SEPARATION AGREEMENT AND RELEASE


      THIS  SEPARATION  AGREEMENT AND RELEASE (the  "Agreement") is entered into
this 21st day of November,  1997 but is effective for all purposes hereunder as
of October 22, 1997 (the "Effective  Date"), by and between KEYSTONE  FINANCIAL,
INC., a Pennsylvania corporation ("Keystone") and GEORGE H. GROVES ("Groves").

      WHEREAS, Groves was employed by Keystone as Senior Executive
Vice President and Chief Banking Officer; and

      WHEREAS, by letter dated October 24, 1997, Groves tendered to Keystone his
resignation from all positions and  directorships  held by him with Keystone and
with any and all of Keystone's subsidiaries and affiliates,  such resignation to
be effective as of the Effective Date; and

     WHEREAS,  Groves  resignation was accepted by and was done with the consent
of Keystone; and

      WHEREAS,  both parties  desire to achieve an amicable  separation to fully
and  finally  resolve  and/or  avoid any  existing or other  potential  disputes
between them.

      NOW, THEREFORE,  in consideration of the mutual covenants contained herein
and intending to be legally bound, Keystone and Groves agree as follows:

<PAGE>

      1. PURPOSE OF AGREEMENT.  The purpose of this  Agreement is to confirm and
memorialize the termination of the employment  relationship between Keystone and
Groves,  to resolve  fully and  finally  and/or  avoid any and all  existing  or
potential disputes arising from the employment  relationship and the termination
thereof without  admission of any liability on the part of either party. To that
end, the parties  acknowledge  that this  Agreement  resolves any and all claims
either may have against the other with respect to Grove's  employment and/or the
termination  of such  employment.  For the purpose of this  Agreement,  the term
"Keystone" includes not only Keystone  Financial,  Inc. and its employee welfare
benefit,  pension,  fringe  benefit or  compensation  plans,  but also all other
entities affiliated with Keystone Financial, Inc.

     2.  TERMINATION OF EMPLOYMENT.  Groves hereby  acknowledges and agrees that
his  employment  with  Keystone as Senior  Executive  Vice  President  and Chief
Banking Officer and any and all officer positions and  directorships  terminated
as of the Effective Date.

      3. CONSIDERATION.   Groves  acknowledges  and  confirms  that  the  only
consideration  for his executing  this  Agreement is set forth  herein,  that no
other  promises  or  agreements  of any  kind,  save for those set forth in this
Agreement, have been made to him by any person or entity whatsoever to cause him
to sign this Agreement and that he fully  understands  the meaning and intent of
this Agreement.

     4. SEPARATION PAYMENTS.  In consideration of the promises set forth in this
Agreement,  Keystone and Groves agree that Groves shall  receive the  separation
payments and other benefits set forth in Exhibit A, which is attached hereto and
incorporated  herein.  Keystone  and Groves  further  agree that the  separation
payments and benefits set forth in Exhibit A constitute  all of the payments and
benefits which Groves shall receive due to the termination of his employment
with Keystone.

<PAGE>

      5. NONDISCLOSURE OF INFORMATION.  Groves acknowledges that as an employee,
officer and director of Keystone, he had access to extensive confidential and/or
proprietary  information.  Groves agrees that he shall not,  without the written
consent of a duly  authorized  executive  officer of  Keystone,  disclose to any
person any material confidential information obtained by him while in the employ
of  Keystone  with  respect  to  any of the  services,  products,  improvements,
formulas,  designs or styles, processes,  customers,  methods of distribution or
business  practices,  the  disclosure of which  reasonably  would be expected to
materially  damage  Keystone;  provided,  however,  that  for  purposes  of this
Agreement,  confidential  information  shall not include any  information  known
generally to the public  (other than as a result of  unauthorized  disclosure by
Groves) or any  information of a type not otherwise  considered  confidential by
persons engaged in the same business or a business  similar to that conducted by
Keystone. Provided, further, that this section shall not apply to any disclosure
that may be required by Groves by law, regulation or court order, but only after
Groves  notifies an executive  officer of Keystone of such demand for disclosure
and Keystone has a reasonable  opportunity to respond to such demand. Any breach
of this Nondisclosure of Information provision shall be deemed a material breach
of this Agreement.

      6.  RETURN OF  PROPERTY.  Groves  represents  that he has  surrendered  to
Keystone any and all materials in Groves' possession,  or elsewhere,  whether or
not said  materials  are  proprietary  in nature,  relating  to the  business of
Keystone  including,  but not limited to, data,  documents,  reports,  programs,
diskettes,  computer  printouts,  program  listings,  computer  hardware  and/or
software  specifications,  client  lists,  client  information,  and any and all
similar  information  without  regard to form of  representation,  including all
copies  thereof.  Groves  acknowledges  that  all  such  materials  are the sole
property of Keystone and that Groves has no right, title or other interest in or
to  such  materials.  These  materials  are  included  in the  Nondisclosure  of
Information provision contained in Section 5. Further, any breach of this Return
of Property provision shall be deemed a material breach of this Agreement.

<PAGE>

      7. NO ACCESS. The parties  acknowledge that Groves' office at Keystone was
fully equipped with a computer  system and other  equipment.  In addition to the
return to Keystone of all of its property and any copies  thereof as required in
Section 6 above,  Groves agrees never to access  Keystone's  computer system for
any  purpose  whatsoever.  Groves  acknowledges  and agrees that any such access
constitutes an illegal act and would cause  irreparable  damage and liability to
Keystone.  Any  breach of this No Access  provision  shall be deemed a  material
breach of this Agreement.

      8. NO  SOLICITATION.  Groves  agrees  that he shall not entice or solicit,
directly or  indirectly,  any other  executives or key  management  personnel of
Keystone  to leave the employ of Keystone to work with Groves or any entity with
which  Groves  has  affiliated  for a period of one (1) year from the  Effective
Date.  Groves  acknowledges  and agrees that any breach of the  restrictions set
forth in this Section 8 will result in irreparable  injury to Keystone for which
it may have no  meaningful  remedy  in law and  Keystone  shall be  entitled  to
injunctive relief in order to enforce the provisions hereof. Upon obtaining such
injunction,  Keystone  shall be  entitled  to pursue  reimbursement  from Groves
and/or Groves'  employer of costs  incurred in securing a qualified  replacement
for any employee enticed away from Keystone by Groves.  Further,  Keystone shall
be  entitled  to set off  against  or obtain  reimbursement  from  Groves of any
payments  owed or made to Groves by  Keystone  hereunder.  Any breach of this No
Solicitation provision shall be deemed a material breach of this Agreement.

     9.  NONCOMPETITION.  In consideration for the separation payments and other
benefits  extended to Groves under this  Agreement,  Groves agrees that he shall
not, directly or indirectly,  within the marketing area of Keystone (defined for
purposes of this  Section 9 as all areas  within one hundred  (100) miles of the
work  location to which  Groves was assigned for the majority of the time during
the  twelve  (12)  months  preceding  the  Effective  Date  where  Keystone  has
established  an  active  and  material  market  presence)  enter  into or engage
generally  in direct or indirect  competition  with  Keystone in the business of
banking or any banking or trust related business,  either directly or indirectly
as an individual on his own or as a partner or joint venturer, or as a director,
officer,  shareholder (except as an incidental  shareholder),  employee or agent
for any  person,  for a period  of one (1) year  from the  Effective  Date.  The
existence of any material claim or cause of action of Groves  against  Keystone,
whether  predicated  on this  Agreement  or  otherwise,  shall not  constitute a
defense to the enforcement by Keystone of this provision. In the event that this
Section 9 shall be  determined  by any  court of  competent  jurisdiction  to be
unenforceable  in part by reason of being too great a period of time or covering
too great a  geographical  area, it shall be in full force and effect as to that
period of time or  geographical  area  determined to be reasonable by the court.
Any breach of this Noncompetition provision shall be deemed a material breach of
this Agreement.
<PAGE>
      10. NO DISPARAGEMENT.  Groves agrees not to make disparaging remarks about
Keystone or its operations, its employees, or any other aspect of its operation,
and Keystone agrees not to make disparaging  remarks about Groves. Any breach by
either  party of this No  Disparagement  provision  shall be  deemed a  material
breach of this Agreement.

      11. GENERAL  RELEASE.  In  consideration  for the separation  payments and
other benefits extended to Groves under this Agreement, Groves, for himself, his
heirs, executors,  administrators,  successors and assigns, forever releases and
discharges  Keystone,  its board and their  successors  and  assigns,  officers,
agents, contractors,  consultants and employees, past and present,  collectively
or individually,  from any and all claims, demands, causes of action, losses and
expenses of every nature whatsoever, known or unknown, that Groves ever had, now
has or hereafter may have,  arising out of or in conjunction with his employment
with Keystone or the termination thereof,  including, but not limited to, breach
of contract  (express or implied),  infliction  of emotional  harm,  defamation,
wrongful  discharge or any other tort, the Age  Discrimination in Employment Act
(29 U.S.C.  ss.621 et seq.), the Pennsylvania  Human Relations Act, or any other
federal, state or municipal statute or ordinance including,  but not limited to,
those relating to employment,  labor relations or wages. It is expressly  agreed
and understood that this Agreement is a general release.

     In  consideration  of the  foregoing  release,  and the covenants set forth
therein,  Keystone, for itself, its agents,  employees,  successors and assigns,
releases Groves, his heirs,  executors,  administrators and assigns from any and
all claims,  demands,  causes of action,  losses and  expenses  of every  nature
whatsoever,  known or unknown, that Keystone ever had, now has, or hereafter may
have,  arising out of or in conjunction  with Groves'  employment by Keystone or
the termination  thereof;  provided,  however,  that Keystone expressly does not
release Groves with respect to any acts of gross  negligence or any  intentional
acts by Groves that are or were materially  injurious to or which may contribute
or has contributed to the material  detriment of Keystone.  Nothing herein shall
act as a release of Groves from complying with this Agreement.
<PAGE>
12.  COVENANT NOT TO SUE. Groves agrees that he will not bring any action,  suit
or  administrative  proceeding  or  request  contesting  the  validity  of  this
Agreement or attempting to negate, modify or reform it, nor will he sue Keystone
and its successors and assigns, agents,  contractors,  consultants or employees,
past and present,  individually or  collectively,  for any reason arising out of
Groves'  employment or termination  thereof.  Any breach of this Covenant Not To
Sue shall be deemed a  material  breach of this  Agreement  requiring  Groves to
tender back to Keystone any and all payments paid to him  thereunder,  including
the value of any benefits provided by Keystone.

13.  INDEMNIFICATION. Except as prohibited by law, Keystone agrees to defend and
indemnify  Groves against  expenses and any liability paid or incurred by Groves
in connection  with any actual or  threatened  claim,  cause of action,  suit or
proceeding,  civil or administrative,  brought by any third party against Groves
by reason of Groves  having  been an officer  of  Keystone;  provided,  however,
Keystone does not agree to so indemnify  Groves for any acts of gross negligence
or any intentional  acts by Groves that are or were  materially  injurious to or
which may contribute or has  contributed to the material  detriment of Keystone.
If Groves  obtains  knowledge  of:  (a) facts that would give rise to a right of
defense or  indemnification;  or (b)  commencement of an action that may require
defense or  indemnification,  Groves  shall give  written  notice to Keystone as
promptly as practicable  after his receipt of that knowledge.  Following receipt
of such notice, Keystone shall be entitled to participate in the defense of such
claim,  and upon  notice  delivered  promptly  to Groves,  to assume the defense
thereof,  with counsel  reasonably  satisfactory to Groves.  Within a reasonable
period  following the  assumption  of such defense by Keystone,  Groves shall be
permitted to participate in the defense of such claim and may retain  additional
counsel  of his  choice  at his  own  expense.  As an  additional  condition  to
Keystone's  obligation  to defend and  indemnify  Groves  under this  paragraph,
Groves shall make himself  available  upon  reasonable  notice to testify in any
suit or proceeding which relates to Groves' duties as an officer of Keystone.

<PAGE>

     14. CONFIDENTIALITY. The parties agree that the terms and existence of this
Agreement shall remain  confidential.  The parties agree further not to disclose
any information concerning this Agreement to any agency or person, including but
not limited to past, present and future employees of Keystone, except where such
disclosure  is  required by law or is  necessary  to carry out the terms of this
Agreement.  Any breach of this Confidentiality  provision shall be regarded as a
material  breach of this  Agreement.  There is  specifically  excepted  from the
foregoing the right of Groves to disclose information  concerning this Agreement
to his  family,  financial  advisors  and  attorneys,  but Groves  shall  assume
responsibility  for the failure of such persons to comply with the terms of this
Confidentiality provision.

     15.  ENFORCEMENT.  In the event of an actual or threatened breach by Groves
of the  provisions  of Sections 5, 6, 7, 8 or 9,  Keystone  shall be entitled to
injunctive  relief  restraining  Groves  and any  other  so  engaged  from  such
violation  for  the  entire  period  set  forth  in the  applicable  section(s);
provided, however, that said period shall be extended by the time which may have
elapsed  between the time Groves is notified of such violation and an injunction
issues restraining Groves from such violation. Nothing herein shall be construed
as  prohibiting  Keystone  from pursuing any other  remedies  available for such
breach or  threatened  breach  including,  but not limited  to, the  recovery of
damages, reasonable fees of counsel and costs from Groves.

     16. DAMAGES.  Should suit be necessary to enforce either parties' rights in
this  Agreement,  the  party  determined  in such  suit to  have  breached  this
Agreement  shall pay damages,  reasonable  fees of counsel and costs incurred by
the  other  party  enforcing  its  rights  under  this  Agreement.  The  parties
acknowledge, however, that any damages to Keystone that may result from a breach
of the  provisions  of Sections 5, 6, 7, 8 or 9 of this  Agreement by Groves are
not  readily  ascertainable.  Accordingly,  in  the  event  of a  breach  of the
provisions of Sections 5, 6, 7, 8 or 9 of this Agreement by Groves,  the parties
agree that Groves shall be required to pay to Keystone,  as liquidated  damages,
the sum of Four Hundred Thousand Dollars ($400,000.00),  plus reasonable fees of
counsel and costs.  Nothing herein shall,  however,  be construed as prohibiting
Keystone from pursuing  injunctive  relief  restraining  Groves and any other as
provided in Section 15 of this Agreement.
<PAGE>
      17.  REFERENCES.  All  requests for  references  about Groves by potential
future  employers  shall  be  directed  to  the  Senior  Vice  President,  Human
Resources,  who will provide such  information  as Groves and Keystone  mutually
determine.  The parties may prepare a summary of such information which shall be
either  attached  to this  Agreement  as  Exhibit  B or, if  prepared  after the
execution of this Agreement, shall reference this Agreement and be signed by the
parties.

     18. GOVERNING LAW. This Agreement shall be construed in accordance with and
be governed by the laws of the Commonwealth of Pennsylvania.

      19.  SEVERABILITY.  Groves and Keystone  acknowledge that any restrictions
contained in this  Agreement  are  reasonable  and that  consideration  for this
Agreement has been exchanged.  In the event that any provision of this Agreement
shall be held to be void,  voidable or  unenforceable,  the  remaining  portions
hereof shall remain in full force and effect; provided, that in the event that a
court  shall  determine  that any  provision  is  inequitably  broad,  it is the
intention of the parties that the court adjust such obligations of Groves rather
than eliminating such obligations entirely.

<PAGE>

     20. EXECUTIVE EMPLOYMENT AGREEMENT.  Groves and Keystone hereby acknowledge
that by executing this Agreement,  the Executive  Employment  Agreement  between
Groves and  Keystone  dated  January  27,  1994 and as  modified  pursuant  to a
memorandum  to Groves from G. E.  Aumiller  dated March 11, 1994 and a letter to
Groves  from  Carl  L.  Campbell  dated  September  29,  1994  (the  "Employment
Agreement")  has been  terminated and its terms thereby  rendered null and void.
Groves hereby  specifically  acknowledges that he has no rights or claims to any
compensation  or  benefits  pursuant to the terms of the  Employment  Agreement,
including,  but not limited to, the right to  arbitration  and/or the payment of
attorneys fees and administrative court costs by Keystone pursuant to Section 19
of the Employment Agreement.

      21. OTHER AGREEMENTS.  This Agreement supersedes all other agreements,  if
any, oral or written,  heretofore made with respect to the subject matter hereof
and contains  the entire  agreement of the  parties.  This  Agreement  cannot be
amended or modified, except in writing signed by Groves and an agent of Keystone
specifically authorized to sign on behalf of Keystone in this matter.

     22.  ACKNOWLEDGMENT.  Groves  acknowledges  and  represents  to Keystone as
follows:

            a. He has had  ample  time  (up to 21  days)  to  review  all of the
      provisions of this Agreement and fully understands it and the choices with
      respect to the  advisability of making the settlement and release provided
      herein.

            b. He acknowledges that,  because of the consideration  promised in
      return,  he has entered  into this  Agreement  by his free will and choice
      without any compulsion, duress or undue influence from anyone.

            c. He  acknowledges  that he has been  advised  to seek  independent
      legal counsel  regarding his rights and the  advisability of entering into
      this Agreement.

            d. He  acknowledges  that he has been advised and  understands  that
      once  executed,  he shall have up to seven (7) days  thereafter  to revoke
      this Agreement.

      IN WITNESS  WHEREOF,  the parties have executed this Agreement the day and
      year first above written.

WITNESS:

/s/ Craig A. Golfieri                    /s/ George H. Groves
---------------------                    --------------------

ATTEST:                                  KEYSTONE FINANCIAL, INC.

/s/ George R. Barr                       By Carl L. Campbell
---------------------                    --------------------

<PAGE>

                                   EXHIBIT A

                 SCHEDULE OF SEPARATION PAYMENTS AND BENEFITS

      I.    SEPARATION PAYMENTS

      A.    SEPARATION PAYMENTS.

     1. Groves  shall  receive  separation  payments in an amount  equal to Four
Hundred  Fifty  Thousand  Dollars   ($450,000.00)  payable  in  accordance  with
subsections 2 and 3 below.

     2. Groves  shall  receive a  separation  payment in an amount  equal to the
balance  of his  Annual  Salary  (as  such  term is  defined  in the  Employment
Agreement) for 1997 under the terms of the Employment  Agreement had he remained
an employee of Keystone for the remainder of 1997. The separation  payment shall
be made immediately  following the expiration of the statutory revocation period
referenced in Section 22(d) of the Agreement.

     Groves shall receive a separation  payment equal to the balance of the Four
Hundred Fifty Thousand Dollars ($450,000.00) referenced in subsection 1 above on
January 2, 1998 (or on such other date as is mutually  agreed to by Keystone and
Groves.) In the event of Groves' death prior to January 2, 1998, his heirs shall
receive the separation payment.

     4. Groves hereby acknowledges that the separation payments referenced above
include  payment  for  any  vacation,   personal  days,  sick  days,  short-term
disability  and holidays to which Groves may have  otherwise  been  entitled and
that  such  separation  payments  represent  complete  satisfaction  of any such
obligations.

      B.    SEPARATION PAYMENTS IN LIEU OF BENEFITS.

     1. Groves shall  receive an  additional  separation  payment of Two Hundred
Thousand  Dollars  ($200,000.00) on January 2, 1998 (or on such other date as is
mutually agreed to by Keystone and Groves).  In the event of Groves' death prior
to January 2, 1998, his heirs shall receive the separation payment.

     2. Groves hereby acknowledges that the payment of this Two Hundred Thousand
Dollars  ($200,000.00)  is in lieu  of any  welfare,  fringe  benefit  or  other
incentive   compensation  benefits  to  which  Groves  may  have  been  entitled
including,   but  not  limited  to,  medical,   dental,   accidental  death  and
dismemberment,  long-term disability,  life, payments pursuant to the Management
Incentive   Compensation  Plan  (MICP)  for  1997,   payments  pursuant  to  the
Performance   Unit  Plan  (PUP)  for  the  current   performance   period,   any
phone/secretarial support, tax consulting services,  automobile allowance and/or
club  memberships  and  that  such  separation   payment   represents   complete
satisfaction of any such obligations.
<PAGE>

      C.  SEPARATION  PAYMENTS FOR RETIREMENT  BENEFIT  PURPOSES.  W-2 wages are
generally included in the calculation of retirement benefits under the qualified
and nonqualified retirement programs maintained by Keystone. Employment contract
buyout  payments  (such  as  the  separation   payments   provided  herein)  are
specifically  excluded from the  calculation  of retirement  benefits  under the
qualified and nonqualified retirement programs maintained by Keystone.

<PAGE>

II.   BENEFITS

A.    SPLIT DOLLAR LIFE INSURANCE.

     1.  Keystone  shall  continue to maintain the split  dollar life  insurance
policy  with a death  benefit  of Six  Hundred  Thousand  Dollars  ($600,000.00)
(Metropolitan  Life Insurance Policy No.  947590025U) on the life of Groves (the
"Policy")  for a period of eighteen (18) months from the  Effective  Date,  such
maintenance period to end on April 22, 1999.

     2. In the  event  of  Groves'  death  prior  to  April  22,  1999,  Groves'
designated beneficiaries shall receive the death benefits under the terms of the
Policy and Keystone  shall receive a repayment of the premium  payments that are
owed by Groves to Keystone.

     3. On April 22, 1999,  the Policy shall be transferred to Groves and Groves
shall not be required to repay the premium  payments  that would have  otherwise
been owed by Groves to  Keystone  in the  amount of  approximately  One  Hundred
Thirty Thousand Five Hundred Forty-Four Dollars ($130,544.00).

B.   QUALIFIED PENSION PLANS.  Any retirement benefits to which Groves is enti-
     tled under the terms of the Keystone Financial Pension Plan and/or the
     Keystone Financial 401(k) Savings Plan shall be paid in accordance with
     the terms of such plans.

C.   NONQUALIFIED RETIREMENT BENEFITS. Any benefits to which Groves may be enti-
     tled under the terms of the Supplemental Retirement Income Plan and/or the
     Savings Restoration Plan shall be paid in accordance with the terms of
     such plans.

<PAGE>

D.    STOCK OPTIONS.

      1.  Groves  acknowledges  that he is not  eligible  to receive any further
grants of stock options pursuant to any program maintained by Keystone.

      2.  Outstanding  vested  incentive  stock  options  held by Groves must be
exercised no later than the earlier of (i) three months from the Effective  Date
or (ii) the scheduled expiration of the exercise period of such options.

      3.  Outstanding  vested  nonqualified  stock  options must be exercised no
later  than the  earlier  of (i) one year  from the  Effective  Date or (ii) the
scheduled expiration of the exercise period of such stock options.

      4. All nonvested incentive stock options and nonvested  nonqualified stock
options have lapsed as of the Effective Date.

E.    MANAGEMENT STOCK OWNERSHIP PROGRAM.  In accordance with the terms of the
MSOP and the  underlying  loan  documents,  Groves  shall be  required  to repay
the outstanding  loan balance  within ninety (90) days from the Effective Date.

F.    EMPLOYEE STOCK PURCHASE PLAN. Groves' account balance (plus accrued
interest) shall be distributed to Groves pursuant to the terms of the Plan.

G.    PERFORMANCE UNIT PLAN AND MANAGEMENT INCENTIVE COMPENSATION PLAN.  Groves
thereby acknowledges that the separation  payment made  pursuant to Section
I.B.2 hereof  represents  complete satisfaction  of any amounts to which Groves
may have been entitled  pursuant to the terms of the PUP and MICP.

H.   COBRA.  Groves shall be provided with a notice of his right to COBRA
continuation coverage.  If Groves elects COBRA continuation coverage, the cost
of such coverage shall be paid exclusively by Groves.

III.  TAX WITHHOLDING

     All  separation   payments  and  benefits  hereunder  are  subject  to  all
applicable federal, state and local taxes and reporting requirements.
<PAGE>