AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of October 12, 2006, by and among Beneficial Savings Bank, MHC, a federally chartered mutual holding company, Beneficial Mutual Bancorp, Inc., a federally chartered mid-tier holding company and wholly owned subsidiary of Beneficial MHC, Beneficial Mutual Savings Bank, a Pennsylvania-chartered savings bank and wholly owned subsidiary of Bancorp, FMS Financial Corporation, a New Jersey chartered corporation and savings and loan holding company, and Farmers and Mechanics Bank, a federally chartered savings bank and wholly owned subsidiary of FMS.

WHEREAS, the respective Boards of Directors of Beneficial MHC, Bancorp, BMSB, FMS and FMB have determined that it is in the best interest of their respective companies and shareholders or depositors, as the case may be, to consummate the business combination transactions provided for herein, subject to the terms and conditions set forth herein;

WHEREAS, FMS will merge with and into Merger Corp., a federally chartered interim corporation to be formed as a subsidiary of Bancorp, with Merger Corp. being the surviving entity and simultaneously with, or as soon thereafter as practicable, Merger Corp. will be merged with and liquidated into Bancorp;

WHEREAS, FMB will merge with and into BMSB with BMSB as the surviving entity;

WHEREAS, all of the directors and executive officers of FMS have agreed, in their capacity as shareholders of FMS, to vote their shares of FMS Common Stock in favor of this Agreement pursuant to separate voting agreements (in the form attached as Exhibit D hereto);

WHEREAS, the Merger will be conducted immediately following a Minority Stock Offering by Bancorp; and

WHEREAS, the transactions provided herein are subject to various regulatory approvals and other conditions specified herein.

When used in this Agreement, the following terms shall have the meanings specified:

Acquisition .  “Acquisition” shall mean any of the following involving FMS or FMB on the one hand, or Beneficial MHC, Bancorp or BMSB on the other hand, other than the Merger and the Minority Stock Offering:

(a)     any merger, consolidation, share exchange, business combination or other similar transaction;

(b)     any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 24.9% or more of assets in a single transaction or series of related transactions, excluding from this calculation any such transactions undertaken in the ordinary course of business and consistent with past practice;

(c)     any sale of 24.9% or more of the outstanding shares of capital stock (or securities convertible or exchangeable into or otherwise evidencing, or an agreement or instrument evidencing, the right to acquire capital stock);

(d)     the filing of an acquisition application (or the giving of acquisition notice), whether in draft or final form, under HOLA or under any other applicable Law with respect to it;

(e)     any person shall have acquired beneficial ownership or the right to acquire beneficial ownership of, or any “group” (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations of the SEC promulgated thereunder) shall have been formed which beneficially owns or has the right to acquire beneficial ownership of, 24.9% or more of the then outstanding shares of capital stock; or

(f)     any public announcement of a proposal, plan or intention to do any of the foregoing.

Acquisition Proposal .  “Acquisition Proposal” shall mean the making of any proposal by any Person concerning an Acquisition.  

Affiliate .  “Affiliate” shall mean, with respect to any Person, any other Person who directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with the first Person, including without limitation all directors and executive officers of the first Person.  

Affiliate Letter .  “Affiliate Letter” shall mean a letter from each Affiliate of FMS substantially in the form of Exhibit E attached to this Agreement.

Agreement .  “Agreement” shall mean this Agreement and Plan of Merger, together with the Exhibits attached hereto and together with the Disclosure Schedules, as the same may be amended or supplemented from time to time in accordance with the terms hereof.

Bancorp .  “Bancorp” shall mean Beneficial Mutual Bancorp, Inc., a federally chartered mid-tier holding company and wholly owned subsidiary of Beneficial Savings Bank MHC.

Bancorp Common Stock .  “Bancorp Common Stock” shall mean the common stock, $1.00 par value per share of Bancorp.

Bancorp Disclosure Schedule .  “Bancorp Disclosure Schedule” shall mean the disclosure schedule, dated the date of this Agreement, delivered by Bancorp to FMS contemporaneously with the execution and delivery of this Agreement and as the same may be amended from time to time after the date of this Agreement and prior to the Closing Date in accordance with the terms of this Agreement.

Bancorp Subsidiaries .  “Bancorp Subsidiaries” shall mean BMSB, a wholly-owned subsidiary of Bancorp, and the following wholly-owned subsidiaries of BMSB: Beneficial Investment Center, LLC, Neumann Corporation, Beneficial Insurance Services, LLC and BSB Union Corporation, which constitute all of the direct and indirect subsidiaries of Bancorp.

Beneficial MHC .  “Beneficial MHC” shall mean Beneficial Savings Bank MHC, a federally chartered mutual holding company.

BMSB .  “BMSB” shall mean Beneficial Mutual Savings Bank, a Pennsylvania-chartered savings bank headquartered in Philadelphia, Pennsylvania, which is a wholly owned subsidiary of Bancorp.

Buildings .  “Buildings” shall mean all buildings, fixtures, structures and improvements (including without limitation stand-alone automated teller machines or similar devices) used by a Person or an Affiliate and located on the Person’s Real Estate.

CERCLA .  “CERCLA” shall mean the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may be in effect from time to time.

Closing .  “Closing” shall mean the conference to be held at 9:00 a.m., Eastern Time, on the Closing Date at the offices of Muldoon Murphy & Aguggia LLP, 5101 Wisconsin Avenue, NW, Washington, DC 20016, or such other time and place as the parties may mutually agree to in writing, at which the transactions contemplated by this Agreement shall be consummated.

Closing Date .  “Closing Date” shall mean the date of the Effective Time or such other date as the parties may mutually agree to in writing.  

Code .  “Code” shall mean the Internal Revenue Code of 1986, as amended, as the same may be in effect from time to time.

Contracts .  “Contracts” shall mean all of the contracts, agreements, leases, relationships and commitments, written or oral, to which the relevant Person is a party or by which it is bound.

Control .  “Control,” as used with respect to any Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or by contract or otherwise.  “Control,” as used with respect to securities or other property, shall mean the power to exercise or direct the exercise of any voting rights associated therewith, or the power to dispose or direct the disposition thereof, or both.

Disclosure Schedules .  “Disclosure Schedules” shall mean the FMS Disclosure Schedule and the Bancorp Disclosure Schedule.  

Employee Benefit Plans .  “Employee Benefit Plans” shall mean any pension plan, profit sharing plan, bonus plan, incentive compensation plan, deferred compensation plan, stock ownership plan, stock purchase plan, stock option plan, stock appreciation plan, employee benefit plan, employee benefit policy, retirement plan, fringe benefit program, insurance plan, severance plan, disability plan, health care plan, sick leave plan, death benefit plan, or any other plan or program to provide retirement income, fringe benefits or other benefits to former or current employees of the relevant Person.  

Environmental Claim .  “Environmental Claim” shall mean any and all administrative, regulatory or judicial actions, suits, demands, demand letters, directives, claims, Liens, investigations, proceedings or notices of noncompliance or violation (written or oral) by any Person alleging potential liability (including, without limitation, potential liability for enforcement, investigatory costs, cleanup costs, governmental response costs, removal costs, remedial costs, natural resources damages, property damages, personal injuries, or penalties) arising out of, based on or resulting from: (A) the presence, or release into the environment, of any Hazardous Materials at any location, whether or not owned by a Person or any of its Subsidiaries; or (B) circumstances forming the basis of any violation or alleged violation, of any Environmental Law; or (C) any and all claims by any Person seeking damages, contribution, indemnification, cost, recovery, compensation or injunctive relief resulting from the presence or Release of any Hazardous Materials.  

Environmental Laws .  “Environmental Laws” shall mean all federal, state, local or foreign statutes, Laws, rules, ordinances, codes, policies, guidelines, and regulations relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, ground water, land surface or subsurface strata), including, without limitation, Laws and regulations relating to Releases or threatened Releases of Hazardous Materials, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials.

Environmental Permits .  “Environmental Permits” shall mean environmental, health and safety permits and governmental authorizations necessary for their operations of a Person under Environmental Laws.  

Equipment .  “Equipment” shall mean all equipment, boilers, furniture, fixtures, motor vehicles, furnishings, office equipment, computers and other items of tangible personal property owned by the relevant Person which are either presently used, or are used on the Closing Date, by the relevant Person in the conduct of its business.  

ERISA .  “ERISA” shall mean the Employee Retirement Income Security Act of 1974, as the same may be in effect from time to time.  

Exchange Act .  “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, as the same may be in effect from time to time.  

FDIA .  “FDIA” shall mean the Federal Deposit Insurance Act, as the same my be in effect from time to time.

FDIC .  “FDIC” shall mean the Federal Deposit Insurance Corporation.

FHLB of New York .  “FHLB of New York” shall mean the Federal Home Loan Bank of New York.

FHLB of Pittsburgh .  “FHLB of Pittsburgh” shall mean the Federal Home Loan Bank of Pittsburgh.

FMB .  “FMB” shall mean Farmers and Mechanics Bank, a federally chartered stock savings bank headquartered in Burlington, New Jersey.

FMS .  “FMS” shall mean FMS Financial Corporation, a New Jersey chartered corporation headquartered in Burlington, New Jersey, which is registered as a unitary savings and loan holding company under HOLA and the rules and regulations of the OTS promulgated thereunder.

FMS Common Stock .  “FMS Common Stock” shall mean all of the authorized shares of common stock, $.10 par value per share, of FMS.

FMS Disclosure Schedule .  “FMS Disclosure Schedule” shall mean the disclosure schedule, dated the date of this Agreement, delivered by FMS to Bancorp contemporaneously with the execution and delivery of this Agreement and as the same may be amended from time to time after the date of this Agreement and prior to the Closing Date in accordance with the terms of this Agreement.

FMS Executives .  “FMS Executives” shall mean the individuals who serve as executive officers of FMS or FMB.

FMS Existing Indebtedness .  “FMS Existing Indebtedness” shall mean all Indebtedness of FMS and the FMS Subsidiaries, all of which is listed on the FMS Disclosure Schedule.

FMS Existing Liens .  “FMS Existing Liens” shall mean all Liens affecting any of the assets and properties of FMS or any FMS Subsidiary (except for Liens for current taxes not yet due and payable, pledges to secure deposits and such imperfections of title, easements and other encumbrances, if any, as do not materially detract from the value of or substantially interfere with the present use of the property affected thereby), all of which are listed and briefly described on the FMS Disclosure Schedule.  

FMS Existing Litigation .  “FMS Existing Litigation” shall mean all pending or, to the Knowledge of FMS, threatened claims, suits, audit inquiries, charges, workers compensation claims, litigation, arbitrations, proceedings, governmental investigations, citations and actions of any kind against FMS or any FMS Subsidiary, or affecting any assets or the business of FMS or any FMS Subsidiary, all of which are listed and briefly described on the FMS Disclosure Schedule.

FMS Existing Plans .  “FMS Existing Plans” shall mean all Employee Benefit Plans of FMS and the FMS Subsidiaries including any tax-qualified Benefit Plans of such entities that have been terminated since December 31, 2004, all of which are listed on the FMS Disclosure Schedule.

FMS Meeting .  “FMS Meeting” shall mean the special or annual meeting of the FMS Shareholders for the purpose of approving the Merger, this Agreement and the transactions contemplated by this Agreement, and for such other purposes as may be necessary or desirable.

FMS Real Estate .  “FMS Real Estate” shall mean the parcels of real property identified in the legal descriptions set forth in the FMS Disclosure Schedule.

FMS Shareholders .  “FMS Shareholders” shall mean all Persons owning shares of FMS Common Stock on the relevant date of inquiry.

FMS Stock Option Plan .  “FMS Stock Option Plan” shall mean the FMS Financial Corporation Stock Option Plan.

FMS Stock Options .  “FMS Stock Options” shall mean all options to purchase shares of FMS Common Stock granted pursuant to the FMS Stock Option Plan that are outstanding as of the relevant time of inquiry, whether or not such options are exercisable prior to the Effective Time.

FMS Subsidiaries .  “FMS Subsidiaries” shall mean those Subsidiaries of FMS listed on the FMS Disclosure Schedule pursuant to Section 4.1(c) of this Agreement.  

Fraction Payment .  “Fraction Payment” shall mean any cash paid for fractional share interests paid pursuant to Section 2.6(c) of this Agreement.

Hazardous Materials .  “Hazardous Materials” shall mean:  (a) any petroleum or petroleum products, radioactive materials, asbestos in any form that is or could become friable, urea formaldehyde foam insulation, and transformers or other equipment that contain dielectric fluid containing regulated levels of polychlorinated biphenyls (PCBs) and radon gas; (b) any chemicals, materials or substances which are now defined as or included in the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “extremely hazardous wastes, restricted hazardous wastes,” “toxic substances,” “toxic pollutants,” or words of similar import, under any Environmental Law; and (c) any other chemical, material, substance or waste, exposure to which is now prohibited, limited or regulated by any governmental authority.

HOLA .  “HOLA” shall mean the Home Owners’ Loan Act, as the same may be in effect from time to time, including the rules and regulations of the OTS promulgated thereunder.

Indebtedness .  “Indebtedness” shall mean all liabilities or obligations (except deposit accounts) of the relevant Person, whether primary or secondary, absolute or contingent: (a) for borrowed money; (b) evidenced by notes, bonds, debentures or similar instruments; or (c) secured by Liens on any assets of the relevant Person.

Investment Securities .  “Investment Securities” shall mean all investment securities of the relevant Person permitted to be held by the relevant Person under Law.

IRS .  “IRS” shall mean the United States Internal Revenue Service.  

Knowledge .  “Knowledge” of a Person shall mean, for purposes of this Agreement, when any fact or matter is stated to be “to the Knowledge” of that Person or words of similar import, the actual knowledge of the existence or nonexistence of such fact or matter by the executive officers and the Person and its Subsidiaries.  

Law .  “Law” shall mean any federal, state, local or other law, rule, regulation, policy or governmental requirement of any kind, and the rules, regulations and orders promulgated thereunder by any regulatory agencies or other Persons.

Lien .  “Lien” shall mean, with respect to any asset: (a) any mortgage, pledge, lien, charge, claim, restriction, reservation, condition, easement, covenant, lease, encroachment, title defect, imposition, security interest or other encumbrance of any kind; and (b) the interest of a vendor or lessor under any conditional sale agreement, financing lease or other title retention agreement relating to such asset.

Material Adverse Effect .  “Material Adverse Effect” shall mean any change or effect that is or is reasonably likely to be materially adverse to the financial condition or results of operations of the relevant Person and its Subsidiaries, taken as a whole or that would reasonably be expected to materially and adversely affect the ability of the relevant Person to consummate the transactions contemplated in this Agreement or to perform their material obligations hereunder; provided, however, that “Material Adverse Effect” shall not be deemed to include (i) the impact of actions or omissions of a Party taken with the prior written consent of the other in contemplation of the transactions contemplated by this Agreement, (ii) changes in laws and regulations or interpretations thereof that are generally applicable to the banking or savings institutions industries, (iii) changes in generally accepted accounting principles, (iv) expenses incurred in connection with this Agreement and the Merger including payments to be made pursuant to employment and severance agreements and the termination of other benefit plans, or (v) changes attributable to or resulting from changes in general economic conditions generally affecting financial institutions including changes in interest rates.

Material Contract .  “Material Contract” shall mean any Contract of a Person or any of its subsidiaries which constitutes:

(a)     a lease of, or agreement to purchase or sell, any capital assets involving in excess of $25,000 as to any asset or $100,000 in the aggregate;

(b)     any management, consulting, employment, personal service, severance, agency or other contract or contracts providing for employment or rendition of services and which: (i) are in writing, or (ii) create other than an at will employment relationship; or (iii) provide for any commission, bonus, profit sharing, incentive, retirement, consulting or additional compensation;

(c)     any agreements or notes evidencing any Indebtedness;

(d)     a power of attorney (whether revocable or irrevocable) given to any other person by the Person that is in force;

(e)     an agreement by the Person not to compete in any business or in any geographical area;

(f)     an agreement restricting the Person’s right to use or disclose any information in its possession;

(g)     a partnership, joint venture or similar arrangement;

(h)     a license involving payments in excess of $10,000;

(i)     an agreement or arrangement with any Affiliate which is not a Subsidiary;

(j)     an agreement for data processing services;

(k)     any assistance agreement, supervisory agreement, memorandum of understanding, consent order, cease and desist order or other regulatory order or decree with or by the SEC, OTS, FDIC, P.D.B. or any other regulatory authority; or

(l)     any other agreement or set of related agreements or series of agreements which: (i) involve an amount in excess of $25,000 on an annual basis or $100,000 in the aggregate; or (ii) is not in the ordinary course of business of the Person or any Subsidiary of the Person.

Merger .  “Merger” shall mean collectively the Corporate Merger, the Mid-Tier Merger, the Bank Merger and any other mergers by interim corporate entities necessary to effectuate the transactions contemplated by this Agreement.

Merger Corp . “Merger Corp.” shall mean a federally chartered corporation to be formed by Bancorp for the purpose of effecting the transactions contemplated by this Agreement.

N.J.S.A.   “N.J.S.A.” shall mean the New Jersey Statutes Annotated.

OTS .  “OTS” shall mean the Office of Thrift Supervision, United States Department of the Treasury, or any successor agency.

Permits .  “Permits” shall mean all licenses, permits, approvals, franchises, qualifications, permissions, agreements, orders and governmental authorizations required for the conduct of the business of the relevant Person.  

Permitted Liens .  “Permitted Liens” shall mean those FMS or FMB Existing Liens which are expressly noted as Permitted Liens on a Disclosure Schedule.

Person .  “Person” shall mean a natural person, corporation, bank, trust, partnership, association, governmental entity, agency or branch or department thereof, or any other legal entity.

P.D.B .  “P.D.B.” shall mean the Pennsylvania Department of Banking.

Proxy Statement .  “Proxy Statement” shall mean the proxy statement of FMS to be filed with the SEC and to be distributed to the FMS Shareholders in connection with the FMS Special Meeting and the approval of the Merger by the FMS Shareholders and which shall also constitute a prospectus with respect to the shares of Bancorp Common Stock to be issued in the Merger.

Registration Statement .  “Registration Statement” shall mean a registration statement on Form S-1 (or other appropriate form) to be filed under the Securities Act by Bancorp in connection with the Merger for purposes of registering the shares of Bancorp Common Stock to be issued in the Merger pursuant to this Agreement and in connection with the Minority Stock Offering for purposes of registering the shares of Bancorp Common Stock to be issued in the Minority Stock Offering.

Regulatory Approvals .  “Regulatory Approvals” shall mean all of the approvals which are conditions precedent to consummating the Merger and the Minority Stock Offering, as specified in Section 7.1(c) of this Agreement.

Release .  “Release” shall mean any release, spill, emission, leaking, injection, deposit, disposal, discharge, dispersal, leaching or migration into the atmosphere, soil, surface water, groundwater or property.

SEC .  “SEC” shall mean the United States Securities and Exchange Commission.

Securities Act .  “Securities Act” shall mean the Securities Act of 1933, as amended, as the same may be in effect from time to time.

Subsidiary .  “Subsidiary” shall mean any corporation, financial institution, joint venture, partnership, limited liability company, trust or other business entity: (i) 25% or more of any outstanding class of whose voting interests is directly or indirectly owned by the relevant Person, or is held by it with power to vote; (ii) the election of a majority of whose directors, trustees, general partners or comparable governing body is controlled in any manner by the relevant Person; or (iii) with respect to the management or policies of which the relevant Person has the power, directly or indirectly, to exercise a controlling influence.  Subsidiary shall include an indirect Subsidiary of the relevant Person which is controlled in any manner specified above through one or more corporations or financial institutions which are themselves Subsidiaries.

Other Defined Terms .  The following additional terms are defined in the specific Section to which they relate:

2.1          The Merger .   This Agreement provides for the merger of FMS with and into Merger Corp., whereby the stock of FMS and Merger Corp. outstanding as of the Effective Time will be converted as described herein.  The consummation of the Merger shall be effected as promptly as practicable after the satisfaction or waiver of the conditions set forth in Article VII of this Agreement.  The Merger shall become effective on the later of the date and time specified in Articles of Merger filed with the OTS and the date and time specified in the Certificate of Merger to be filed with the New Jersey Office of the Secretary of State pursuant to the N.J.S.A. The date and time on which the Merger shall become effective is referred to in this Agreement as the “Effective Time.”

(a)      The Corporate Merger .  FMS shall merge with and into Merger Corp. with Merger Corp. as the surviving entity (the “Corporate Merger”).  Merger Corp. and FMS shall enter into the Corporate Merger Agreement substantially in the form of Exhibit A attached hereto.  Immediately thereafter, Merger Corp. shall merge with and into Bancorp with Bancorp as the surviving entity in accordance with the Mid-Tier Merger Agreement substantially in the form of Exhibit B attached hereto.

(b)     FMB shall merge with and into BMSB with BMSB as the surviving institution (the “Bank Merger”).  The Bank Merger shall be effected pursuant to the Bank Merger Agreement substantially in the form of Exhibit C attached hereto.  As a result of the Bank Merger, the existence of FMB shall cease and BMSB shall be the surviving association and continue to existence as a savings bank under the laws of Pennsylvania.

(c)      Charter and Bylaws of Bancorp .  The Charter of Bancorp as in effect immediately prior to the Effective Time shall be the Charter of Bancorp immediately after the Effective Time.  The Bylaws of Bancorp as in effect immediately prior to the Effective Time shall be the Bylaws of Bancorp immediately after the Effective Time.

(d)      Directors and Officers of Bancorp .  As of the Effective Time, the directors and officers of Bancorp shall be the directors and officers of Bancorp serving immediately prior the Effective Time, plus the current members of FMS’s Board appointed to Bancorp’s Board pursuant to Section 3.16.

2.3       Conversion of Shares Upon Merger .     At the Effective Time, by virtue of the Merger and without any action on the part of Bancorp, FMS or holders of FMS Common Stock, the following shall occur:

(a)      FMS Common Stock .   Subject to Section 2.3(b) and Section 2.6(c), each share of FMS Common Stock issued and outstanding immediately prior to the Effective Time shall be converted into the right to receive the Merger Consideration, as defined and pursuant to Section 2.5.

(b)      FMS Common Stock Held by FMS .  All shares of FMS Common Stock (other than shares of FMS Common Stock held directly or indirectly in trust accounts, managed accounts and the like or otherwise held in a fiduciary capacity that are beneficially owned by third parties) that are (i) owned by FMS as treasury stock, or (ii) owned directly or indirectly by FMS or any of its wholly owned subsidiaries, shall be cancelled and no Merger Consideration or other consideration shall be delivered in exchange therefore.

2.4       FMS Stock Options .  Upon the satisfaction of all conditions set forth in Article VII of this Agreement, immediately prior to the Effective Time, each holder of an option that is outstanding under the FMS Stock Option Plan immediately prior to the Effective Time, whether or not the option is then exercisable, shall receive from FMS in cancellation of such option (such cancellation to be reflected in a written agreement) a cash payment in an amount determined by multiplying the number of shares of FMS Common Stock subject to option by such holder by an amount equal to the difference between the Cash Consideration and the per share exercise price of such option, net of any cash which must be withheld under federal and state income tax requirements.  Immediately thereafter, FMS shall cancel each such option.  

(a)      Subject to the provisions of this Section 2.5, each share of FMS Common Stock issued and outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 2.3(b)) shall be converted at the election of the holder thereof, subject to and in accordance with the procedures set forth in this Agreement, into:

(i)     the right to receive in cash from Bancorp, without interest, an amount equal to $28.00 (the “Cash Consideration”);

(ii)     the right to receive from Bancorp that number of shares of Bancorp Common Stock equal to the Exchange Ratio (as defined below) (the “Stock Consideration”).  The “Exchange Ratio” shall be equal to 2.80; or

(iii)     the right to receive a combination of the foregoing in accordance with the procedures set forth in this Agreement.

“ Merger Consideration ” means the Stock Consideration, the Cash Consideration or any combination thereof.

(b)       Maximum Conversion Numbers .  Subject to adjustment pursuant to Section 2.5(c):  (i) the total number of shares of FMS Common Stock to be converted into the right to receive Cash Consideration for such shares (including any such shares subject to the cash portion of a Mixed Election (as defined below)), shall be 42.5% of the number of shares of FMS Common Stock outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 2.3(b)) (the “Cash Conversion Number”); (ii) the total number of shares of FMS Common Stock to be converted into the right to receive Stock Consideration for such shares (including any such shares subject to the stock portion of a Mixed Election) shall be 57.5% of the number of shares of FMS Common Stock outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 2.3(b)) (the “Stock Conversion Number”); and (iii) the maximum number of shares of Bancorp Common Stock which may be issued as Stock Consideration will be equal to the Exchange Ratio multiplied by the Stock Conversion Number and the maximum amount of cash which will be paid as Cash Consideration will be equal to the Cash Consideration multiplied by Cash Conversion Number.

(c)           Adjustments .

(i)      Adjustments To the Cash Conversion Number and the Stock Conversion Number Dependent Upon Minority Offering Appraisal .  The Cash Conversion Number and Stock Conversion Number will be adjusted to ensure the OTS’ requirement that the percentage of Stock Consideration issued to FMS Shareholders as Merger Consideration is less than 50% of the amount of stock issued by Bancorp publicly in the Minority Stock Offering is satisfied.  In addition, to the extent necessary to maintain the aggregate pro forma tangible book value of the shares of Bancorp Common Stock to be issued in the Merger at not less than $65.609 million:  (A) the Cash Conversion Number will decrease to no lower than 35% of the number of shares of FMS Common Stock outstanding immediately prior to the Effective Time (excluding shares to be cancelled pursuant to Section 2.3(b)); and (B) the Stock Conversion Number will increase to no greater than 65% of the number of shares of FMS Common Stock outstanding immediately prior to the Effective Time (excluding shares to be canceled pursuant to Section 2.3(b)).  For purposes of this provision, pro forma tangible book value per share shall be as disclosed in the final appraisal as approved by the OTS in connection with the Minority Stock Offering.

(ii)      Adjustment for Dilution and Other Matters .  If, between the date of this Agreement and the Effective Time, each of the outstanding shares of FMS Common Stock shall have been changed into a different number of shares or into a different class by reason of any stock dividend, subdivision, reclassification, recapitalization, split, combination or exchange of shares, the Exchange Ratio shall be adjusted appropriately to provide the holders of FMS Common Stock the same economic effect as contemplated by this agreement prior to such event.

(d)           Election Procedures .  

(i)     All elections contemplated by Section 2.5(a) shall be made on a form designed for that purpose prepared by FMS and reasonably acceptable to Bancorp (an “Election Form”).  Holders of record of shares of FMS Common stock who hold such shares as nominees, trustees or in other representative capacities (“Representatives”) may submit multiple Election Forms, provided that such Representative certifies that each such Election Form covers all the shares of FMS Common Stock held by each such Representative for a particular beneficial owner.

(ii)     The Election Form shall be mailed on the same date as the date on which the Proxy Statement is mailed to all holders of record of shares of FMS Common Stock as of the record date of the FMS Meeting.  Thereafter FMS and Bancorp shall each use its reasonable and diligent efforts to mail the Election Form to all persons who become record holders of shares of FMS Common Stock during the period between the record date for the Stockholders’ Meeting and 5:00 p.m., Eastern Time, on the day five (5) business days prior to the date of the FMS Meeting.  In order to be effective, an Election Form must be received by the Exchange Agent (as defined below), on or before 5:00 p.m., Eastern Time, on the business day prior to the FMS Meeting (the “Election Deadline”).  An election shall have been properly made only if the Exchange Agent shall have actually received a properly completed Election Form by the Election Deadline.  An Election Form shall be deemed properly completed only if accompanied by one or more certificates theretofore representing FMS Common Stock (“Certificate(s)”) (or customary affidavits and, if required by Bancorp pursuant to Section 2.6(a), indemnification regarding the loss or destruction of such Certificates or the guaranteed delivery of such Certificates) representing all shares of FMS Common Stock covered by such Election Form, together with duly executed transmittal materials included with the Election Form.  Subject to the terms of this Agreement and the Election Form, the Exchange Agent shall have reasonable discretion to determine wither any election has been properly or timely made and to disregard immaterial defects in any Election Form, and any good faith decisions of the Exchange Agent regarding such matters shall be binding and conclusive.  All elections will be revocable unit the Election Deadline and thereafter shall be irrevocable.

(iii)     Each Election Form shall entitle the holder of shares of FMS Common Stock (or the beneficial owner through appropriate and customary documentation and instructions) to (i) elect to receive the Cash Consideration for all of such holder’s shares (a “Cash Election”); (ii) elect to receive the Stock Consideration for all of such holder’s shares (a “Stock Election”), (iii) elect to receive the Cash Consideration with respect to some of such holder’s shares and the Stock Consideration with respect to such holder’s remaining shares (a “Mixed Election”), or (iv) make no election or indicate that such holder has no preference as to the receipt of the Cash Consideration or the Stock Consideration (a “Non-Election”).  Shares of FMS Common Stock as to which a valid Cash Election has been made (including pursuant to a Mixed Election) are referred to herein as “Cash Election Shares.” The aggregate number of shares of FMS Common Stock as to which a valid Cash Election is made is referred to herein as the “Cash Election Number.”  Shares of FMS Common Stock as to which a valid Stock Election has been made (including pursuant to a Mixed Election) are referred to herein as “Stock Election Shares.”  The aggregate number of shares of FMS Common Stock as to which a valid Stock Election is made is referred to herein as the “Stock Election Number.”  Shares of FMS Common Stock as to which a Non-Election is deemed in effect are referred to as “Non-Election Shares.”  All shares of FMS Common Stock of a holder whose properly completed Election Form is not received by the Exchange Agent prior to the Election Deadline shall be deemed to be Non-Election Shares.  If the Exchange Agent shall have determined that any purported election was not properly made, such purported election shall be deemed to be of no force and effect and the shares of FMS Common Stock subject to such purported election shall for purposes hereof be deemed to be Non-Election Shares.

(e)          Proration Procedures .  As soon as practicable after the Election Deadline, Bancorp shall cause the Exchange Agent to effect the allocation among holders of FMS Common Stock of rights to receive the Cash Consideration and the Stock Consideration as follows:

(i)     If the Stock Election Number exceeds the Stock Conversion Number, then:

(A)     all Cash Election Shares and all Non-Election Shares shall be converted into the right to receive the Cash Consideration, and

(B)     each holder of Stock Election Shares shall have the right to receive:

(1)     the number of shares of FMS Common Stock equal to the product obtained by multiplying (a) the number of Stock Election Shares held by such holder by (b) the Exchange Ratio by (c) a fraction (rounded to four decimal places) the numerator of which is the Stock Conversion Number (as adjusted pursuant to Section 2.5(c)) and the denominator of which is the Stock Election Number (the “Stock Proration Factor”), and

(2)     cash in an amount equal to the product obtained by multiplying (a) the number of Stock Election shares held by such holder by (b) the Cash Consideration by (c) one minus the Stock Proration Factor.

Except as provided herein and except as may be required by Section 2.5(c)(ii), no other change shall be made with respect to the number of shares of Bancorp Common Stock that may be received in respect to shares of FMS Common Stock as to which a Stock Election has been made.

(A)     if the Shortfall Number is less than or equal to the number of Non-Election Shares, then

(1)     all Cash Election Shares shall be converted into the right to receive the Cash Consideration; and

(2)     each holder of Non-Election Shares shall have the right to receive (a) the number of shares of Bancorp Common Stock equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) the Exchange Ratio by (z) a fraction (rounded to four decimal places) the numerator of which is the Shortfall Number and the denominator of which is the total number of Non-Election Shares (the “Non-Election Proration Factor”) and (b) cash in an amount equal to the product obtained by multiplying (x) the number of Non-Election Shares held by such holder by (y) the Cash Consideration by (z) one minus the Non-Election Proration Factor; or

(B)     if the Shortfall Number exceeds the number of Non-Election Shares, then:

(1)     all Non-Election Shares shall be converted into the right to receive the Stock Consideration; and

(2)     each holder of Cash Election Shares shall have the right to receive (a) the number of shares of Bancorp Common Stock equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) the Exchange Ratio by (z) a fraction (rounded to four decimal places) the numerator of which is the amount by which the Shortfall Number exceeds the number of Non-Election Shares and the denominator of which is the Cash Election Number (the “Cash Proration Factor”) and (b) cash in an amount equal to the product obtained by multiplying (x) the number of Cash Election Shares held by such holder by (y) the Cash Consideration by (z) one minus the Cash Proration Factor.

2.6           Exchange of FMS Common Stock .

(a)      Surrender of Certificates .  As soon as practicable after the Effective Time but in no event later than five (5) business days following the Effective Time a firm selected by Bancorp and reasonably acceptable to FMS (the “Exchange Agent”), pursuant to documentation reasonably acceptable to Bancorp and FMS consistent with the terms hereof, shall mail to each holder of record of a Certificate who did not previously submit a properly completed Election Form together with duly executed transmittal materials prior to the Election Deadline:

(i)     a form letter of transmittal which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon delivery of the Certificates (or a lost certificate affidavit and bond in a form reasonably acceptable to the Exchange Agent) to the Exchange Agent; and

(ii)     instructions for use in effecting the surrender of the Certificates in exchange for the Merger Consideration (in the form or forms determined in accordance with the provisions of Section 2.5).  Upon surrender of a Certificate for cancellation to the Exchange Agent) or a lost certificate affidavit and bond in a form reasonably acceptable to the Exchange Agent), together with such letter of transmittal, duly executed, the holder of such Certificate shall be entitled to receive, in exchange therfor, (i) a certificate evidencing the whole number of shares of Bancorp Common Stock into which the shares of FMS Common Stock theretofore represented by the Certificate so surrendered, shall have been converted pursuant to the provisions of Section 2.5, if any, plus (ii) a check for the aggregate amount of cash, without interest, which such holder would be entitled to receive pursuant to Section 2.5, if any, including any cash amount payable in lieu of fractional shares in accordance with Section 2.6(c).  Certificates so surrendered shall be cancelled.  Bancorp shall direct the Exchange Agent to make such deliveries within five (5) business days of the receipt of all required documentation.  If any Bancorp Common Stock to be exchanged for shares of FMS Common Stock is to be delivered in a name other than that in which the Certificate surrendered for exchange is registered, it shall be a condition to the exchange that the Certificate so surrendered shall be properly endorsed or otherwise in proper form for transfer, that all signatures shall be guaranteed by a member firm of any national securities exchange in the United States or the National Association of Securities Dealers, Inc., or by a commercial bank or trust company or other financial institution acceptable to Bancorp having an office in the United States, and that the person requesting the payment shall either (a) pay to the Exchange Agent any transfer or other taxes required by reason of the payment to a person other than the registered holder of the Certificate surrendered, or (b) establish to the satisfaction of the Exchange Agent that such taxes have been paid or are not payable.  From and after the Effective Time, there shall be no transfers on the stock transfer books of FMS of any shares of FMS Common Stock outstanding immediately prior to the Effective Time and any such shares of FMS Common Stock presented to the Exchange Agent shall be cancelled in exchange for the Merger Consideration payable with respect thereto as provided in Section 2.5 above.

(b)      Failure to Exchange FMS Common Stock .  No dividends or other distributions declared after the Effective Time with respect to Bancorp Common Stock payable to the holders of record thereof after the Effective Time shall be paid to the holder of any unsurrendered Certificate with respect to Bancorp Common Stock represented thereby and no cash payment in lieu of fractional shares shall be paid to any holder until the holder of record shall surrender such Certificate.  Subject to the effect, if any, of applicable law, after the subsequent surrender and exchange of a Certificate the holder thereof shall be entitled to receive any such dividends or distributions, without interest thereon, which theretofore became payable with respect to the Bancorp Common Stock represented by such Certificate.  All dividends or other distributions declared on or after the Effective Time with respect to the Bancorp Common Stock and payable to the holders of record thereof on or after the Effective Time which are payable to the holder of a Certificate not theretofore surrendered and exchanged for Bancorp Common Stock pursuant to this Section 2.6(b) shall be paid or delivered by Bancorp to the Exchange Agent, in trust, for the benefit of such holders.  All such dividends and distributions held by the Exchange Agent for payment or delivery to the holders of unsurrendered Certificates unclaimed at the end of one (1) year from the Effective Time shall be repaid or redelivered by the Exchange Agent to Bancorp after which time any holder of Certificates who has not theretofore surrendered such Certificates to the Exchange Agent, subject to applicable law, shall look only to Bancorp for payment or delivery of such dividends or distributions, as the case may be.  Any shares of Bancorp Common Stock or other consideration delivered or made available to the Exchange Agent pursuant to this Section 2.6(b) and not exchanged for Certificates within one (1) year after the Effective Time shall be returned by the Exchange Agent to Bancorp which shall thereafter act as exchange agent subject to the rights of holders of unsurrendered Certificates hereunder.

(c)      Fractional Shares .  No certificates or scrip representing fractional shares of Bancorp Common Stock shall be issued upon the surrender or exchange of Certificates, no dividend or distribution of Bancorp shall relate to any fractional shares, and such fractional shares interests will not entitle the owner thereof to vote or assert any rights of a stockholder of Bancorp.  In lieu of any fractional share of Bancorp Common Stock, Bancorp shall cause to be paid to each holder of shares of FMS Common Stock who otherwise would be entitled to receive a fractional share of Bancorp Common Stock an amount of cash, rounded to the nearest cent (without interest), equal to the product of such fraction multiplied by the Cash Consideration.

(d)      Escheat .  Notwithstanding anything in this Agreement to the contrary, neither the Exchange Agent nor any party hereto shall be liable to a former holder of FMS Common Stock for any consideration delivered to a public official pursuant to applicable escheat or abandoned property laws.

(e)      Exchange Fund .  On the date the Effective Time occurs, Bancorp shall deposit, or cause to be deposited, with the Exchange Agent for the benefit of the holders of FMS Common Stock, for exchange in accordance with the terms of this Agreement, an aggregate amount of cash, sufficient to pay the aggregate Cash Consideration payable pursuant to Section 2.5 of this Agreement (plus an additional amount of cash sufficient to cover amounts payable in lieu of any fractional shares of FMS Common Stock (“Election Fund”)).

(f)      Investment of Exchange Fund .  The Exchange Agent shall invest any cash included in the Exchange Fund as directed by Bancorp.  Any interest and other income resulting from such investments shall be paid to Bancorp.  In the event the cash in the Exchange Fund shall be insufficient to fully satisfy all of the payment obligations to be made by the Exchange Agent hereunder, then Bancorp shall promptly deposit cash into the Exchange Fund in an amount which is equal to the deficiency in the amount of cash required to fully satisfy such payment obligations.

2.7          Tax-Free Reorganization .  The parties intend that this Agreement be a plan of reorganization within the meaning of Section 368(a) of the Code and that the Merger be a tax-free reorganization under Section 368(a) of the Code to the extent that shares of FMS Common Stock are exchanged for shares of Bancorp Common Stock as described in this Agreement.  No party shall voluntarily take or cause to be taken any action which would disqualify the Merger as a tax-free reorganization under Section 368 of the Code.

2.8          Reserved .

2.9           Minority Stock Offering .

In connection with the Merger and subject to the requirements of Section 6.3 of this Agreement, Bancorp will take all steps necessary to conduct an offering of shares of Bancorp Common Stock in accordance with the applicable regulations of the OTS (“Minority Stock Offering”).  Such shares shall be offered for sale at a price of $10.00 per share.  Following the Minority Stock Offering and the Merger, no more than 49% of the outstanding shares of Bancorp Common Stock shall be owned by parties other than Beneficial MHC.

Following the Minority Stock Offering and the Merger, Beneficial MHC will own at least 51% of Bancorp Common Stock issued and outstanding, and the Bancorp Common Stock issued in the Minority Stock Offering to parties other than Beneficial MHC and in the Merger to the former FMS Shareholders shall constitute up to 49% of the issued and outstanding shares of Bancorp Common Stock.

The amount of Bancorp Common Stock to be offered to parties other than Beneficial MHC will be determined so that the total of Bancorp Common Stock issued to parties other than Beneficial MHC in the Minority Stock Offering, plus shares of Bancorp Common Stock issued to FMS Shareholders in the Merger as well as shares reserved for options or the other future compensation programs for directors and employees of Bancorp and its Subsidiaries, would constitute less than 50% of the total Bancorp Common Stock issued and outstanding, and the balance would be owned by Beneficial MHC.

2.10       Alternative Structure .  Notwithstanding anything in this Agreement to the contrary, Bancorp may specify (subject to FMS’s approval, which shall not be unreasonably withheld) that any of its or Beneficial MHC’s direct or indirect subsidiaries, and FMS and any of its direct or indirect subsidiaries shall enter into transactions other than those described in this Article II, in order to effect the purposes of this Agreement, and Bancorp and FMS shall take all action necessary and appropriate to effect, or cause to be affected, such transactions; provided, however, that (i) other than a change in structure required by a regulatory agency having jurisdiction over the transactions contemplated by this Agreement, no such specification shall materially and adversely affect the timing of the consummation of the transactions contemplated herein; or (ii) no such specifications shall materially and adversely affect the tax treatment or economic benefits of the Merger to the holders of FMS Common Stock or to Beneficial MHC, its members or Subsidiaries.

3.1           Confidentiality; Access .  The Confidentiality Agreement previously entered into between Bancorp and FMS shall remain in full force and effect.  Upon reasonable notice, each party shall afford to the other’s officers, employees, accountants, legal counsel and other representatives access, during normal business hours, to all of its and its Subsidiaries’ properties, books, contracts, commitments and records; provided that FMS shall have the right to redact any information from such materials which relates to assessments, analyses or discussions of a possible Acquisition engaged in by it prior to the date of this Agreement, or which, relates to matters or issues concerning its evaluation of the Merger or its obligations under this Agreement, or that would impair its Board of Directors’ ability to discharge its fiduciary duties.

3.2           Disclosure Schedules .

(a)     Contemporaneously with the execution and delivery of this Agreement, FMS is delivering to Bancorp the FMS Disclosure Schedule.  The FMS Disclosure Schedule is deemed to constitute an integral part of this Agreement and to modify the representations, warranties, covenants or agreements of FMS contained in this Agreement to the extent that such representations, warranties, covenants or agreements expressly refer to the FMS Disclosure Schedule.

(b)     Contemporaneously with the execution and delivery of this Agreement, Bancorp is delivering to FMS the Bancorp Disclosure Schedule.  The Bancorp Disclosure Schedule is deemed to constitute an integral part of this Agreement and to modify the representations, warranties, covenants or agreements of Bancorp contained in this Agreement to the extent that such representations, warranties, covenants or agreements expressly refer to the Bancorp Disclosure Schedule.

(c)     All capitalized terms used in the Disclosure Schedules shall have the definitions specified in this Agreement.  All descriptions or listings of documents contained in the Disclosure Schedules are qualified in their entirety by reference to the documents so described, true copies of which heretofore have been delivered or made available to the other.  Except as expressly stated to the contrary in the Disclosure Schedules, disclosure of a matter or document in a Disclosure Schedule shall not be deemed to be an acknowledgment that such matter is material or outside the ordinary course of business of the disclosing party.  Disclosure of any matter or event in any of the schedules included in Disclosure Schedule shall be deemed disclosure for purposes of any and all other schedules included therein without the need of specific cross reference or duplication, provided, however, that disclosure of an agreement or other document in a listing of agreements or documents without any summary or description of the substance thereof shall be deemed disclosure only for purposes of the schedule in which such agreement or other document is listed.  

(d)      Updates .  At least 15 days prior to the Closing Date and immediately prior to the Closing Date, each party shall, to the extent a matter required to be reported occurs, update its Disclosure Schedule by written notice to the other to reflect any matters which have occurred from and after the date of this Agreement which, if existing on the date of this Agreement, would have been required to be described in the Disclosure Schedule.  

3.3           Duties Concerning Representations .  Each party to this Agreement shall: (a) to the extent within its control, use best efforts to cause all of its representations and warranties contained in this Agreement to be true and correct in all material respects at the Effective Time with the same force and effect as if such representations and warranties had been made on and as of the Effective Time; and (b) use best efforts to cause all of the conditions precedent set forth in Article VII of this Agreement to be satisfied.  Neither party shall take any action, nor agree to commit to take any action, which would or reasonably can be expected to: (i) adversely affect the ability of either Bancorp or FMS to obtain the Regulatory Approvals; (ii) adversely affect a party’s ability to perform its covenants or agreements under this Agreement; or (iii) result in any of the conditions to the Merger set forth in Article VII not being satisfied.

3.4           Deliveries of Information; Consultation .  From time to time prior to the Effective Time, and subject to the limitations on access rights under Section 3.1 of this Agreement and to the Confidentiality Agreement:

(a)      Deliveries .  FMS and Bancorp shall furnish promptly to the other: (i) a copy of each significant report, schedule and other document filed by or received by it or its Subsidiaries pursuant to the requirements of federal or state securities or banking Laws promptly after such documents are available; (ii) its consolidated monthly financial statements (as prepared in accordance with its normal accounting procedures) promptly after such financial statements are available; (iii) a summary of any action taken by its, or its Subsidiaries’, Boards of Directors, or any committee thereof; and (iv) all other significant information concerning it and its Subsidiaries’ business, properties and personnel as the other may reasonably request.

(b)      Consultation .  Representatives of FMS and Bancorp shall confer and consult with one another on a regular and frequent basis to report on operational matters and the general status of their respective ongoing business operations.

(c)      Regulatory Matters .  Representatives of FMS and Bancorp shall discuss with one another any matters directly affecting them in which any state or federal regulator of FMS or Bancorp or any of their respective Subsidiaries, is involved.

(d)      Litigation .  FMS and Bancorp shall provide prompt notice to the other of any litigation, arbitration, proceeding, governmental investigation, citation or action of any kind which may be commenced, threatened or proposed by any Person concerning the legality, validity or propriety of the transactions contemplated by this Agreement.  If any such litigation is commenced against any party to this Agreement, the parties shall cooperate in all respects in connection with such litigation.  

3.5           Directors’ and Officers’ Indemnification and Insurance .  

(a)      Indemnification .  For a period of six (6) years following the Effective Time, Bancorp shall indemnify, and advance expenses in matters that may be subject to indemnification to, persons who served as directors or officers of FMS or FMB or any FMS Subsidiaries on or before the Effective Time (“Indemnified Parties”) with respect to liabilities and claims (and related expenses, including fees and disbursements of counsel) made against them resulting from their service as such prior to the Effective Time in accordance with and subject to the requirements and other provisions of the Certificate of Incorporation and Bylaws of FMS in effect as of the date hereof and applicable provisions of Law.

(b)      Director and Officer Liability Insurance .  Bancorp shall purchase or cause FMS to purchase and keep in force for a period of six (6) years following the Effective Time directors’ and officers’ liability insurance to provide coverage for acts or omissions of the type and in the amount currently covered by FMS’s and the FMB’s existing directors’ and officers’ liability insurance for acts or omissions occurring on or prior to the Effective Time.  

(c)      Parties Benefited .  The provisions of this Section 3.5 are intended to be for the benefit of, and shall be enforceable by, each Indemnified Party, his or her heirs and his or her representatives, and shall survive the Effective Time and any merger, consolidation or reorganization of Bancorp.

3.6           Letter(s) of Accountants .  FMS shall use its best efforts to cause to be delivered to Bancorp a letter of Grant Thornton LLP, FMS’s independent auditors, and/or a letter of PricewaterhouseCoopers LLP, FMS’s former independent auditors, each dated a date within three (3) business days before the date on which the Registration Statement is declared effective, and each addressed to Bancorp, in form and substance reasonably satisfactory to Bancorp and each customary in scope and substance for letters delivered by independent public accountants in connection with registration statements similar to the Registration Statement and proxy statements similar to the Proxy Statement.

3.7           Legal Conditions to Merger .  Each party to this Agreement will: (a) take all reasonable actions necessary to comply promptly with all legal requirements which may be imposed on it with respect to the Merger (including making all filings and requests in connection with the Regulatory Approvals and furnishing all information required in connection therewith); (b) promptly cooperate with and furnish information to the other party in connection with any such requirements imposed upon any of them in connection with the Merger; and (c) take all reasonable actions necessary to obtain (and will cooperate with the other party in obtaining) any consent, authorization, order or approval of, or any exemption by, any governmental entity or other public or private Person, required to be obtained by the parties to this Agreement in connection with the Merger or the taking of any action contemplated thereby or by this Agreement.

3.8           Stock Listings .  FMS shall use its reasonable best efforts to maintain the listing of FMS Common Stock on the Nasdaq Global Market through the Effective Time.

3.9          Announcements .  Subject to each party’s disclosure obligations imposed by Law, FMS and Bancorp will cooperate with each other in the development and distribution of all news releases and other public information disclosures with respect to this Agreement or any of the transactions contemplated hereby and shall not issue any public announcement or statement with respect thereto prior to consultation with the other party.  

3.10        Best Efforts .  Subject to the terms and conditions of this Agreement and subject to the fiduciary duties of the Board of Directors of each party, each of the parties agrees to use its best efforts to take, or cause to be taken, all action and to do, or cause to be done, all things necessary or advisable to consummate the transactions contemplated by this Agreement including, but not limited to, the Merger.  

3.11        Employee and Managerial Matters .

(a)      Employees .  FMB will continue to employ substantially all present employees who are employed without employment contracts as employees at will, subject to the determinations of FMB management and the FMB’s and Bancorp’s boards of directors.

(b)      Bancorp Executive Officers .  Following the Effective Time, the Executive Officers of Bancorp shall be as set forth in Exhibit F.

(c)      Bonus and Retention Program .  Officers and employees of FMB and/or FMS will be paid bonus and retention awards as disclosed on FMS Disclosure Schedule 3.11(c).

(d)      Employee Severance .  Employees of FMS and FMB who continue as employees after the Effective Time will be eligible to receive severance benefits on the terms set forth on FMS Disclosure Schedule 3.11(d).

3.12        Employee Benefit Matters .

(a)      FMS Defined Benefit Plan .  The FMS Defined Benefit Plan shall continue, except to the extent inconsistent with Law, after the Merger for employees of FMB until such time as Bancorp’s Board of Directors elects to take alternative action.

(b)      Health and Welfare Benefits .  After the Merger, Bancorp shall continue, except to the extent not consistent with Law, FMB’s health and welfare benefit plans, programs, insurance and policies until such time as Bancorp’s Board of Directors elects to take alternative action.  

(c)      Replacement .  With respect to each employee and health and welfare benefit plan or program that replaces a FMS or FMB Existing Plan, for purposes of determining eligibility to participate and vesting, service with FMS or an Affiliate of FMS shall be treated as service with Bancorp; provided, however, that such service shall not be recognized to the extent that such recognition would result in a duplication of benefits.  Such service shall also apply for purposes of satisfying any waiting periods, actively-at-work requirements, and evidence of insurability requirements.  No pre-existing condition limitations will apply to any of FMB’s employees or their dependents who were participants in the FMS or FMB Existing Plans comparable to the plan in question at the Closing Date.  Each of the FMB’s continuing employees and their dependents shall be given credit for amounts paid under a corresponding benefit plan during the same period for purposes of applying deductibles, co-payments and out-of-pocket maximums as though such amounts had been in accordance with the terms and conditions of the corresponding FMS Existing Plan.

(d)      COBRA .  Until the Effective Time, FMS shall be liable for all obligations for continued health coverage pursuant to Section 4980B of the Code and Sections 601 through 609 of ERISA (“COBRA”) with respect to each FMS qualifying beneficiary (as defined in COBRA) who incurs a qualifying event (as defined in COBRA) before the Effective Time.  Bancorp shall be liable for (i) all obligations for continued health coverage under COBRA with respect to each FMS qualified beneficiary (as defined in COBRA) who incurs a qualifying event (as defined in COBRA) from and after the Effective Time, and (ii) for continued health coverage under COBRA from and after the Effective Time for each FMS qualified beneficiary who incurs a qualifying event before the Effective Time.

(e)     As of the Effective Time, FMB employees that shall continue as Bancorp or BMSB employees immediately thereafter shall be eligible to participate in any employee stock ownership plan (“ESOP”) that is purchasing Bancorp Common Stock in the Minority Stock Offering or immediately thereafter, on the same basis as all other Bancorp or BMSB employees as of the Effective Time, and such FMB employees shall receive credit for employment service with FMB prior to the Effective Time in the same manner as other Bancorp or BMSB employees shall receive credit for employment service with Bancorp and BMSB prior to the Effective Time for purposes of eligibility to participate in such ESOP and the vesting of benefits under such ESOP.

(f)     As of the Effective Time, FMB employees that shall continue as Bancorp or BMSB employees immediately thereafter shall be eligible to participate in any tax-qualified defined contribution plan, including any 401k plan then maintained or thereafter established by Bancorp or BMSB on the same basis as all other Bancorp or BMSB employees employed as of the Effective Time, and such FMB employees shall receive credit for employment service with FMB prior to the Effective Time for purposes of eligibility to participate in such  plan and vesting of benefits under such plan.

3.13         Listing of Bancorp Common Stock .  Bancorp shall use its best efforts to cause the shares of Bancorp Common Stock to be issued pursuant to this Agreement to be approved for listing on the Nasdaq Global Market subject to official notice of issuance, prior to the Effective Time.  

3.14         Affiliates .  FMS shall use its best efforts to obtain and deliver to Bancorp on the date hereof a signed representation letter as to certain restrictions on resale substantially in the form of Exhibit E hereto from each executive officer and director of FMS and each stockholder of FMS who may be deemed an “affiliate” of FMS within the meaning of such term as used in Rule 145 under the Securities Act, and shall use best efforts to obtain and deliver to Bancorp a signed representation letter substantially in the form of Exhibit E from any person who becomes an executive officer or director of FMS or any stockholder who becomes such an “affiliate” after the date hereof as promptly as practicable after (and shall use its reasonable best efforts to obtain and deliver within five (5) business days after) such person achieves such status.

3.15         Disclosure Controls .  (a) Between the date of this Agreement and the Effective Time, FMS shall maintain disclosure controls and procedures that are effective to ensure that material information relating to FMS and FMS Subsidiaries is made known to the President and Chief Executive Officer and Chief Financial Officer of FMS to permit FMS to record, process, summarize and report financial data in a timely and accurate manner; (ii) such officers shall promptly disclose to FMS’ auditors and audit committee any significant deficiencies in the design or operation of internal controls which could adversely affect FMS’ ability to record process, summarize and report financial data, any material weaknesses identified in internal controls, and any fraud, whether or not material, that involves management or other employees who have a significant role in FMS’ internal controls; and (iii) FMS shall take appropriate corrective actions to address any such significant deficiencies or material weaknesses identified in the internal controls.

(b)     Between the date of this Agreement and the Effective Time, FMS shall, upon reasonable notice during normal business hours, permit Bancorp (a) to meet with the officers of FMS and any FMS Subsidiary responsible for the financial statements of FMS and each FMS Subsidiary and the internal control over financial reporting of FMS and each FMS Subsidiary to discuss such matters as Bancorp may deem reasonably necessary or appropriate concerning Bancorp’s obligations under Sections 302 and 906 of the Sarbanes-Oxley Act; and (b) to meet with officers of FMS and FMS Subsidiaries to discuss the integration of appropriate disclosure controls and procedures and internal control over financial reporting relating to FMS and each FMS Subsidiary’s operations with the controls and procedures and internal control over financial reporting of Bancorp for purposes of assisting Bancorp in compliance with the applicable provisions of the Sarbanes-Oxley Act following the Effective Time.  FMS shall, and shall cause its and each FMS Subsidiary’s respective employees and accountants to, fully cooperate with Bancorp in the preparation, documentation, review, testing and all other actions Bancorp deems reasonably necessary to satisfy the internal control certification requirements of Section 404 of the Sarbanes-Oxley Act.

(c)          Between the date of this Agreement and the Effective Time, Bancorp shall maintain an adequate internal control structure and procedures for financial reporting as required by the rules and regulations of the FDIC (12 C.F.R. Part 363).

3.16         Appointment to Bancorp Board of Directors .  Bancorp shall, as of the Effective Time, cause Craig W. Yates and one other director to be designated by FMS and approved by Bancorp to be appointed to the Board of Directors of each of Bancorp, Beneficial MHC and BMSB.

3.17         Advisory Board .  Bancorp shall cause BMSB to create an advisory board (the “ Advisory Board ”) to (a) assist in and advise with respect to integration of the operations of FMB with and into those of BMSB, and (b) advise with respect to the operations of BMSB.  Other than the directors identified in Section 3.16 above, BMSB will invite all current members of the Board of Directors of FMS who are members of such Board of Directors as of the Effective Time to serve on the Advisory Board.  The Advisory Board will have a term of one year and during the one-year term each Advisory director will earn an amount equal to the aggregate regular Board fees paid to a FMS Board member for service on both the FMS and FMB boards for the twelve month period immediately prior to the Effective Time.  

3.18         Meeting of FMS Shareholders .

(a)     FMS will promptly take all steps necessary to cause the FMS Meeting to be duly called, noticed, and held as soon as practicable after the Registration Statement is declared effective for the purpose of voting to approve this Agreement, the Merger and all matters related thereto.  FMS will use its best efforts to secure the required approval of its Shareholders.

(b)     FMS will prepare and file with the SEC a Proxy Statement as soon as reasonably practicable after the date of this Agreement.  FMS shall use reasonable best efforts to cause the Proxy Statement to be cleared for mailing as promptly as practicable after such filing.  FMS will cause to be mailed to its Shareholders a notice of the Meeting and the Proxy Statement as soon as practicable thereafter.  Each party to this Agreement will furnish to the other parties all information concerning itself as each such other party or its counsel may reasonably request and which is required or customary for inclusion in the Proxy Statement.

(c)     The Proxy Statement shall include the recommendation of the Board of Directors of FMS in favor of the Merger; provided, however, that if the Board of Directors of FMS shall, in good faith and after consulting with its legal counsel, determine that to make such a recommendation would be a violation of its fiduciary obligations under applicable Law, then the Board of Directors of FMS shall not be obligated to make any such recommendation.

3.19         Voting Agreement .  FMS shall use its best efforts to have Frances E. Yates enter into a Voting Agreement in the form attached hereto as Exhibit D as soon as practicable following the execution of this Agreement.

FMS hereby represents and warrants to Bancorp that:

4.1          Organization and Qualification; Subsidiaries .  

(a)     FMS is a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, and is a registered savings and loan holding company under HOLA.  FMB is a federally chartered capital stock savings bank duly organized and validly existing under the HOLA.  The deposits of FMB are insured by the Deposit Insurance Fund of the FDIC to the extent provided by the FDIA, and FMB has paid all premiums and assessments required thereunder.  FMB is a member in good standing of the FHLB of New York.  Each of the other FMS Subsidiaries is duly organized, validly existing and in good standing under the laws of the state of its incorporation.  Each of FMS and the FMS Subsidiaries has the requisite corporate power and authority and is in possession of all franchises, grants, authorizations, licenses, permits, easements, consents, certificates, approvals and orders (“FMS Approvals”) necessary to own, lease and operate its properties and to carry on its business as it is now being conducted, including appropriate authorizations from the OTS and the FDIC, except where a failure to be so organized, existing and in good standing or to have such power, authority and FMS Approvals would not, individually or in the aggregate, have a Material Adverse Effect on FMS, and neither FMS nor any FMS Subsidiary has received any notice of proceedings relating to the revocation or modification of any FMS Approvals.

(b)     Each of FMS and FMB is duly qualified or licensed as a foreign corporation to conduct business, and is in good standing (or the equivalent thereof) in each jurisdiction where the character of the properties it owns, leases or operates or the nature of the activities it conducts make such qualification or licensing necessary, except for such failures to be so duly qualified and licensed and in good standing that would not, either individually or in the aggregate, have a Material Adverse Effect on FMS.

(c)     A true and complete list of all Subsidiaries of FMS (the “FMS Subsidiaries”), together with (i) FMS’s direct or indirect percentage ownership of each FMS Subsidiary; (ii) the jurisdiction in which the FMS Subsidiaries are incorporated; and (iii) a description of the principal business activities conducted by each FMS Subsidiary, is set forth in the FMS Disclosure Schedule.  FMS and/or one or more of the FMS Subsidiaries owns beneficially and of record all of the outstanding shares of capital stock of each of the FMS Subsidiaries.  Except for the Subsidiaries identified in the FMS Disclosure Schedule, FMS does not directly or indirectly own any equity or similar interests in, or any interests convertible into or exchangeable or exercisable for any equity or similar interest in, any corporation, partnership, limited liability company, joint venture or other business association or entity other than in the ordinary course of business, and in no event in excess of 10% of the outstanding equity or voting securities of such entity.

4.2           Certificate of Incorporation and Bylaws .  FMS heretofore has furnished to Bancorp a complete and correct copy of the Certificate of Incorporation or other chartering documents and Bylaws, as amended or restated, of FMS and of FMB.  Each such Certificate of Incorporation or other chartering document and Bylaws are in full force and effect.  Neither FMS nor FMB is in violation of any of the provisions of its Certificate of Incorporation or other chartering document or Bylaws.  

4.3           Capitalization .  The authorized capital stock of FMS consists of 10,000,000 shares of FMS Common Stock and 5,000,000 shares of serial preferred stock.  As of the date of this Agreement, (a) 6,515,813 shares of FMS Common Stock are issued and outstanding, all of which are duly authorized, validly issued, fully paid and non-assessable, and not issued in violation of any preemptive right of any FMS Shareholder, (b) 1,493,579 shares of FMS Common Stock are held in the treasury of FMS, (c) 31,000 shares of FMS Common Stock are subject to issuance pursuant to outstanding Stock Options, and (d) no shares of FMS Common Stock are reserved for future issuance pursuant to the FMS Stock Option Plan.  As of the date of this Agreement, no shares of FMS’s preferred stock are issued and outstanding.  Except as set forth in clauses (c) and (d) above, as of the date of this Agreement FMS has not granted any options, warrants or other rights, agreements, arrangements or commitments of any character, including without limitation voting agreements or arrangements, relating to the issued or unissued capital stock of FMS or FMB or obligating FMS or FMB to issue or sell any shares of capital stock of, or other equity interests in, FMS or FMB.  All shares of FMS Common Stock subject to issuance as described in the foregoing, upon issue on the terms and conditions specified in the instruments pursuant to which they are issuable, will be duly authorized, validly issued, fully paid and nonassessable and will not be issued in violation of any preemptive right of any FMS Shareholder.  Except as described in the FMS Disclosure Schedule, there are no obligations, contingent or otherwise, of FMS or FMB to repurchase, redeem or otherwise acquire any shares of FMS Common Stock or the capital stock of FMB or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in FMB or any other entity.  Each of the outstanding shares of capital stock of FMB is duly authorized, validly issued, fully paid and nonassessable, and such shares owned by FMS are owned free and clear of all security interests, liens, claims, pledges, agreements, limitations of FMS’ voting rights, charges or other encumbrances of any nature whatsoever.

4.4           Authorization; Enforceability .  The execution, delivery and performance of this Agreement and all of the documents and instruments required by this Agreement to be executed and delivered by FMS are within the corporate power of FMS, and: (a) have been duly and validly authorized by the requisite vote of the Board of Directors of FMS; and (b) upon the approval of the FMS Shareholders and receipt of all Regulatory Approvals, shall be duly and validly authorized by all necessary corporate action.  This Agreement is, and the other documents and instruments required by this Agreement to be executed and delivered by FMS or FMB will be, when executed and delivered by FMS and FMB, the valid and binding obligations of FMS and FMB, enforceable against each of them in accordance with their respective terms, except as the enforcement thereof may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar Laws generally affecting the rights of creditors and subject to general equity principles.  

4.5           No Violation or Conflict .  Except as set forth in the FMS Disclosure Schedule, subject to the receipt of the Regulatory Approvals and the receipt of the approval of the FMS Shareholders, the execution, delivery and performance of this Agreement and all of the documents and instruments required by this Agreement to be executed and delivered by FMS do not and will not conflict with or result in a breach of any Law, the Certificate of Incorporation or Bylaws of FMS, or the Charter or Bylaws of FMB, constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any FMS Existing Contract or any FMS Permit, or the creation of any Lien upon any of the properties or assets of FMS or FMB, in each case which would have a Material Adverse Effect on FMS.

4.6           Title to Assets; Leases .  Except for the FMS Existing Liens, which are listed in the FMS Disclosure Schedule, Liens for current taxes not yet due and payable, pledges to secure deposits and such imperfections of title, easements and other encumbrances, if any, as do not materially detract from the value of or substantially interfere with the present use of the property affected thereby, FMS owns good and, with respect to real property, marketable title to the assets and properties which it owns or purports to own, free and clear of any and all Liens.  There is not, under any leases pursuant to which FMS or FMB leases from others real or personal property, any default by FMS, FMB or, to the best of FMS’s Knowledge, any other party thereto, or any event which with notice or lapse of time or both would constitute such a default in each case which would have a Material Adverse Effect on FMS.  

4.7           Litigation .  Except as disclosed on the FMS Disclosure Schedule, (a) neither FMS nor FMB is subject to any material continuing order of, or written agreement or memorandum of understanding with, or, to the Knowledge of FMS, any continuing material investigation by the OTS or insurance authority or other governmental entity, or any judgment, order, writ, injunction, decree or award of any governmental entity or arbitrator, including, without limitation, cease and desist or other orders of any savings and loan regulatory authority; (b) there is no claim, litigation, arbitration, proceeding, governmental investigation, citation or action of any kind pending or, to the Knowledge of FMS, proposed or threatened, against or relating to FMS or FMB, nor to the Knowledge of FMS is there any basis known for any such material action which could result in a Material Adverse Effect; (c) there are no actions, suits or proceedings pending or, to the knowledge of FMS, proposed or threatened, against FMS by any Person which question the legality, validity or propriety of the transactions contemplated by this Agreement; and (d) there are no uncured material violations or violations with respect to which material refunds or restitutions may be required, cited in any compliance report to FMS or FMB as a result of an examination by any regulatory authority which could result in a Material Adverse Effect.

4.8           Securities and Banking Reports; Books and Records .  

(a)     Since December 31, 2003, FMS and FMB have filed all reports, registration statements, definitive proxy statements and prospectuses, together with any amendments required to be made with respect thereto, that were and are required to be filed under the Securities Act, Exchange Act or any other Law with: (i) the SEC; (ii) the OTS; (iii) the FHLB of New York; (iv) the FDIC; and (v) any other applicable state securities or savings and loan authorities (all such reports, statements and prospectuses are collectively referred to herein as the “FMS Reports”).  When filed, each of the FMS Reports complied as to form and substance in all material respects with the requirements of applicable Laws.  

(b)     Each of the consolidated audited financial statements and consolidated unaudited interim financial statements (including, in each case, any related notes thereto) of FMS included in the FMS Reports filed with the SEC have been or will be, as the case may be, prepared in accordance with generally accepted accounting principles applied on a consistent basis (except as may be indicated therein or in the notes thereto and except with respect to consolidated unaudited interim statements as permitted by SEC Form 10-Q) and each fairly presents the consolidated financial condition of FMS as of the respective dates thereof and the consolidated income, equity and cash flows for the periods then ended, subject, in the case of the consolidated unaudited interim financial statements, to normal year-end and audit adjustments and any other adjustments described therein.  

(c)     The minute books of FMS and FMB contain accurate and complete records of all meetings and actions taken by written consent by their respective shareholders and Boards of Directors (including all committees of such Boards), and all signatures contained therein are the true signatures of the Persons whose signatures they purport to be.  To the Knowledge of FMS, the share transfer books of FMS are correct, complete and current in all respects.  Except as set forth in the FMS Disclosure Schedule, the accounting books and records of FMS: (i) are in all material respects correct and complete; (ii) are current in a manner consistent with past practice; and (iii) have recorded therein all the properties and assets and liabilities of FMS.

4.9           Absence of Certain Changes .  Except as set forth in the FMS Disclosure Schedule or otherwise provided in this Agreement, since June 30, 2006 there has not been any:

(a)     change in the financial condition, properties, business or results of operations of FMS or FMB having a Material Adverse Effect on FMS;

(b)     damage, destruction or loss (whether or not covered by insurance) with respect to any assets of FMS or FMB having a Material Adverse Effect on FMS;

(c)     transactions by FMS or FMB outside the ordinary course of their respective businesses or inconsistent with past practices, except for the transactions contemplated by this Agreement;

(d)     except for regular quarterly cash dividends of $0.03 per share on FMS Common Stock with usual record and payment dates, declaration or payment or setting aside the payment of any dividend or any distribution in respect of the capital stock of FMS or, except as set forth on the FMS Disclosure Sch