Campbell, $33,039; Mr. Pulaski,
$16,446; Mr. Rooke, $9,858; Mr. Deitch, $5,290; Mr. Leech, $4,757; and
Mr. Wozniewicz, $4,650; employer matching contributions to the
Corporation's retirement savings plans as follows: Mr. Campbell, $21,729;
Mr. Pulaski, $13,557; Mr. Rooke, $9,617; Mr. Deitch, $8,433; Mr. Leech,
$6,745; and Mr. Wozniewicz, $7,842; the above market portions of interest
accrued for 1999 under one retirement savings plan as follows: Mr.
Campbell, $514; Mr. Rooke, $389; and Mr. Leech, $278; payment to Mr.
Deitch in the amount of $448,750 as discussed on page 21; and payment to
Mr. Wozniewicz in the amount of $49,955 as reimbursement for relocation
expenses.

(5) Mr. Campbell and Mr. Pulaski assumed new positions effective November 18,
1999 as follows: Mr. Campbell, Chairman, President and Chief Executive
Officer; Mr. Pulaski, President of the Wealth Management Division of the
Corporation's Bank subsidiary. Compensation information for 1997 is not
provided for Messrs. Deitch, Leech and Wozniewicz as they did not serve
as executive officers of the Corporation during this year. Mr. Deitch's
employment as an executive officer of the Corporation terminated as of
December 17, 1999.

Stock Option Grants in 1999

The following table sets forth information concerning the individual grants
of options to purchase the Corporation's Common Stock made to the Named
Officers in 1999:

<TABLE>
<CAPTION>
Individual Grants
------------------------------------------------
Number Percent of
of shares total options Grant
underlying granted to Exercise date
options employees Price Expiration present
Name granted(#) in 1999(1) ($/Share)(2) date(3) value($)(4)
---- ---------- ------------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
Carl L. Campbell 20,000 2.45% $36.41 01/04/09 $174,010
100,000 12.25% $39.94 01/21/09 $740,630
5,255 0.64% $20.22 12/31/00 $ 9,781
Mark L. Pulaski 12,000 1.47% $36.41 01/04/09 $104,406
75,000 9.19% $39.94 01/21/09 $555,473
3,000 0.37% $35.22 03/25/09 $ 22,250
Ben G. Rooke 7,500 0.92% $36.41 01/04/09 $ 65,254
50,000 6.13% $39.94 01/21/09 $370,315
2,500 0.31% $35.22 03/25/09 $ 21,042
894 0.11% $30.31 06/30/00 $ 2,543
James M. Deitch (5) 5,000 .61% $36.41 01/04/09 $ 43,503
25,000 3.06% $39.94 01/21/09 $185,158
12,500 1.53% $35.22 03/25/09 $105,209
Robert E. Leech (5) 5,000 .61% $36.41 01/04/09 $ 43,503
25,000 3.06% $39.94 01/21/09 $185,158
2,500 .31% $35.22 03/25/09 $ 21,042
Robert R. Wozniewicz 5,000 .61% $36.41 01/04/09 $ 43,503
25,000 3.06% $39.94 01/21/09 $185,158
2,500 .31% $35.22 03/25/09 $ 21,042
</TABLE>
- --------
(1) Total options granted to employees in 1999 were 816,038.

12
<PAGE>

(2) The exercise price of each option is equal to the fair market value on
the date of the option grant, except for the options expiring on 1/21/09
which were premium options granted at 110% of the fair market value on
the date the options were granted.

(3) All options, except reload options, become exercisable approximately two
years after the date of grant. Reload options become exercisable 6 months
after date of grant. All options are subject to possible acceleration in
certain events involving an actual or potential change in control of the
Corporation. All options have revocable reload rights. The option granted
to Mr. Campbell for 5,255 shares and the option granted to Mr. Rooke for
894 shares are reload options.

(4) The grant date present value of the options has been determined utilizing
the Black-Scholes option pricing model. The assumptions used to arrive at
the present values were: stock price volatility of .2300; expected
dividend yield of 3.1%; expected seven-year option term; and a 4.7% risk-
free rate of return.

(5) These options for Messrs. Deitch and Leech terminated upon cessation of
employment.

Aggregated Option Exercises in 1999 and Option Values as of December 31, 1999

The following table sets forth information concerning stock options
exercised by the Named Officers in 1999 and unexercised stock options held by
the Named Officers as of December 31, 1999

<TABLE>
<CAPTION>
Number of Shares Value of Unexercised
Underlying Unexercised in-the-money Options
Shares Value Options at 12/31/99 at 12/31/99($)(2)
Acquired on Realized ------------------------- -------------------------
Name Exercise(#) ($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Carl L. Campbell 23,744 $309,528 313,298 140,255 $117,376 $4,436
Mark L. Pulaski 4,381 $ 66,905 99,803 99,000 $157,844 $ 0
Ben G. Rooke 8,318 $134,391 90,357 65,000 $147,999 $ 0
James M. Deitch 15,000 $190,020 10,896 0 $ 4,408 $ 0
Robert E. Leech 6,286 $120,246 28,440 36,000 $ 9,112 $ 0
Robert R. Wozniewicz 29,900 $305,215 24,370 36,000 $ 60,338 $ 0
</TABLE>
- --------
(1) Represents the difference between the market value on the date of
exercise of the shares acquired and the option price of those shares.

(2) Represents the difference between the aggregate market value at December
31, 1999 of the shares subject to the options and the aggregate option
price of those shares.

13
<PAGE>

STOCK PRICE PERFORMANCE GRAPH

Set forth below is a line graph comparing the cumulative total returns
(assuming reinvestment of dividends) for the five years ended December 31, 1999
of $100 invested on December 31, 1994 in each of the Common Stock, the CRSP
Total Return Index for the NASDAQ Stock Market (U. S. Companies) and the CRSP
Total Return Index for NASDAQ Bank Stocks.

[GRAPH APPEARS HERE]

Year Ended December 31 1994 1995 1996 1997 1998 1999

KEYSTONE $99 $104 $136 $226 $215 $127

NASDAQ U.S. $98 $141 $173 $213 $299 $541
Stock Market

NASDAQ $100 $149 $197 $333 $327 $315
Bank Stocks

14
<PAGE>

HUMAN RESOURCES COMMITTEE
1999 REPORT ON EXECUTIVE COMPENSATION

In compliance with the Securities and Exchange Commission ("SEC") guidelines
on disclosure of executive compensation levels and practices, the Human
Resources Committee ("the Committee") of the Corporation's Board of Directors
has prepared the following report for shareholders and other interested
parties.

Role and Composition of the Human Resources Committee

The role of the Committee with respect to associate compensation is to
approve the total compensation philosophy of the organization and to monitor
compensation plans and related practices for conformity with that philosophy.

The Corporation's Human Resources department developed a comprehensive
compensation strategy, which included moving the Corporation to broadbanding.
Broadbanding is a consolidation of existing job grades into fewer, wider,
salary bands. As a result of this effort some of the Executives have a greater
percentage of their total compensation directly linked to the Corporation's
performance.

Specifically, in the area of executive compensation, the Committee's role
includes reviewing and approving appropriate compensation and benefit plans,
reviewing the Chief Executive Officer's recommendations on compensation for
executive officers, and determining compensation for executive officers and
for the Chief Executive Officer. An essential component of this role is the
review and approval of performance standards set for the Corporation's merit
and incentive programs and monitoring actual performance against those
standards.

The Committee is composed of six non-employee directors. Except for
discussions and decisions concerning their own compensation, Mr. Campbell and
Mr. Pulaski attended Committee meetings for discussions about executive
compensation and offered recommendations on specific plans and individual
actions for consideration by the Committee.

The Committee met five times during 1999. This report discusses actions
initiated and approved by the Committee over the course of the year.

Executive Compensation Program Objectives and Operating Philosophy

The Corporation's executive compensation program is designed to (1) foster
continuous improvement in corporate performance, (2) maximize shareholder
value, (3) attract and retain qualified executives, and (4) recognize and
reward executives' collective and individual contributions to the business. To
these ends, the Corporation is employing a compensation strategy and specific
compensation plans to tie a significant portion of executive compensation to
the Corporation's success in meeting pre-determined performance goals and to
appreciation in the Corporation's earnings and stock price.

In setting performance standards for executive officers during 1999, the
Committee considered the compensation philosophy, compared the Corporation's
recent performance to industry indices/2/ and also considered the
Corporation's stock price performance over the last few years. The target
level of total compensation for the Corporation's executives, including the
executive officers listed in the tables under "Executive Compensation" above,
when expected performance is achieved, is the median level of market practice
among financial services institutions of similar asset size. The compensation
programs will provide above market level pay when the Corporation's
performance exceeds the expected (Target) level of performance.

- --------
/2/The Committee and management review reports from securities and investment
banking firms, e.g., SNL Securities and Keefe, Bruyette, and Woods, which
monitor the performance of commercial banks and other financial services
institutions. Most of the banks included in these reports are also
included in the NASDAQ Bank Stock Index. Further, the Corporation's
Finance Department annually prepares in-depth analyses of financial data
on ten commercial banks of similar or larger asset size operating in the
Pennsylvania, Maryland, West Virginia, Virginia, and Ohio banking markets.

15
<PAGE>

The primary performance measure used by the Committee is earnings per share.
Other measures also considered by the Committee are asset quality, capital
adequacy, and prudent risk management. In addition, the Committee considers
the current economic environment and such subjective measures as the executive
officers' leadership and management performance.

The remainder of this report discusses specific plans, policies, and 1999
actions in each component of the executive compensation program.

Base Salaries

Competitive market ranges for base salary for the executive officers are
determined by evaluating the responsibilities of the positions, required
skills and experiences, and prevailing pricing among financial services
institutions of similar type and asset size for comparable positions.

Typically, annual salary adjustments are determined through an evaluation of
the Corporation's performance against its goals for the prior year,
performance of functions and business units under the executive's management
and the executive's performance against individual goals assigned for the
prior year. The relative importance of each of the three criteria in making a
salary adjustment decision for a given executive will vary among the
executives and from year to year based on corporate priorities for that
specific time period.

Corporate goals are expressed in terms of gross revenue or earnings per
share. Earnings per share is the basis for establishing the goals for the
Management Incentive Compensation Plan ("MICP"), the annual short-term
incentive plan which is part of the executives' total compensation package. An
example of a business unit performance measure would be improved revenue
performance against budgeted goals. An example of an individual performance
measure would be the implementation of a new business product.

Additionally, the executive's professional development, readiness for other
and broader responsibilities in the organization and overall contribution to
the management and the success of the business are considered. The
Corporation's overall success, coupled with the achievements against
functional/business unit and individual business goals, primarily determines
the Committee's salary adjustment decision. The other factors noted may
influence the Committee's decision.

The Chief Executive Officer reviews the performance of each executive
officer, except himself, with the Committee using a specific checklist of
performance goals and performance characteristics, and he offers a specific
pay increase recommendation for the Committee's consideration. The Chairperson
of the Committee likewise uses and discusses with the Committee a similar
checklist of performance goals and performance characteristics for the Chief
Executive Officer, and he/she offers a recommendation to the Committee on an
appropriate salary action for the CEO. These performance factors include: net
income, asset growth, asset quality, risk management, customer service,
leadership, community involvement, personal development, and the influence of
the economy and regulatory factors on the performance of the Corporation. Once
approved by the Committee, all salary actions for the executive officers are
presented to the Board of Directors for ratification.

In January 1999, the Committee approved the recommendation for a combined
base salary freeze and premium priced option grants. Mr. Campbell's salary was
frozen through 2001 at the $460,000 annual rate in effect since June 1998 in
exchange for a premium priced grant of 100,000 shares. These options grants
were granted in addition to the normal option grants received during 1999 and
vest under the Corporation's standard terms.

Annual Performance Incentives

The executive officers participate in the Corporation's MICP, an annual
short-term incentive pay plan based primarily on earnings per share
achievement against a specific goal. Where an officer has divisional
responsibilities (e.g., Wealth Management), the majority (75%) of the
participant's incentive award is based on the division's pre-tax, pre-
allocation earnings performance, and the remainder (25%) is based on the
Corporation's earnings per share performance. Officers of the Corporation,
including eligible Named Officers as listed in the Executive Compensation
Table, having corporate responsibilities receive incentive awards based

16
<PAGE>

solely on achievement of goals expressed in terms of earnings per share. The
Committee has the discretion to modify the cash award for a particular officer
if it determines such action is appropriate. Such action is based on a
subjective evaluation of each officer's performance in such areas as teamwork,
management and division performance, and support of integration efforts among
different divisions and business lines.

For 1999, the Committee approved a range of specific achievement levels for
corporate earnings per share and divisional pre-tax, pre-allocation earnings.
If threshold performance was not achieved, no payment would be made. If
performance exceeded the threshold level of performance, actual awards would
be proportionally greater in line with actual performance up to the defined
maximum award amount.

The Corporation's performance for 1999 did not meet the threshold goal
established under MICP, and accordingly, Mr. Campbell did not qualify for a
cash award.

Long Term Incentives

Stock Options. Stock options were granted to each of the Named Officers, and
selected senior officers of the Corporation in January 1999 under the
Corporation's 1997 Stock Incentive Plan. These stock option grants were made
according to the Committee's established guideline of granting options at fair
market value using a declining percentage of base salary based on level of
position within the organization to achieve the desired "mix" of long-term
incentive income opportunity for a given position in the organization. The
percentage of base salary ranged from 32.5% for the Chief Executive Officer to
a low of 17.5% for executive and senior vice presidents, with the exact number
of option grants determined by using the Black-Scholes option pricing model.
The size of the award can vary from year to year based on corporate and
individual performance. Corporate performance is usually gauged in terms of
net income, although other financial measures and performance comparisons
within peer group may also be considered. In the event of poor corporate
performance or poor individual performance, the Committee can elect to make no
award. If corporate and/or individual performance exceeds expectations, the
Committee may grant larger than typical awards.

The January 4, 1999 stock option awards were granted in recognition of the
Corporation's increase in net income for 1998, and the Corporation's favorable
ranking in the banking peer group. On January 21, 1999 a larger than normal
option grant at a premium price was made to executive officers in recognition
of their new role on the management committee and in recognition that a salary
freeze was imposed for the year beginning January 1, 2000. The larger amounts
were also granted in exchange for a salary freeze for Mr. Campbell and Mr.
Pulaski for 1999 and 2000. The executive officers do not realize any gain from
these options unless there is a 10% increase in the Corporation's stock price.
This motivates them toward improved performance and links a greater percentage
of their compensation to the Corporation's results. An additional stock option
grant was awarded March 25, 1999 to the new senior management team after the
restructuring to recognize their increased responsibilities.

In deciding on stock options awards to eligible participants, the Committee
does not currently consider the total number of outstanding options held by a
participant or the number of shares held by the participant. The Committee has
not canceled or re-priced any prior stock option grants.

The granting of stock options is designed to align the executives' interests
with those of the shareholders. Stock options are granted with an exercise
price equal to or above the fair market value on the date of the grant. Grants
carry a 2-year cliff vesting provision, which means that the option cannot be
exercised for two years from the date of grant except in certain circumstances
involving an actual or threatened change of control. The granting of options
at fair market value or a premium over fair market value with a minimum 2-year
vesting requirement provides an incentive for the executives to increase
shareholder value over the long term since no benefit of the options can be
realized unless stock price appreciation occurs.

In addition to the previously mentioned 100,000 premium stock options, Mr.
Campbell received stock option grants of 20,000 shares in 1999 which reflected
the targeted percentage for his position. These grants included incentive
stock options and nonstatutory stock options. Mr. Campbell participates in the
Corporation's Stock Incentive Plan on the same basis as all other
participants.

17
<PAGE>

1996 Performance Unit Plan. In 1996 the Board of Directors approved the
implementation of the 1996 Performance Unit Plan (the "PUP plan") in which
certain officers of the Corporation would participate. This PUP plan was
approved by shareholders at the 1997 Annual Meeting. The Named Officers
participate in the PUP plan.

The PUP plan is a cash-based, long-term incentive plan. When approved, it
was expected that the PUP plan would operate in three-year cycles beginning on
January 1, 1996, with a new cycle commencing every two years, i.e., January 1,
1998; January 1, 2000; January 1, 2002. The 1996-1998 performance period ended
on December 31, 1998. The payout was calculated using a three-year cumulative
EPS number excluding extraordinary items. This was the first payout under the
1996 PUP plan. The total cumulative EPS for the 1996-1998 performance period
was $5.69. This exceeded the threshold of $5.49. The per unit payment made was
$39.70 as approved by the Committee during the January 1999 meeting. Mr.
Campbell, who participates in this plan, received a cash award of $121,720 in
1999 for the three-year performance period. This award was based on the
Corporation's three-year cumulative earnings per share exceeding the threshold
level of the plan.

The Corporation believes that stock options under its Stock Incentive Plans
and performance unit awards under the PUP plan qualify as "performance-based
compensation" under Section 162(m) of the Internal Revenue Code, and the
Corporation does not anticipate that it will be affected by the cap on
deductibility of executive compensation imposed by that Section.

Other Executive Benefits

In 1994, the Corporation implemented a split-dollar type of insurance policy
which is owned by the covered executive. Under this policy, the Corporation
has a collateral assignment which is intended to reimburse the Corporation for
premiums paid into the policy when the policy is redeemed or the covered
executive dies.

In 1995, the Board of Directors approved the Management Stock Ownership
Program ("MSOP"). The MSOP is intended, among other things, to promote
alignment of management and shareholder interests and to encourage management
to act like owners with a focus on value creation. To accomplish these
purposes, the MSOP establishes stock ownership goals for the Named Officers
and selected senior officers to be achieved over a five-year period. At the
end of the five-year period, each officer, including the Named Officers, is
expected to achieve a level of ownership of Common Stock having a value equal
to an approved percentage of the officers' current base salary. New targets
for ownership were approved by the Committee at their meeting in January,
1999. For the Chief Executive Officer the new target is 600%, for the Chief
Operating Officer 400%, and for the Vice Chairman 300%. The Executive Vice
Presidents have a target of 200% and other Executives have 150% and 100%
targets depending on the level of position they hold within the Corporation.

In order to assist officers in attaining their stock ownership goals, the
MSOP provides for loans to the officers, in amounts not to exceed 50% of the
officer's stock ownership goal, to be used to purchase shares of Common Stock
from the Corporation at their fair market value on the date of purchase. Under
the terms of the MSOP, the loans are made on a nonrecourse basis and without
interest, but are secured by collateral having an initial value of 120% of the
loan amount and consisting of the shares of Common Stock purchased with the
loan plus additional shares of Common Stock or other acceptable collateral
owned by the officer. The loans are payable in full upon demand of the
Corporation at any time but not later than the target date for achieving the
officer's stock ownership goal. The loans are also payable in full not later
than 90 days after termination of the officer's employment with the
Corporation or a subsidiary for any reason other than death and one year after
termination due to death of the officer.

In connection with the adoption of the MSOP, the Board recommended that the
shareholders approve the 1995 Management Stock Purchase Plan ("MSPP"), which
provides for the purchase of Common Stock from the Corporation by eligible
associates at a price not less than fair market value and for the financing of
such purchases through loans secured by the shares so purchased. The
shareholders approved the MSPP at the 1995 Annual Meeting. As of December 31,
1999, 24 of the 27 eligible officers, including all of the Named Officers
other than Mr. Deitch, were participating in the MSPP under the terms of the
ownership program. 25 of the 27 eligible officers are on schedule to achieve
their ownership goals.

18
<PAGE>

Conclusion

The Corporation's executive compensation program continues to evolve in line
with the objectives noted earlier in this report: continuous improvement in
annual corporate performance, maximizing shareholder value, attracting and
retaining qualified executives, and recognizing and rewarding executives'
contributions to the business.

The Committee will continue to explore opportunities to enhance the variable
aspects of executive compensation, so as to strengthen the link between total
pay and corporate performance.

Respectfully Submitted by:

THE HUMAN RESOURCES COMMITTEE: Richard G. King, Chairperson;
Gerald E. Field;
Philip C. Herr, II;
William L. Miller;
Ronald C. Unterberger; and
G. William Ward

OTHER INFORMATION CONCERNING
DIRECTORS AND EXECUTIVE OFFICERS

Human Resources Committee Interlocks and Insider Participation

The current members of the Human Resources Committee are the individuals
whose names appear above. Ms. June Barry served as Chairperson of the
Committee until she resigned as a member of the Board of Directors after the
July 21, 1999 meeting of the Human Resources Committee. Mr. Campbell, the
Corporation's Chairman and Chief Executive Officer, and Mr. Pulaski, the
Corporation's former President and Chief Operating Officer (now serving as the
Wealth Management Division President), are not members of the Human Resources
Committee but were invited guests at Committee meetings in 1999. Mr. Campbell
is involved in corporate compensation matters, including compensation
decisions for all executive officers except himself. There are no interlocking
relationships, as defined in regulations of the SEC, involving members of the
Human Resources Committee.

Board and Committee Meetings

The Executive Committee of the Board of Directors is composed of Messrs.
Antanavage, Campbell, Devorris, Herr, King, Martz, Miller, and Wolfe. During
1999 the Executive Committee met ten times. The Executive Committee exercises
the powers of the Board of Directors between Board meetings and makes
recommendations to the full Board on various matters. The Executive Committee
reviews the policy and practice of the Corporation and its subsidiaries in the
areas of strategic planning and franchise expansion and reports its
recommendations to the Board for action. The Executive Committee also
functions as a nominating committee and in this capacity establishes criteria
for selection of nominees to stand for election or reelection as Corporation
directors at any Annual Meeting of shareholders and reports its
recommendations to the Board for action. Any shareholder who desires to have
an individual considered for nomination by the Board must submit his
recommendation in writing to the Secretary of the Corporation at least 120
days prior to the Annual Meeting at which the election of directors will
occur.

The Audit Committee of the Board of Directors, which met five times during
1999, is composed of Messrs. Antanavage, Brubaker, Detwiler, Holman,
Messenger, Rosini, Scheiner, and Schoeneman. The Audit Committee recommends
the selection of independent auditors, provides oversight of the internal
auditors of the bank and reviews the reports of those persons.

During 1999 the Corporation's Board of Directors met eight times. All of the
directors attended at least 75% of the meetings of the Board and committees of
which they were members during the period they served as such.

19
<PAGE>

Director Compensation

In 1999, directors of the Corporation who are not salaried officers of the
Corporation or its subsidiaries received an annual retainer of $10,000
(payable in Common Stock only) and an additional $2,000 (payable in cash or
Common Stock) if they served as chairperson of a Board committee. In 1999,
non-employee directors received $1,500 for each Board meeting they attended.
For committee meetings attended on the same day as a regular Board meeting,
non-employee directors received $750; for committee meetings attended on an
adjoining day of a regular Board meeting date, non-employee directors received
$1,000; and for any other committee meeting, non-employee directors received
$1,500. Non-employee directors that participated in telephone conferences
received $500.

The Corporation's 1992 Director Fee Plan, which was approved by the
shareholders at the 1992 Annual Meeting, permits non-officer directors to
elect to receive payment of their compensation as Corporation and bank
directors either in cash or Common Stock or to defer such compensation for
subsequent payment in cash or Common Stock. During 1999, the Corporation
accrued an aggregate total of $534,250 in director compensation. Of this
amount, $277,700 was paid currently in cash or stock. The balance of $256,550
was deferred compensation, of which $65,200 will be paid in cash and $191,350
will be paid in stock.

The Corporation's 1995 Non-Employee Directors' Stock Option Plan was
approved by the shareholders at the 1995 Annual Meeting. Its purposes are to
promote the long-term success of the Corporation by creating a long-term
mutuality of interests between the non-employee directors and shareholders of
the Corporation, to provide additional inducement for such directors to remain
with the Corporation and to assist the Corporation in attracting and retaining
able persons to serve as outside directors. Under the Plan, directors who are
not employees of the Corporation or a subsidiary receive annual stock option
grants to purchase up to 2,812 shares of Common Stock at an option price equal
to the market value on the date the options are granted. The options are
exercisable two years from the date of grant, subject to acceleration in
certain events involving an actual or potential change in control of the
Corporation or retirement by the director. The options expire 10 years from
the date of grant. Reload options are granted if a director exercises an
option by paying the option price in shares of Common Stock. If approved by
the shareholders, the proposed 2000 Non-Employee Directors' Stock Option Plan
will replace the 1995 Plan, which expired following the January 2000 stock
option grants.

In connection with the acquisition of Financial Trust Corp in May 1997, the
Corporation entered into an employment agreement with Mr. Wolfe. The agreement
provides for Mr. Wolfe to be employed by the Corporation in a senior executive
capacity through May 2000 at an all inclusive annual salary of $350,000.
Thereafter, Mr. Wolfe will serve in a consulting capacity at an annual salary
of $177,000 until his 65th birthday in August 2003. In the event of a change
of control of the Corporation, as defined in the agreement, Mr. Wolfe may
elect to receive the balance of the unpaid salary for the remainder of the
agreement in a single lump sum.

Named Officer Stock Ownership

Information concerning Mr. Campbell's beneficial ownership of Common Stock
is included in the table above under "Proposal No. 1--Election of Directors."
The following table shows the beneficial ownership of Common Stock by the
other Named Officers as of March 30, 2000:

<TABLE>
<CAPTION>
Shares Beneficially Percent of Common Stock
Name Owned (1) Outstanding
- ---- ------------------- -----------------------
<S> <C> <C>
James M. Deitch..................... 23,943 .05%
Robert E. Leech..................... 34,762 .07%
Mark L. Pulaski..................... 176,863 .36%
Ben G. Rooke........................ 146,950 .30%
Robert R. Wozniewicz................ 42,213 .09%
</TABLE>
- --------
(1) Shares beneficially owned include the following shares of Common Stock
which the Named Officers have the right to acquire under stock options
which are or will become exercisable within 60 days under the
Corporation's Stock Incentive Plans: Mr. Deitch, 3,080 shares; Mr. Leech,
14,104 shares; Mr. Pulaski,

20
<PAGE>

108,803 shares; Mr. Rooke, 95,357 shares and Mr. Wozniewicz, 27,870 shares.
Shares beneficially owned also include the following shares of Common Stock
in their 401(k) plan accounts for which they have the power to direct the
voting only: Mr. Deitch, 1,062 shares; Mr. Leech, 1,434 shares; Mr. Pulaski,
4,024 shares; Mr. Rooke, 3,744 shares and Mr. Wozniewicz, 2,265 shares.

Named Officer Employment Agreements

The Corporation has entered into employment agreements with certain of its
officers, including the Named Officers listed in the summary compensation
table. The employment agreements for all Named Officers are for rolling three-
year terms (five years for the CEO) and provide that the officer will continue
to be employed for the term of the agreement at not less than his current
compensation unless sooner terminated for cause or by reason of death,
disability or retirement. If the named officer's employment is terminated by
the Corporation without cause or by the officer for "good reason" (as defined
in the agreement) prior to expiration of the agreement, the officer is entitled
to a payment of one and one-half times (two times for the CEO) his highest
annual base salary within the last three years and to a continuation of
employee benefits for 18 months (24 months for the CEO). Under this scenario,
currently, each of the Named Officers would receive a payment as follows: Mr.
Campbell, $923,574; Mr. Pulaski, $527,037; Mr. Rooke, $391,500; and Mr.
Wozniewicz, $316,215. Mr. Leech's employment agreement was terminated in
connection with his resignation from the Corporation in January 2000.

If the named officer's employment terminates in certain circumstances
following a change in control of the Corporation, the officer is entitled to a
payment of two and one-half times the sum of his highest annual base salary
within the last three years and his highest annual incentive award during the
last three years; a continuation of benefits for a period of twenty-four
months; a release of the premium repayment obligation under his split-dollar
life insurance agreement; and certain outplacement services. Under this
scenario, currently, each of the Named Officers would receive a payment as
follows: Mr. Campbell, $1,575,730; Mr. Pulaski, $1,088,305; Mr. Rooke,
$796,328; and Mr. Wozniewicz, $620,498. In consideration of the agreements,
each named officer agrees not to engage in any business in competition with the
Corporation or its subsidiaries for a period of one year following any
termination of his employment, other than a termination within two years after
a change in control.

In December 1999, Mr. Deitch's employment as an executive officer of the
Corporation was terminated by mutual agreement. In settlement of all claims in
connection with Mr. Deitch's employment, including his rights under his
employment agreement, Mr. Deitch received a lump sum payment of $448,750 and a
conditional release of the $31,500 premium repayment obligation under his
split-dollar life insurance agreement.

Retirement Plans

The Corporation has a noncontributory retirement plan which covers
substantially all employees, as well as supplemental plans to pay on an
unfunded basis to certain management employees, including the Named Officers,
benefits which would have been payable under the principal retirement plan but
for certain limitations contained in the Internal Revenue Code or the decision
of the officer to defer compensation otherwise subject to the plan. The
following table shows the combined annual retirement benefits payable under
these plans to participants, including the Named Officers, in selected
compensation and years of service classifications:

<TABLE>
<CAPTION>
5-Year Years of Service
Average ----------------------------------------------------------------
Compensation 10 15 20 25 30 35
- ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
200,000 $ 30,851 $ 46,277 $ 61,702 $ 77,128 $ 92,553 $107,979
300,000 47,351 71,027 94,702 118,378 142,053 165,729
400,000 63,851 95,777 127,702 159,628 191,553 223,479
500,000 80,351 120,527 160,702 200,878 241,053 281,229
600,000 96,851 145,277 193,702 242,128 290,553 338,979
700,000 113,351 170,027 226,702 283,378 340,053 396,729
800,000 129,851 194,777 259,702 324,628 389,553 454,479
</TABLE>

21
<PAGE>

The amounts shown in the table are straight-life annuity amounts, assuming
normal retirement at age 65 and no election of any available survivorship
option, and are not subject to offset for social security or other benefits
received by the participant. Benefits under the plans vest after five years
and are based on the participant's average compensation for the five highest
years in the ten years immediately preceding retirement, with compensation
including substantially all taxable and deferred compensation. The 1999
covered compensation for the Named Officers and their years of credited
service at December 31, 1999 are as follows: Mr. Campbell, $461,787 (27
years); Mr. Pulaski, $351,358 (16 years); Mr. Rooke, $261,000 (17 years); Mr.
Deitch, $241,336 (7 years); Mr. Leech, $200,781 (9 years); and Mr. Wozniewicz,
$210,810 (24 years).

Certain Transactions

Director Devorris is a limited partner in a partnership that leases office
space at market rate to the Corporation and its bank subsidiary. Mr. Devorris'
limited partnership interest is 50%. The total rent paid by the Corporation
and the bank in 1999 was $610,200. Director Brubaker is a partner in a law
firm that provided legal services to the Corporation in 1999.

As described above in the Human Resources Committee Report under "Other
Executive Benefits," the Corporation has made loans to certain of its
executive officers under the Management Stock Ownership Program. The largest
amounts of such loans outstanding to the Named Officers since January 1, 1999
and the amounts of such loans currently outstanding are as follows: Mr.
Campbell, $1,380,000; Mr. Pulaski, $699,983; Mr. Rooke, $389,976; and Mr.
Wozniewicz, $209,988. The loans to Mr. Deitch and Mr. Leech were repaid
following termination of their employment. The largest amount of such loan
outstanding since January 1, 1999 was as follows: Mr. Deitch, $249,983; and
Mr. Leech, $199,995. No interest is charged on loans made under this program,
but interest is imputed to the officer and deductible by the Corporation for
federal income tax purposes. The amounts of interest income imputed to the
Named Officers in 1999 in connection with loans under the program are included
in the "All Other Compensation" column in the Summary Compensation Table under
"Executive Compensation" above.

The Corporation's bank subsidiary has made loans in the ordinary course of
business to certain directors and executive officers of the Corporation,
including members of their immediate families and corporations or other
organizations in which such persons have a beneficial interest of 10% or more
or are associated as officers, partners or trustees. Such loans were made on
substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons
and do not involve more than the normal risk of collectibility or present
other unfavorable features.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Securities Exchange Act of 1934 requires that directors
and certain officers of the Corporation file reports with the SEC with respect
to changes in their beneficial ownership of the Common Stock. Based solely
upon a review of the copies of the reports of its directors and officers
furnished to the Corporation and written representations by certain persons
that reports on Form 5 were not required, the Corporation believes that all
1999 Section 16(a) filing requirements applicable to its directors and
officers were complied with.

SHAREHOLDER PROPOSALS
Proposals 5A and 5B

Set forth below are two proposals received from shareholders. The first
proposal (Shareholder Proposal 5A) recommends to the Board of Directors that
it engage an investment banking firm to explore a sale or merger of the
Corporation. The second proposal (Shareholder Proposal 5B) recommends to the
Board that it take steps to remove from the Corporation's Restated Articles of
Incorporation and Bylaws provisions previously approved by the shareholders in
order to protect the Corporation and its shareholders from hostile takeover
abuses. These proposals are included in the Proxy Statement in accordance with
the rules of the Securities and Exchange Commission and are not endorsed by
the Board of Directors. The Board of Directors recommends that shareholders
vote AGAINST approval of Shareholder Proposal 5A and AGAINST approval of
Shareholder Proposal 5B.

22
<PAGE>

Shareholder Proposal 5A is similar and Shareholder Proposal 5B is identical
to proposals which were submitted by the same persons last year and rejected
by the shareholders at the 1999 Annual Meeting. As with the 1999 proposals,
the Board of Directors opposes both of this year's proposals because it
believes that they are based on a faulty premise. Both proposals are based on
the premise that the Corporation should be promptly sold because, in the view
of the proponents, such a sale would enable them to realize a premium over the
current market price of the Corporation's stock. The Board does not contest
the proponents' assertion that a sale of the Corporation might produce a
short-term profit to shareholders in the form of a premium over current market
prices. The Board strongly disagrees, however, that this fact alone, even if
true, is any indication that an immediate sale of the Corporation would be
desirable or in the best interests of the Corporation and its shareholders. If
it were, then there would be scarcely a corporation in the country that should
not be sold immediately.

A decision as to whether or when to sell a company such as the Corporation
involves a complex balancing of a variety of factors. It involves estimating
the short-term returns that might be achieved if the Corporation were sold in
the current market and in its current financial and business posture. It
involves comparing these with the long-term returns which might be achieved as
an independent company through execution of the Corporation's business plan or
through a future sale of the Corporation under different market conditions or
after execution of the business plan had changed the financial or business
posture of the Corporation. It involves considering the effects of a decision
to sell the Corporation, and the manner in which such a decision is announced
and executed, on the employee and customer base which represent the inherent
value of the Corporation to an even greater extent than its financial assets.

Because the making of such decisions requires detailed knowledge of the
Corporation's business, plans, prospects and the markets in which it operates
and the time to study and consider the myriad of factors involved, the
Pennsylvania Business Corporation Law places the responsibility for making
decisions as to whether, when and how to sell the Corporation in the Board of
Directors, subject to the ultimate control of the shareholders through their
power to elect the members of the Board. The statutes also place upon the
Board of Directors the fiduciary duty to make such decisions only in the
manner that it believes in good faith, after a proper investigation, to be in
the best interests of the Corporation.

In the exercise of its fiduciary duties to the Corporation, the Board does
consider the sale of the Corporation as an alternative for maximizing long-
term shareholder value. The Board regularly reviews with management mergers in
the financial industry and potential combinations involving the Corporation.
The Corporation also regularly asks investment bankers and other professionals
to make presentations to the Board concerning mergers, the consolidation of
the banking industry in general and the future of the industry. Finally, the
Board has in the past and is prepared in the future to carefully and fairly
consider and evaluate any good faith offer to purchase or merge with the
Corporation.

While the Board regularly receives advice from investment banking firms, the
Board has not engaged and does not presently intend to engage an investment
banker for the specific purpose of selling the Corporation or evaluating the
price that could be received in a sale or merger. To publicly announce such an
engagement, as does Shareholder Proposal 5A, would be viewed in the industry
in the same manner as hanging a "for sale" sign on the Corporation's front
door.

Even if the Board had determined, which it has not, that an immediate sale
of the Corporation in the current environment offers the best long-term
prospects for the Corporation and its shareholders and other constituents, the
Board would not go about achieving a sale in this manner. In the opinion of
the Board of Directors, such an announcement could only be expected to have
the immediate effect of lowering the price that could be achieved in any sale
or merger transaction that might otherwise have occurred. In addition, the
uncertainty that such an announcement would engender among the Corporation's
employees and customers would produce an immediate and ongoing deterioration
in the business and value of the Corporation. Any sale that might be achieved
after an announcement such as that contemplated by Shareholder Proposal 5A
could be the equivalent of a "going out of business" sale. The Board believes
that the Corporation's franchise has significant long-term value. The Board
does not believe that a fire sale is the manner in which to achieve that value
for the shareholders.

23
<PAGE>

At the Annual Meeting of Shareholders in 1987, the shareholders approved a
series of amendments to the Corporation's Restated Articles of Incorporation
which had the expressed purpose of helping to assure that any person seeking
to acquire control of the Corporation would have to negotiate with the Board
of Directors and could not unilaterally determine the price the Corporation's
shareholders would receive. The amendments approved by the shareholders
divided the Board of Directors into three classes, with one class elected at
each Annual Meeting,/3/ eliminated cumulative voting in the election of
directors/4/ and required special shareholder votes for mergers and other
business combinations or amendments to the Restated Articles or Bylaws which
were not approved by the Board./5/ Shareholder Proposal 5B recommends that the
Board take action to repeal these provisions/6/ because they present an
"obstacle for a suitor of the Company who is not approved by the Board of
Directors but who seeks to acquire the Company at a stock price above current
market prices."

The Board agrees with the proponent that these provisions may present an
obstacle to any person who seeks to avoid negotiating with the Board of
Directors concerning the price and terms upon which control of the Corporation
may be acquired. That is precisely their purpose. The Board disagrees,
however, with the proponent's characterization of these provisions as "anti-
takeover" defenses. The purpose and effect of these provisions is not to
prevent a takeover of the Corporation. Rather, their purpose and effect is to
help provide the Board of Directors with the negotiating leverage necessary
for it to fulfill its fiduciary duty to assure that any takeover of the
Corporation which does occur is not merely "at a stock price above current
market prices," but at a price and upon terms which reflect the true long-term
value of the Corporation's franchise.

For the reasons indicated above the Board of Directors unanimously
recommends that the shareholders vote AGAINST approval of Shareholder Proposal
5A and AGAINST approval of Shareholder Proposal 5B. These proposals, and the
statements of the proponents in support of the proposals, are quoted below.
The Corporation assumes no responsibility for the content of these materials.
The names of the proponents and the numbers of shares which they hold will be
furnished to any shareholder upon request to the Corporate Secretary at the
address indicated on page 1.

SHAREHOLDER PROPOSAL 5A:

"PROPOSAL

"RESOLVED, it is recommended that the Board of Directors of Keystone
Financial, Inc. ('the "Company") engage an investment banking firm to advise
the Company on ways to maximize shareholder value, including the sale or
merger of the Company.

"YOUR VOTE IS IMPORTANT. PLEASE VOTE YES ON THIS PROPOSAL."

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST"
APPROVAL OF SHAREHOLDER PROPOSAL 5A.

- --------
/3/Article 8.1 of the Restated Articles, the substance of which is repeated
in Sections 2.01 and 2.10 of the Bylaws.

/4/Article 12 of the Restated Articles.

/5/Article 9 of the Restated Articles (mergers and other business
combinations), Article 10.3 of the Restated Articles (amendment of the
Restated Articles) and Article 8.3 of the Restated Articles amendment of
the Bylaws). In each case, the special vote required is 75% of the
outstanding voting shares plus a majority of the shares which are not
beneficially owned by any 20% shareholder. Section 9.01 of the Bylaws
repeats the substance of Article 8.3 of the Restated Articles concerning
amendment of the Bylaws, and Article 10.2 of the Restated Articles gives
the Board of Directors the power to interpret the Restated Articles and to
make any determinations required to implement their provisions.

/6/Proposal 5B also seeks repeal of Section 1.02 of the Bylaws, which
authorizes the Chairman, the President or the Board of Directors to call a
special meeting of shareholders, and Section 2.04 of the Bylaws, which
authorizes the Chairman, the President or one-fourth of the members of the
Board to call a special meeting of the Board of Directors. Under the
Pennsylvania Business Corporation Law, if these provisions were repealed,
then only a majority of the Board of Directors would have the authority to
call special meetings of the shareholders or the Board.

24
<PAGE>

SHAREHOLDER PROPOSAL 5B:

"Shareholder Proposal

"Resolved, it is recommended that the Board of Directors of Keystone
Financial, Inc. make every effort, unless precluded by applicable state or
federal law, to remove the following "anti-takeover' defenses from the
Company's Certificate of Incorporation and Bylaws:

"1. Article 8.1 (b) of the Company's Certificate of Incorporation.

"2. Article 8.1 (c) of the Company's Certificate of Incorporation.

"3. Article 8.1 (d) of the Company's Certificate of Incorporation.

"4. Article 8.3 of the Company's Certificate of Incorporation.

"5. Article 9 of the Company's Certificate of Incorporation.

"6. Article 10.2 of the Company's Certificate of Incorporation.

"7. Article 10.3 of the Company's Certificate of Incorporation.

"8. Article 12 of the Company's Certificate of Incorporation.

"9. Article I, Section 1.02 of the Company's Bylaws.

"10. Article II, Section 2.01 of the Company's Bylaws.

"11. Article II, Section 2.04 of the Company's Bylaws.

"12. Article II, Section 2.10 of the Company's Bylaws.

"13. Article IX, Section 9.01 of the Company's Bylaws.

"Supporting Statement

"The Certificate of Incorporation and Bylaws of Keystone Financial, Inc.
(the "Company') presently contain "anti-takeover' defenses which place
considerable restrictions on the ability of the stockholders to effectuate a
proposed takeover of the company that has not been approved by the Board of
Directors. These anti-takeover defenses may deprive stockholders the
opportunity to receive a substantial premium for their shares of stock. With
the anti-takeover defenses in place, potential takeover attempts, however
lucrative to the stockholders, stand little chance of success if the Board of
Directors decides, for whatever reason, to withhold its approval.

"The existence of these defenses may present an insurmountable obstacle for
a suitor of the Company who is not approved by the Board of Directors but who
seeks to acquire the Company at a stock price above current market prices.
These provisions may also create negative connotations and serve to discourage
other suitors from even pursuing a takeover of the company. Moreover, these
provisions restrict the stockholders' ability to alter the composition of the
Board of Directors.

"Please join me in voting Yes for this proposal."

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "AGAINST"
APPROVAL OF SHAREHOLDER PROPOSAL 5B.

Vote Required

Approval of either shareholder proposal would require a majority of the
votes cast on the proposal at the Annual Meeting by the holders of Common
Stock voting in person or by proxy. An abstention or a broker non-vote is not
considered a vote cast and would not be included in determining the number of
votes required for approval.

25
<PAGE>

SHAREHOLDER PROPOSALS AND NOMINATIONS

The Bylaws of the Corporation require that any shareholder intending to
present a proposal for action at an Annual Meeting must give written notice of
the proposal, containing the information specified in the Bylaw, so that it is
received by the Corporation not later than the date of the notice deadline
determined under the Bylaw. This notice deadline will generally be 120 days
prior to the anniversary date of the Corporation's Proxy Statement for the
previous year's annual meeting, or December 8, 2000 for the Corporation's
Annual Meeting in 2001.

The Bylaw described in the preceding paragraph does not affect the right of
a shareholder to request inclusion of a shareholder proposal in the
Corporation's Proxy Statement pursuant to SEC Rule 14a-8 or to present for
action at an Annual Meeting any proposal so included. Rule 14a-8 requires that
notice of a shareholder proposal requested to be included in the Corporation's
Proxy Statement pursuant to the Rule must also generally be received by the
Corporation not later than 120 days prior to the anniversary date of the
Corporation's Proxy Statement for the previous year's Annual Meeting. For the
Corporation's Annual Meeting in 2001, this deadline would also be December 8,
2000.

The Corporation's Restated Articles of Incorporation require that any
shareholder who intends to nominate a candidate for election as a director of
the Corporation must furnish a written notice of the nomination, containing
the information specified in the Articles, so that it is received by the
Corporation not later than 120 days in advance of the meeting at which the
election is to be held.

The notices of shareholder proposals and nominations described under this
caption must be given to the Secretary of the Corporation at the address set
forth on page 1. A copy of the Bylaw and Articles provisions described above
will be furnished to any shareholder upon written request to the Secretary at
the same address.

OTHER MATTERS

As of the date of this Proxy Statement, no matters are expected to be
presented to the shareholders for action at the Annual Meeting other than
those referred to in the Notice of Meeting. However, if any further business
should properly come before the meeting, the persons named in the accompanying
proxy will be authorized to vote on such matters in accordance with their best
judgment.

ANNUAL REPORT ON FORM 10-K

Upon written request to the Investor Relations Department of the
Corporation, at the address set forth on page 1, the Corporation will furnish
without charge to any shareholder whose proxy is solicited hereby a copy of
the Corporation's 1999 Annual Report on Form 10-K to the Securities and
Exchange Commission, including the financial statements and schedules thereto.

26
<PAGE>

EXPENSES OF SOLICITATION

The cost of solicitation of proxies for the Annual Meeting will be paid by
the Corporation. The Corporation has retained the firm of Georgeson
Shareholder Communications, Inc. to assist in the solicitation of proxies for
the Annual Meeting. For these services, Georgeson will receive a fee not to
exceed $10,000, plus $4 per completed call in the event of telephone
solicitation, and reimbursement for its out-of-pocket expenses. Brokerage
houses, nominees, fiduciaries and other custodians will be requested to
forward proxy materials to beneficial owners of shares held of record by them
and will be reimbursed by the Corporation for their expenses. In addition to
solicitation by mail, directors, officers and employees of the Corporation and
its subsidiaries may solicit proxies in person or by telephone or otherwise.
Such persons will receive no additional compensation for these services.

By the Order of the Board of Directors,
/s/ Ben G. Rooke
Ben G. Rooke, Secretary

April 7, 2000

27
<PAGE>

As Adopted March 23, 2000

KEYSTONE FINANCIAL, INC.

2000 EMPLOYEE STOCK PURCHASE PLAN

The purposes of the 2000 Employee Stock Purchase Plan (the "Plan") are to
provide eligible employees of Keystone Financial, Inc. (the "Corporation") and
its designated Subsidiaries a convenient opportunity to purchase shares of
Common Stock, par value $2.00 per share, of the Corporation (the "Common Stock")
through annual offerings financed by payroll deductions and to provide a stock
ownership incentive for such employees to promote the continued success of the
Corporation. For the purposes of the Plan, the term "Subsidiary" means any
corporation in an unbroken chain of corporations beginning with the Corporation,
if each of the corporations other than the last corporation in the unbroken
chain owns stock possessing at least fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in the chain. The Plan is intended to qualify as an "employee stock purchase
plan" under section 423 of the Internal Revenue Code of 1986 (the "Code"). The
provisions of the Plan shall accordingly be construed so as to extend and limit
participation in a manner consistent with the requirements of section 423 of the
Code and the regulations thereunder.

SECTION 1
Administration

The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Corporation (the "Board") and consisting of not
less than two members of the Board.

The Committee shall keep records of action taken at its meetings. A
majority of the Committee shall constitute a quorum at any meeting, and the acts
of a majority of the members present at any meeting at which a quorum is
present, or acts unanimously approved in writing by the Committee, shall be the
acts of the Committee.

The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan shall be subject to the determination of the Committee,
which shall be final and binding.

SECTION 2
Eligibility

All full-time regular employees of the Corporation and any Subsidiary whose
employees are authorized by the Committee to participate in the Plan shall be
eligible to participate in the Plan during any Purchase Period, as defined in
Section 4, provided they have at least 90 days' continuous service with the
Corporation or a Subsidiary immediately prior to the first day of such Purchase
Period. The term "full-time regular employees" shall mean employees whose
customary employment is (a) more than 20 hours per week and (b) more than 5
months in any calendar year. For purposes of determining whether an employee
has at least 90 days' continuous service with the Corporation or a Subsidiary,
prior service with any other corporation or entity
<PAGE>

shall be counted toward such requirement if as a result of a merger, acquisition
or similar transaction such entity (a) becomes a Subsidiary whose employees are
authorized to participate in the Plan or (b) becomes part of the Corporation or
an existing Subsidiary whose employees are authorized to participate in the
Plan.

Notwithstanding any other provision of the Plan, no employee shall be
granted an option under the Plan if such employee, immediately after the option
is granted, owns stock possessing five percent (5%) or more of the total
combined voting power or value of all classes of stock of the Corporation or any
Subsidiary. For purposes of the preceding sentence, the rules of section 424(d)
of the Code shall apply in determining the stock ownership of an employee, and
stock which the employee may purchase under outstanding options shall be treated
as stock owned by the employee.

SECTION 3
Shares Available Under the Plan

The aggregate number of shares of Common Stock which may be issued under
the Plan is 1,000,000 shares, subject to adjustment and substitution as set
forth in Section 8. The shares which may be issued under the Plan may be either
authorized but unissued shares or treasury shares or partly each, as shall be
determined from time to time by the Board.

SECTION 4
Purchase Periods; Grant of Stock Options

Unless otherwise determined by the Committee, (a) there shall be five (5)
annual Purchase Periods under the Plan, (b) each Purchase Period shall be of
twelve (12) months duration beginning on July 1 and ending on the following June
30 and (c) the first Purchase Period shall commence on July 1, 2000. In no
event shall the duration of any Purchase Period exceed twenty-seven (27) months.

On the first day of each Purchase Period, each employee participating in
the Plan on such date shall be granted an option to purchase a number of full
shares of Common Stock (subject to adjustment as provided in Section 8)
determined by dividing (a) thirty percent (30%) of the employee's Regular
Compensation, as defined in Section 5, for the twelve months immediately
preceding the first day of the Purchase Period, by (b) eighty-five percent (85%)
of the fair market value of a share of Common Stock on the first day of such
Purchase Period, determined as provided in Section 7. To the extent an option
to purchase shares of Common Stock is not exercised at the end of the Purchase
Period as provided for in Section 6, the option shall not accrue and shall
terminate.

If as a result of a merger, acquisition or similar transaction occurring
after the first day of the then current Purchase Period a corporation or other
entity (a) becomes a Subsidiary whose employees are authorized to participate in
the Plan or (b) becomes part of the Corporation or an existing Subsidiary whose
employees are authorized to participate in the Plan, the Committee may authorize
a special Purchase Period to accommodate the employees affected by such
transaction, provided that such special Purchase Period is consistent with the
requirements of section 423 of the Code and the regulations thereunder.

-2-
<PAGE>

Notwithstanding any other provision of the Plan, no employee participating
in the Plan shall be granted an option which permits the employee's rights to
purchase stock under all employee stock purchase plans under section 423 of the
Code of the Corporation or any Subsidiary to accrue at a rate which exceeds
$25,000 in fair market value of Common Stock, determined at the time such option
is granted, or such other maximum as may be prescribed for qualifying employee
stock purchase plans under section 423 of the Code, for each calendar year in
which such option is outstanding at any time.

SECTION 5
Payroll Deductions

An eligible employee may become a participant in the Plan for a Purchase
Period by completing the authorization for a payroll deduction on the form
provided by the Corporation and filing it with the appropriate, designated
Corporation employee by the enrollment deadline established for the Purchase
Period. An eligible employee who was a participant in the Plan (or, in the case
of the first Purchase Period under the Plan, the 1995 Employee Stock Purchase
Plan) at the close of the preceding Purchase Period shall automatically be
enrolled as a participant in the Plan for the succeeding Purchase Period, if
any, unless written notice of the employee's election not to participate for the
succeeding Purchase Period is received by the designated Corporation employee by
the enrollment deadline established for the Purchase Period.

At the time an employee files an authorization for payroll deduction, the
employee shall elect to have deductions made from the employee's pay for each
pay period ending during the Purchase Period at a rate of not less than one
percent (1%) and not more than twenty percent (20%), in whole percentages, of
the employee's Regular Compensation for such pay periods. Unless a new payroll
deduction authorization form changing the employee's prior payroll deduction is
received by the designated Corporation employee by the enrollment deadline for a
Purchase Period, an employee who is automatically reenrolled in the Plan for a
Purchase Period by virtue of having been a participant for the preceding
Purchase Period shall be deemed to have elected the same level of payroll
deductions for the new Purchase Period as was in effect for the participant as
of the close of the preceding Purchase Period. For this purpose, Regular
Compensation shall mean the sum of (a) wages, as defined in Section 3401 of the
Code, paid to an employee, including salary and wages, overtime, Management
Incentive Compensation Plan payments, incentive bonuses and awards (whether paid
in cash or in property) and Flex earnings paid in cash, but excluding the items
set forth in the next succeeding sentence to the extent they are included in
such definition of wages, and (b) any contribution made to the Keystone
Financial, Inc. 401(k) Savings Plan pursuant to a salary reduction agreement
(exclusive of the employer's matching contribution). Regular Compensation shall
exclude (a) any fringe benefits not specifically listed in the preceding
sentence, (b) relocation reimbursements and resettlement allowances and any
related payments, (c) contributions or benefits (except as specifically listed
in the preceding sentence) under any employee benefit plans maintained by the
Corporation or a subsidiary (including the Supplemental Retirement Income Plan
and the Savings Restoration Plan) and (d) any income realized as a result of
participation in the Plan, the Corporation's Stock Incentive Plan or any similar
plan maintained by the Corporation or a subsidiary. Notwithstanding the
foregoing, no payroll deduction shall be made pursuant to a payroll deduction
authorization form filed by any employee who has made a hardship withdrawal from
the Keystone Financial, Inc. 401(k) Savings Plan for a period of 12 months from
the date of such

-3-
<PAGE>

hardship withdrawal if the hardship withdrawal has been made in reliance on
Treasury Regulation (S) 1.401(k)-1(d)(2)(iv)(B) or any successor regulation.

Payroll deductions made under the Plan need not be set aside or segregated
from other corporate funds of the Corporation or any Subsidiary and may be used
for any corporate purpose. With respect to such payroll deductions and any
interest accrued thereon, the rights of participants shall be those of an
unsecured general creditor.

An employee stock purchase account will be established for each employee
participating in the Plan, and payroll deductions made pursuant to this Section
5 shall be credited to the individual employee's stock purchase account. The
Corporation shall also credit each employee's stock purchase account with
interest at such rate and at such times as the Committee may from time to time
determine. Unless otherwise determined by the Committee, interest shall be
credited to employee stock purchase accounts at the end of each pay period
during a Purchase Period, on the last day of a Purchase Period, on the date of
withdrawal as provided for below in this Section 5, on the date of termination
of employment as provided in Section 9 and on the date of termination of the
Plan.

Subject to such rules, regulations or procedures as may be adopted by the
Committee, an employee may at any time increase, decrease or suspend the
employee's payroll deduction by filing a new payroll deduction authorization
form. The change shall be effective as soon as practicable but in no event
shall it become effective earlier than the first pay period ending after receipt
of the form. Unless otherwise provided in rules, regulations or procedures
established by the Committee, a payroll deduction may be changed only once
during a Purchase Period. In addition, all payroll deductions for an employee
will be automatically suspended for a period of 12 months from the date of a
hardship withdrawal by the employee from the Keystone Financial, Inc. 401(k)
Savings Plan if the hardship withdrawal has been made in reliance on Treasury
Regulation (S) 1.401(k)-1(d)(2)(iv)(B) or any successor regulation.

An employee may at any time prior to the last day of the Purchase Period
and for any reason permanently withdraw the balance accumulated in the
employee's stock purchase account, including interest accrued thereon, and
thereby withdraw from participation in the Plan. An employee electing to
withdraw must sign and deliver a notice of withdrawal as prescribed by the
Committee, and the withdrawal shall be effective as of the date of receipt of
the notice by the designated Corporation employee. Payroll deductions shall
cease and the amounts credited to the employee's stock purchase account shall be
paid to the employee as soon as practicable after receipt of the notice of
withdrawal. The employee may thereafter elect to participate in the Plan for a
subsequent Purchase Period but may not again elect participation for the
Purchase Period including the date of withdrawal. Partial withdrawals shall not
be permitted.

SECTION 6
Purchase of Shares

Subject to Section 9, and unless a notice of withdrawal has been received
prior to such date as provided in Section 5, an employee having a balance in the
employee's stock purchase account on the last day of a Purchase Period at least
equal to the Purchase Price, as defined in Section 7, of a full share of Common
Stock shall thereby automatically exercise the employee's option to purchase
shares of Common Stock under the Plan. The number of shares purchased by

-4-
<PAGE>

each participating employee shall be determined by dividing (a) the balance in
the employee's stock purchase account by (b) the Purchase Price for such
Purchase Period, provided that the number of shares purchased shall not exceed
the maximum number of shares subject to the option granted to the employee as
provided in Section 4. No fractional shares shall be purchased. Any balance in
an employee's stock purchase account after the exercise of the option and
purchase of full shares shall be paid to the employee as soon as practicable,
except that if an employee is a participant in the Plan for the succeeding
Purchase Period, if any, and the employee does not notify the designated
Corporation employee prior to the deadline established by the Corporation or, if
none, prior to the first day of the succeeding Purchase Period that any such
balance should be paid to the employee, any balance in the employee's stock
purchase account which was not applied to the purchase of Common Stock because
it was less than the Purchase Price of a full share shall remain in the
employee's stock purchase account and be carried over to the succeeding Purchase
Period.

Certificates for full shares shall be issued to purchasing employees as
soon as practicable after the end of each Purchase Period. Certificates shall
be registered in the name of the employee, or if the employee so indicates on
the employee's payroll deduction authorization form, in the employee's name
jointly with a member of the employee's family, with the right of survivorship,
or in the name of the employee's spouse. As of the date of exercise, the
person(s) in whose name(s) the Certificates are to be registered shall be
considered for all purposes to be the owner of the shares with respect to which
the stock options have been exercised.

In lieu of issuing certificates, the Corporation may deposit shares
purchased under the Plan to accounts established for participating employees
with a broker or other agent, including a subsidiary of the Corporation.

SECTION 7
Purchase Price

The Purchase Price of shares of Common Stock under the Plan for each
Purchase Period shall be the lesser of (a) an amount equal to eight-five percent
(85%) of the fair market value of the Common Stock as of the first day of such
Purchase Period, the day the options are granted under the Plan, or (b) an
amount equal to eighty-five percent (85%) of the fair market value of the Common
Stock as of the last day of the Purchase Period, the day the options may be
exercised under the Plan.

Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(a) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of the Common Stock as quoted in the NYSE-
Composite Transactions listing for such date, (b) if the Common Stock is not
listed on such exchange, the highest and lowest sales prices per share of Common
Stock for such date on (or on any composite index including) the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 on which the Common Stock is listed, or (c) if the Common Stock is not
listed on any such exchange, the highest and lowest sales prices per share of
Common Stock for such date on The NASDAQ Stock Market or any successor
("NASDAQ"). If

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<PAGE>

there are no such sale price quotations for the date as of which fair market
value is to be determined but there are such sale price quotations within a
reasonable period both before and after such date, then fair market value shall
be determined by taking a weighted average of the means between the highest and
lowest sales prices per share of Common Stock as so quoted on the nearest date
before and the nearest date after the date as of which fair market value is to
be determined. The average should be weighted inversely by the respective
numbers of trading days between the selling dates and the date as of which fair
market value is to be determined. If there are no such sale price quotations on
or within a reasonable period both before and after the date as of which fair
market value is to be determined, then fair market value of the Common Stock
shall be the mean between the bona fide bid and asked prices per share of Common
Stock as so quoted for such date on NASDAQ, or if none, the weighted average of
the means between such bona fide bid and asked prices on the nearest trading
date before and the nearest trading date after the date as of which fair market
value is to be determined, if both such dates are within a reasonable period.
The average is to be determined in the manner described above in this Section 7.
If the fair market value of the Common Stock cannot be determined on the basis
previously set forth in this Section 7 for the date as of which fair market
value is to be determined, the Committee shall in good faith determine the fair
market value of the Common Stock on such date.

SECTION 8
Adjustment and Substitution of Shares

If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock then
subject to any outstanding stock options and the number of shares of Common
Stock which may be issued under the Plan but are not then subject to outstanding
stock options shall be adjusted by adding thereto the number of shares of Common
Stock which would have been distributable thereon if such shares had been
outstanding on the date fixed for determining the shareholders entitled to
receive such stock dividend or distribution.

Subject to the Board's ability to terminate the Plan pursuant to Section
11, if the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, whether through
reorganization, reclassification, recapitalization, stock split-up, combination
of shares, merger or consolidation, then there shall be substituted for each
share of Common Stock subject to any then outstanding stock option and for each
share of Common Stock which may be issued under the Plan but which is not then
subject to any outstanding stock option, the number and kind of shares of stock
or other securities, or cash or other property, into which each outstanding
share of Common Stock shall be so changed or for which each such share shall be
exchangeable. In lieu of any such adjustment, the Board or the Committee may
set a date at or prior to the date the adjustment would otherwise be made, which
date shall be treated as the last day of the Purchase Period then in progress
for purposes of the pricing and exercise of all options then outstanding.

In case of any adjustment or substitution as provided for in this Section
8, the Committee shall equitably adjust the formula for determining the Purchase
Price of outstanding stock options in accordance with the requirements of
sections 423 and 424 of the Code.

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<PAGE>

No adjustment or substitution provided for in this Section 8 shall require
the Corporation to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.

If any adjustment or substitution provided for in this Section 8 requires
the approval of shareholders in order to enable the Corporation to grant stock
options under the Plan, then no such adjustment or substitution shall be made
without the required shareholder approval. Notwithstanding the foregoing, if
the effect of any such adjustment or substitution would be to cause any
outstanding option granted under the Plan to fail to continue to qualify as an
option subject to sections 421 and 423 of the Code or to cause a modification,
extension or renewal of such option within the meaning of section 424 of the
Code, the Committee may elect that such adjustment or substitution not be made
but rather shall use reasonable efforts to effect such other adjustment of each
then outstanding stock option as the Committee, in its discretion, shall deem
equitable and which will not result in any disqualification, modification,
extension or renewal (within the meaning of section 424 of the Code) of such
outstanding stock option.

SECTION 9
Termination of Employment, Transferability

Participation in the Plan shall terminate as of the date of termination of
employment of a participating employee (whether by death, retirement, disability
or otherwise). In the event of a participating employee's termination of
employment on or before the last day of a Purchase Period, payroll deductions
shall be terminated as soon as practicable, no shares shall be purchased for
such employee under Section 6 and the balance in the employee's stock purchase
account shall be paid as soon as practicable to the employee, or in the event of
the employee's death, to the employee's estate. The Committee shall have the
power to determine the date of an employee's retirement or other termination of
employment, and any such determination by the Committee shall be final and
binding. The Corporation shall have no liability to any person in the event
shares are purchased for a deceased employee under Section 6 prior to receipt by
the designated Corporation employee of notice of the death of the participating
employee.

Rights granted under the Plan may not be assigned, transferred, pledged or
otherwise disposed of in any way by a participating employee, other than on
death as described above. Any other attempt to assign, transfer, pledge or
otherwise dispose of rights under the Plan shall be without effect, except that
the Corporation may treat such act as a notice of withdrawal from participation
in the Plan in accordance with Section 5. Stock options granted under the Plan
are not transferable by the participating employee otherwise than by Will or the
laws of descent and distribution, and are exercisable during the employee's
lifetime only by the employee.

SECTION 10
Effect of the Plan on the Rights of Employees and Employer

Nothing in the Plan or any stock option under the Plan shall give any
employee any right to continue in the employ of the Corporation or any
Subsidiary or interfere in any way with the rights of the Corporation or any
Subsidiary to terminate the employment of any employee at any time.

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<PAGE>

SECTION 11
Amendment and Termination

The right to amend the Plan at any time and from time to time and the right
to terminate the Plan at any time are hereby specifically reserved to the Board,
provided that no amendment of the Plan shall, without shareholder approval, (a)
increase the total number of shares which may be issued under the Plan, except
as provided in Section 8, (b) amend the first paragraph of Section 7 to lower
the minimum Purchase Price or (c) make any changes in the class of corporations
whose employees may be offered options under the Plan.

The Plan and all rights of employees under the Plan shall terminate on the
earlier of:

(a) July 1, 2005;

(b) the date the Plan is terminated by the Board, in its discretion;
or

(c) the last day of the Purchase Period that participating employees
become entitled to purchase a number of shares equal to or greater than the
number of shares remaining available for purchase under the Plan. If the
number of shares so purchasable is greater than the shares remaining
available, the available shares shall be allocated by the Committee among
the participating employees in such manner as it deems fair and which
complies with the requirements under section 423 of the Code for employee
stock purchase plans. In the event at any time during a Purchase Period it
appears that the shares purchasable with authorized payroll deductions may
exceed the number of shares remaining available for purchase under the
Plan, the Committee shall have discretion to reduce the payroll deductions
authorized by participating employees in such manner as it deems fair and
which complies with the requirements under section 423 of the Code for
employee stock purchase plans. The Corporation shall provide written
notice to each affected employee of any such reduction.

As soon as practicable following termination of the Plan, all amounts
credited to the stock purchase accounts of participating employees, together
with any interest accrued thereon, shall, to the extent not applied to the
purchase of shares as provided in subparagraph (c) above, be refunded to the
participating employees.

SECTION 12
Effective Date of Plan

The effective date and date of adoption of the Plan shall be March 23,
2000, the date of adoption of the Plan by the Board, provided that such adoption
of the Plan by the Board is approved by a majority of the votes cast at a duly
called and convened meeting of shareholders held on or prior to March 23, 2001
at which a quorum representing a majority of the outstanding voting stock of the
Corporation is, either in person or by proxy, present and voting.
Notwithstanding any other provision contained in the Plan, no stock option
granted under the Plan may be exercised until after such shareholder approval.

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<PAGE>

As Adopted March 23, 2000

KEYSTONE FINANCIAL, INC.

2000 NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN

The purposes of the 2000 Non-Employee Directors' Stock Option Plan (the
"Plan") are to promote the long-term success of Keystone Financial, Inc. (the
"Corporation") by creating a long-term mutuality of interests between the non-
employee Directors and shareholders of the Corporation, to provide an additional
inducement for such Directors to remain with the Corporation and to provide a
means through which the Corporation may attract able persons to serve as
Directors of the Corporation.

SECTION 1
Administration

The Plan shall be administered by a Committee (the "Committee") appointed
by the Board of Directors of the Corporation (the "Board") and consisting of not
less than two members of the Board.

The Committee shall interpret the Plan and prescribe such rules,
regulations and procedures in connection with the operations of the Plan as it
shall deem to be necessary and advisable for the administration of the Plan
consistent with the purposes of the Plan. All questions of interpretation and
application of the Plan, or as to stock options granted under the Plan, shall be
subject to the determination of the Committee, which shall be final and binding.

Notwithstanding the above, the selection of the Directors to whom stock
options are to be granted, the timing of such grants, the number of shares
subject to any stock option, the exercise price of any stock option, the periods
during which any stock option may be exercised and the term of any stock option
shall be as hereinafter provided, and the Committee shall have no discretion as
to such matters.

SECTION 2
Shares Available under the Plan

The aggregate net number of shares which may either be issued pursuant to
or be subject to outstanding stock options (including both stock options granted
under Section 3 and reload options) granted under the Plan is limited to 500,000
shares of Common Stock, par value $2.00 per share, of the Corporation (the
"Common Stock"), subject to adjustment and substitution as set forth in Section
5. If any stock option is exercised by delivering previously owned shares in
payment of the option price, the number of shares so delivered to the
Corporation shall again be available for purposes of the Plan. If any stock
option granted under the Plan is cancelled by
<PAGE>

mutual consent or terminates or expires for any reason without having been
exercised in full, the number of shares subject thereto shall again be available
for purposes of the Plan.

The shares which may be issued under the Plan may be either authorized but
unissued shares or treasury shares or partly each, as shall be determined from
time to time by the Board.

SECTION 3
Grant of Stock Options

On January 2, or if January 2 is not a day on which the principal market
for the Common Stock is open for trading, then on the first such trading day, of
each of the years 2001 through 2005, each person who is then a member of the
Board and who is not then an employee of the Corporation or any of its
subsidiaries (a "non-employee Director") shall be granted a "nonstatutory stock
option" (i.e., a stock option which does not qualify under Section 422 of the
Internal Revenue Code of 1986) to purchase 5,000 shares of Common Stock. If the
number of shares then remaining available for the grant of stock options under
the Plan is not sufficient for each non-employee Director to be granted an
option for 5,000 shares, then each non-employee Director shall be granted an
option for a number of whole shares equal to the number of shares then remaining
available divided by the number of non-employee Directors, disregarding any
fractions of a share.

SECTION 4
Terms and Conditions of Stock Options

Stock options granted under the Plan shall be subject to the following
terms and conditions:

(A) The purchase price at which each stock option may be exercised (the
"option price") shall be one hundred percent (100%) of the fair market value per
share of the Common Stock covered by the stock option on the date of grant,
determined as provided in Section 4(G).

(B) The option price for each stock option shall be paid in full upon
exercise and shall be payable in cash in United States dollars (including check,
bank draft or money order); provided, however, that in lieu of such cash the
person exercising the stock option may pay the option price in whole or in part
by delivering to the Corporation shares of Common Stock having a fair market
value on the date of exercise of the stock option, determined as provided in
Section 4(G), equal to the option price for the shares being purchased; except
that (i) any portion of the option price representing a fraction of a share
shall in any event be paid in cash and (ii) no shares of Common Stock which have
been held for less than six months may be delivered in payment of the option
price of a stock option. The date of exercise of a stock option shall be
determined under procedures established by the Committee, and as of the date of
exercise the person exercising the stock option shall be considered for all
purposes to be the owner of the shares with respect to which the stock option
has been exercised.

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<PAGE>

(C) Except as otherwise provided in Section 6(B), no stock option granted
under Section 3 shall be exercisable while the grantee is a Director prior to
the second anniversary of the date of grant, and no stock option shall be
exercisable in any event during the first six months of its term except in case
of death or disability of the grantee as provided in Section 4(E). No stock
option shall be exercisable after the expiration of ten years from the date of
grant. A stock option to the extent exercisable at any time may be exercised in
whole or in part.

(D) Except to the extent otherwise determined by the Committee and
reflected in the stock option agreement or an amendment thereto, (i) no stock
option shall be transferable by the grantee otherwise than by Will, or if the
grantee dies intestate, by the laws of descent and distribution of the state of
domicile of the grantee at the time of death and (ii) all stock options shall be
exercisable during the lifetime of the grantee only by the grantee or the
grantee's guardian or legal representative.

(E) If a grantee ceases to be a Director of the Corporation for any
reason, any outstanding stock options of the grantee (whether or not then held
by the grantee) shall be exercisable and shall terminate according to the
following provisions:

(i) If a grantee ceases to be a Director of the Corporation for any
reason other than resignation, removal for cause or death, any then
outstanding stock option of such grantee (whether or not exercisable
immediately prior to the grantee ceasing to be a Director) shall be
exercisable at any time prior to the expiration date of such stock option
or within one year after the date the grantee ceases to be a Director,
whichever is the shorter period, provided that, except in the case of a
grantee who is disabled within the meaning of Section 422(c)(6) of the Code
(a "Disabled Grantee"), in no event shall the option be exercisable during
the first six months of its term;

(ii) If during his term of office as a Director a grantee resigns
from the Board or is removed from office for cause, any outstanding stock
option of the grantee which is not exercisable immediately prior to
resignation or removal shall terminate as of the date of resignation or
removal, and any outstanding stock option of the grantee which is
exercisable immediately prior to resignation or removal shall be
exercisable at any time prior to the expiration date of such stock option
or within 90 days after the date of resignation or removal, whichever is
the shorter period;

(iii) Following the death of a grantee during service as a Director
of the Corporation, any stock option of the grantee outstanding at the time
of death (whether or not exercisable immediately prior to death of the
grantee) shall be exercisable by the person entitled to do so under the
Will of the grantee, or, if the grantee shall fail to make testamentary
disposition of the stock option or shall die intestate, by the legal
representative of the grantee (or, if permitted the applicable stock option
agreement, by the grantee's inter vivos transferee) at any time prior to
the expiration date of such stock option or within one year after the date
of death of the grantee, whichever is the shorter period;

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<PAGE>

(iv) Following the death of a grantee after ceasing to be a Director
and during a period when a stock option remains outstanding, any stock
option of the grantee outstanding at the time of death shall be exercisable
by such person entitled to do so under the Will of the grantee or by such
legal representative (or, if permitted under the applicable stock option
agreement, by such inter vivos transferee) at any time prior to the
expiration date of such stock option or within one year after the date of
death of the grantee, whichever is the shorter period.

A stock option of a grantee who has ceased to be a Director of the
Corporation shall terminate upon the expiration of the applicable exercise
period, if any, specified in this Section 4(E). Whether a grantee is a Disabled
Grantee shall be determined, in its discretion, by the Committee, and any such
determination by the Committee shall be final and binding.

(F) All stock options shall be confirmed by an agreement, or an amendment
thereto, which shall be executed by the Corporation and the grantee.

(G) Fair market value of the Common Stock shall be the mean between the
following prices, as applicable, for the date as of which fair market value is
to be determined as quoted in The Wall Street Journal (or in such other reliable
publication as the Committee, in its discretion, may determine to rely upon):
(a) if the Common Stock is listed on the New York Stock Exchange, the highest
and lowest sales prices per share of Common Stock as quoted in the NYSE-
Composite Transactions listing for such date, (b) if the Common Stock is not
listed on such exchange, the highest and lowest sales prices per share of Common
Stock for such date on (or on any composite index including) the principal
United States securities exchange registered under the Securities Exchange Act
of 1934 (the "Exchange Act"), on which the Common Stock is listed, or (c) if the
Common Stock is not listed on any such exchange, the highest and lowest sales
prices per share of Common Stock for such date on The NASDAQ Stock Market or any
successor ("NASDAQ"). If there are no such sale price quotations for the date
as of which fair market value is to be determined but there are such sale price
quotations within a reasonable period both before and after such date, then fair
market value shall be determined by taking a weighted average of the means
between the highest and lowest sales prices per share of Common Stock as so
quoted on the nearest date before and the nearest date after the date as of
which fair market value is to be determined. The average should be weighted
inversely by the respective numbers of trading days between the selling dates
and the date as of which fair market value is to be determined. If there are no
such sale price quotations on or within a reasonable period both before and
after the date as of which fair market value is to be determined, then fair
market value of the Common Stock shall be the mean between the bona fide bid and
asked prices per share of Common Stock as so quoted for such date on NASDAQ, or
if none, the weighted average of the means between such bona fide bid and asked
prices on the nearest trading date before and the nearest trading date after the
date as of which fair market value is to be determined, if both such dates are
within a reasonable period. The average is to be determined in the manner
described above in this Section 4(G). If the fair market value of the Common
Stock cannot be determined on the basis previously set forth in this Section
4(G) for the date as of which fair market value is to be determined, the
Committee shall in good faith determine the fair market value of the

-4-
<PAGE>

Common Stock on such date. Fair market value shall be determined without regard
to any restriction other than a restriction which, by its terms, will never
lapse.

(H) The obligation of the Corporation to issue shares of Common Stock
under the Plan shall be subject to (i) the effectiveness of a registration
statement under the Securities Act of 1933, as amended, with respect to such
shares, if deemed necessary or appropriate by counsel for the Corporation, (ii)
the condition that the shares shall have been listed (or authorized for listing
upon official notice of issuance) upon each stock market or stock exchange, if
any, on which the Common Stock may then be listed and (iii) all other applicable
laws, regulations, rules and orders which may then be in effect.

(I) Each stock option granted under the Plan (including reload options)
shall have reload option rights as provided in this Section 4(I). Reload option
rights shall entitle the holder of a stock option, upon exercise of the stock
option or any portion thereof through delivery of previously owned shares of
Common Stock, to automatically be granted on the date of such exercise a new
nonstatutory stock option (a "reload option") (i) for a number of shares of
Common Stock equal to the number of full shares delivered in payment of the
option price of the original option, (ii) having an option price equal to one
hundred percent (100%) of the fair market value per share (determined as
provided in Section 4(G)) of the Common Stock covered by the reload option on
such date of grant, (iii) becoming exercisable six months from its date of
grant, (iv) having the same expiration date as the stock option so exercised and
(v) otherwise having the same terms and conditions as a stock option granted
under Section 3 of the Plan. Reload option rights shall entitle the holder of a
stock option to be granted a reload option only if the underlying option or
reload option to which it relates is exercised during service of the original
grantee as a director of the Corporation. Except as otherwise specifically
provided herein or required by the context, the term "stock option" as used in
this Plan shall include reload options granted hereunder.

Subject to the foregoing provisions of this Section 4 and the other
provisions of the Plan, any stock option granted under the Plan may be subject
to such restrictions and other terms and conditions, if any, as shall be
determined, in its discretion, by the Committee and set forth in the agreement
referred to in Section 4(F), or an amendment thereto.

SECTION 5
Adjustment and Substitution of Shares

If a dividend or other distribution shall be declared upon the Common Stock
payable in shares of Common Stock, the number of shares of Common Stock then
subject to any outstanding stock options, the number of shares of Common Stock
to be subject to any stock option thereafter granted and the number of shares of
Common Stock which may be issued under the Plan but are not then subject to
outstanding stock options shall be adjusted by adding thereto the number of
shares of Common Stock which would have been distributable thereon if such
shares had been outstanding on the date fixed for determining the shareholders
entitled to receive such stock dividend or distribution.

-5-
<PAGE>

If the outstanding shares of Common Stock shall be changed into or
exchangeable for a different number or kind of shares of stock or other
securities of the Corporation or another corporation, or cash or other property,
whether through reorganization, reclassification, recapitalization, stock split-
up, combination of shares, merger or consolidation, then there shall be
substituted for each share of Common Stock subject to any then outstanding stock
option, for each share of Common Stock which would otherwise be subject to any
stock option thereafter granted and for each share of Common Stock which may be
issued under the Plan but which is not then subject to any outstanding stock
option, the number and kind of shares of stock or other securities (and in the
case of outstanding stock options, the cash or other property) into which each
outstanding share of Common Stock shall be so changed or for which each such
share shall be exchangeable.

In case of any adjustment or substitution as provided for in this Section
5, the aggregate option price for all shares subject to each then outstanding
stock option prior to such adjustment or substitution shall be the aggregate
option price for all shares of stock or other securities (including any
fraction), cash or other property to which such shares shall have been adjusted
or which shall have been substituted for such shares. Any new option price per
share shall be carried to at least three decimal places with the last decimal
place rounded upwards to the nearest whole number.

No adjustment or substitution provided for in this Section 5 shall require
the Corporation to issue or sell a fraction of a share or other security.
Accordingly, all fractional shares or other securities which result from any
such adjustment or substitution shall be eliminated and not carried forward to
any subsequent adjustment or substitution.

SECTION 6
Additional Rights in Certain Events

(A) Definitions.

For purposes of this Section 6, the following terms shall have the
following meanings:

(1) The term "Person" shall be used as that term is used in Sections 13(d)
and 14(d) of the Exchange Act.

(2) Beneficial Ownership shall be determined as provided in Rule 13d-3
under the Exchange Act as in effect on the effective date of the Plan.

(3) "Voting Shares" shall mean all securities of a company entitling the
holders thereof to vote in an annual election of directors (without
consideration of the rights of any class of stock other than the Common Stock to
elect directors by a separate class vote); and a specified percentage of "Voting
Power" of a company shall mean such number of the Voting Shares as shall enable
the holders thereof to cast such percentage of all the votes which could be cast
in an annual election of directors (without consideration of the rights of any
class of stock other than the Common Stock to elect directors by a separate
class vote).

-6-
<PAGE>

(4) "Tender Offer" shall mean a tender offer or exchange offer to acquire
securities of the Corporation (other than such an offer made by the Corporation
or any Subsidiary), whether or not such offer is approved or opposed by the
Board.

(5) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Corporation if each of the corporations other
than the last corporation in the unbroken chain owns stock possessing at least
fifty percent (50%) or more of the total combined Voting Power of all classes of
stock in one of the other corporations in the chain.

(6) "Section 6 Event" shall mean the date upon which any of the following
events occurs:

(a) The Corporation acquires actual knowledge that any Person other
than the Corporation, a Subsidiary or any employee benefit plan(s)
sponsored by the Corporation has acquired the Beneficial Ownership,
directly or indirectly, of securities of the Corporation entitling such
Person to 10% or more of the Voting Power of the Corporation;

(b) A Tender Offer is made to acquire securities of the Corporation
entitling the holders thereof to 20% or more of the Voting Power of the
Corporation; or

(c) A solicitation subject to Rule 14a-12(c) under the Exchange Act
(or any successor Rule) relating to the election or removal of 50% or more
of the members of any class of the Board shall be made by any person other
than the Corporation; or

(d) The shareholders of the Corporation shall approve a merger,
consolidation, share exchange, division or sale or other disposition of
assets of the Corporation as a result of which the shareholders of the
Corporation immediately prior to such transaction shall not hold, directly
or indirectly, immediately following such transaction a majority of the
Voting Power of (i) in the case of a merger or consolidation, the surviving
or resulting corporation, (ii) in the case of a share exchange, the
acquiring corporation or (iii) in the case of a division or a sale or other
disposition of assets, each surviving, resulting or acquiring corporation
which, immediately following the transaction, holds more than 10% of the
consolidated assets of the Corporation immediately prior to the
transaction;

provided, however, that (i) if securities beneficially owned by a grantee are
included in determining the Beneficial Ownership of a Person referred to in
paragraph 6(a), (ii) a grantee is required to be named pursuant Item 3 of the
Schedule TO (or any similar successor filing requirement) required to be filed
by the bidder making a Tender Offer referred to in paragraph 6(b) or (iii) if a
grantee is a "participant" as defined in Instruction 3 of Item 4 of Schedule 14A
under the Exchange Act (or any successor Rule) in a solicitation (other than a
solicitation by the Corporation) referred to in paragraph 6(c), then no Section
6 Event with respect to such grantee shall be deemed to have occurred by reason
of such event.

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<PAGE>

(B) Acceleration of the Exercise Date of Stock Options

Notwithstanding any other provision contained in the Plan, in case any
"Section 6 Event" occurs all outstanding stock options (other than those granted
to a person referred to in the proviso to Section 6(A)(6)) shall become
immediately and fully exercisable, whether or not otherwise exercisable by their
terms.

SECTION 7
Effect of the Plan on the Rights of Corporation and Shareholders

Nothing in the Plan, in any stock option granted under the Plan, or in any
stock option agreement shall give any person any right to continue as a Director
of the Corporation or interfere in any way with the rights of the shareholders
of the Corporation or the Board to elect and remove Directors.

SECTION 8
Amendment and Termination

The right to amend the Plan at any time and from time to time and the right
to terminate the Plan at any time are hereby specifically reserved to the Board;
provided that (1) without shareholder approval, no outstanding stock option
shall be amended to reduce the option price, except as provided in Section 5 and
(2) no other amendment of the Plan shall be made without shareholder approval if
shareholder approval of the amendment is at the time required by law or by the
rules of NASDAQ or any stock exchange on which the Common Stock may then be
listed. No amendment or termination of the Plan shall, without the written
consent of the holder of a stock option theretofore awarded under the Plan,
adversely affect the rights of such holder with respect thereto.

SECTION 9
Effective Date and Duration of Plan

The effective date and date of adoption of the Plan shall be March 23,
2000, the date of adoption of the Plan by the Board, provided that such adoption
of the Plan by the Board is approved by a majority of the votes cast at a duly
held meeting of shareholders at which a quorum representing a majority of the
outstanding voting stock of the Corporation is, either in person or by proxy,
present and voting. Notwithstanding any other provision contained in the Plan,
no stock option granted under the Plan may be exercised until after such
shareholder approval. No stock option may be granted under Section 3 of the
Plan subsequent to January 4, 2005. After January 4, 2005, reload options may
continue to be granted during the terms of stock options then outstanding.

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<PAGE>

KEYSTONE FINANCIAL, INC.

PROXY FOR 2000 ANNUAL MEETING

This Proxy is solicited on behalf of the Board of Directors

The undersigned hereby appoints Donald Devorris, Uzal H. Martz, Jr.
and Don A. Rosini, or any of them, as proxies, with full power of substitution,
to vote all shares of Common Stock of Keystone Financial, Inc. which the
undersigned is entitled to vote at the 2000 Annual Meeting of Shareholders
and at any adjournment thereof, as follows:

(To be Completed and Signed on Reverse Side)
<PAGE>

ANNUAL MEETING OF SHAREHOLDERS of

KEYSTONE FINANCIAL, INC.

May 25, 2000

PROXY VOTING INSTRUCTIONS

TO VOTE BY MAIL
- ----------------
Please date, sign and mail your proxy card in the envelope provided as soon as
possible.

TO VOTE BY INTERNET
- --------------------
Please access the web page at "www.voteproxy.com" or use the proxy voting link
found at www.keyfin.com and follow the on-screen instructions. Have your control
number available when you access the web page.

YOUR CONTROL NUMBER IS ---------------------------[ ]

Please Detach and Mail in the Envelope Provided

- -------------------------------------------------------------------------------
Please mark your
A [ X ] vote as in this
example.

WITHHOLD
FOR all AUTHORITY
nominees (except to vote for
1. Election of Directors for as shown below) all nominees
terms ending in 2003 [ ] [ ]

A vote FOR includes discretionary authority to vote for a substitute nominee if
any nominee named becomes unable or unwilling to serve. To withhold authority to
vote FOR any individual nominee, write that nominee's name on the line below:

- ------------------------------------------------------------------------------
Nominee: (for a term expiring in 2003)
Harold L. Brake
Gerald E. Field
Phillip C. Herr, II
William L. Miller
Ray L. Wolfe

MANAGEMENT RECOMMENDS TO VOTE
FOR PROPOSALS 2, 3 & 4 BELOW:
- ---

2. Approval of the Adoption of the 2000 FOR AGAINST ABSTAIN
Non-Employee Director Stock Option Plan. [ ] [ ] [ ]

3. Approval of the Adoption of the 2000
Employee Stock Purchase Plan. [ ] [ ] [ ]

4. Ratification or Ernst & Young LLP
as independent auditors for 2000. [ ] [ ] [ ]

MANAGEMENT RECOMMENDS A VOTE
AGAINST PROPOSALS 5A & 5B BELOW:
- -------

5. Shareholder Proposals

A. Shareholder Proposal 5A [ ] [ ] [ ]

B. Shareholder Proposal 5B [ ] [ ] [ ]

6. To vote in their discretion on such other matters as may properly come before
the meeting or any adjournment thereof.

This proxy, when properly executed, will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR Items 2, 3, & 4 and
---
AGAINST Items 5A & 5B.
- -------

SIGNATURE(S)______________________________________ DATE ___________________ 2000

Note: Please sign exactly as name appears hereon. For joint accounts, each joint
owner should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give your full title as such. If a corporation, please sign the
full corporate name by President or other authorized officer, giving your full
title as such. If a partnership, please sign in the partnership name by
authorized person, giving your full title as such.

PLEASE MARK, DATE, EXECUTE AND RETURN THIS PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE.