AGREEMENT AND PLAN OF MERGER BY AND AMONG BENEFICIAL SAVINGS BANK MHC BENEFICIAL MUTUAL BANCORP, INC. AND BENEFICIAL MUTUAL SAVINGS BANK AND FMS FINANCIAL CORPORATION AND FARMERS AND MECHANICS BANK DATED AS OF OCTOBER 12, 2006

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EXHIBITS

	Exhibit A	Corporate Merger Agreement
	Exhibit B	Mid-Tier Merger Agreement
	Exhibit C	Bank Merger Agreement
	Exhibit D	Form of Voting Agreement
	Exhibit E	Form of Affiliate’s Letters
	Exhibit F	Directors and Officers of Bancorp

NOW, THEREFORE, in consideration of the premises and mutual promises hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree that:

 

TERM		SECTION
Acquisition Agreement		8.1(k)
Bank Merger		2.2(b)
Bancorp Proposal		6.2(b)
Bancorp Reports		5.9(a)
Benchmark Price		8.3(d)
Cash Consideration		2.5(a)(i)
Cash Conversion Number		2.5(b)(i)
Cash Election		2.5(d)(iii)
Cash Election Number		2.5(d)(iii)
Cash Election Shares		2.5(d)(iii)
Cash Proration Factor		2.5(e)(ii)
Certificates		2.5(d)(ii)
COBRA		3.12(d)
Corporate Merger		2.2 (a)
Costs		8.2(c)
Disclosure Schedule Change		3.2(d)
Effective Time		2.1
Election Deadline		2.5(d)(ii)
Election Form		2.5(d)(i)
Exchange Agent		2.6(a)
Exchange Fund		2.6(e)
Exchange Ratio		2.5(a)(ii)
Bancorp Reports		5.9
FMS Approvals		4.1(a)
FMS Reports		4.8
Indemnified Parties		3.5(a)
Minority Stock Offering		2.9(a)
Mixed Election		2.5(d)(iii)
Merger Consideration		2.5(a)
Non-Election		2.5(d)(iii)
Non-Election Shares		2.5(d)(iii)
Non-Election Proration Factor		2.5(e)(ii)
Representative		2.5(d)(i)
Shortfall Number		2.5(e)(ii)
Special Payment		8.3(a)
Special Payment Event		8.3(a)
Stock Consideration		2.5(a)(ii)
Stock Conversion Number		2.5(b)(ii)
Stock Election		2.5(d)(iii)
Stock Election Number		2.5(d)(iii)
Stock Election Shares		2.5(d)(iii)
Stock Proration Factor		2.5(e)(i)
Superior Proposal		6.2(a)

 

 

(ii)     If the Stock Election Number is less than the Stock Conversion Number (as adjusted pursuant to Section 2.5(c)) (the amount by which the Stock Conversion Number exceeds the Stock Election Number being referred to herein as the “Shortfall Number”), then all Stock Election Shares shall be converted into the right to receive the Stock Consideration and the Non-Election Shares and Cash Election Shares shall be treated in the following manner:

 

 

(b)     There are no pending and unresolved claims by any Person against FMS or FMB arising out of any Law relating to discrimination against employees or employee practices or occupational or safety and health standards. There is no pending or, to the knowledge of FMS, threatened, nor has FMS or FMB, since December 31, 2000, experienced any, labor dispute, strike or work stoppage which affected, affects or may affect the business of FMS or FMB or which did, may or would interfere with the continued operation of FMS or FMB.

 

(c)     Neither FMS nor FMB is a party to any collective bargaining agreement. There is not now pending or, to the Knowledge of FMS, threatened, any charge or complaint against FMS or FMB by or before the National Labor Relations Board or any representative thereof, or any comparable state agency or authority. No union organizing activities are in process, or to FMS’s Knowledge contemplated, and no petitions have been filed for union organization or representation of employees of FMS or FMB, and FMS and FMB have not committed any unfair labor practices which have not heretofore been corrected and fully remedied.

4.23        Indebtedness. Except for the FMS Existing Indebtedness, FMS has no Indebtedness.

4.24        Permits. The Permits described on the FMS Disclosure Schedule constitute all Permits which FMS and FMB currently have and need for the conduct of their respective businesses as currently conducted, except for such Permits the failure of which to have would not have a Material Adverse Effect on FMS.

4.25        Disclosure. No statement of fact by FMS contained in this Agreement, the FMS Disclosure Schedule, or any other document furnished or to be furnished by FMS contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein contained, in the light of the circumstances under which they were made, not misleading as of the date to which it speaks.

4.26        Information Supplied. None of the information supplied or to be supplied by FMS for inclusion or incorporation by reference in the Registration Statement or the Proxy Statement will, at the date the Registration Statement becomes effective, the date(s) the Proxy Statement is mailed to the FMS Shareholders and at the time(s) of the FMS Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder.

4.27        Vote Required. The affirmative vote of the holders of a majority of the outstanding shares of FMS Common Stock is the only vote of the holders of any class or series of capital stock or other securities of FMS necessary to approve the Merger, this Agreement and the transactions contemplated by this Agreement.

 

 

4.28        Opinion of Financial Advisor. FMS has received the opinion of Ryan Beck & Co. as of the date of this Agreement, to the effect that the consideration to be received in the Merger by the FMS Shareholders is fair to the FMS Shareholders from a financial point of view.

4.29        Environmental Protection.

(a)     Except as set forth in the FMS Disclosure Schedule, FMS and the FMS Subsidiaries: (i) are in material compliance with all applicable Environmental Laws; and (ii) have not received any communication (written or oral), from a governmental authority or other Person, that alleges that FMS is not in compliance with applicable Environmental Laws.

(b)     Except as set forth in the FMS Disclosure Schedule, FMS and FMB have obtained all Environmental Permits, and all such Environmental Permits are in good standing and FMS and FMB are in material compliance with all terms and conditions of their Environmental Permits.

(c)     Except as set forth in the FMS Disclosure Schedule, there is no Environmental Claim pending or, to the Knowledge of FMS, threatened against FMS, FMB or against any Person whose liability for any Environmental Claim FMS or FMB has or may have retained or assumed either contractually or by operation of Law, or against any real or personal property or operations which FMS or FMB owns, leases or manages.

(d)     Except as set forth in the FMS Disclosure Schedule, to the Knowledge of FMS there have been no Releases of any Hazardous Material by FMS or by any Person on real property owned (including REO properties of FMB), used, leased or operated by FMS or FMB.

(e)     No real property at any time owned (including REO properties of FMB), operated, used or controlled by FMS or FMB is currently listed on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the CERCLA, or on any comparable state list, and, except as described in the FMS Disclosure Schedule, FMS has not received any written notice from any Person under or relating to CERCLA or any comparable state or local Law relating to potential listing on such lists.

(f)     Except as set forth in the FMS Disclosure Schedule, to the Knowledge of FMS, no off-site location at which FMS or FMB has disposed or arranged for the disposal of any waste is listed on the National Priorities List or on any comparable state list and neither FMS nor FMB has received any written notice from any Person with respect to any off-site location, of potential or actual liability or a written request for information from any Person under or relating to CERCLA or any comparable state or local Law.

   4.30         Controls and Procedures. (a) Each of the principal executive officer and the principal financial officer of FMS has made all certifications required under Sections 302 and 906 of the Sarbanes-Oxley Act with respect to FMS Reports, and FMS has delivered to Bancorp a summary of any disclosure made by management to FMS’ auditors and audit committee since January 1, 2003 referred to in such certifications. For purposes of the preceding sentence, “principal executive officer” and “principal financial officer” shall have the meanings given to such terms in the Sarbanes-Oxley Act.

 

 

(b)     FMS has (i) designed and maintains disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) to ensure that material information required to be disclosed by FMS in the reports it files or submits under the Exchange Act is communicated to its management by others within those entities as appropriate to allow timely decisions regarding required disclosure, and (ii) disclosed, based on its most recent evaluation, to its auditors and the audit committee of its Board of Directors (A) any significant deficiencies or material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect FMS’ ability to record, process, summarize and report financial information, and (B) any fraud, whether or not material, that involves management or other employees who have a significant role in FMS’ internal control over financial reporting. FMS has provided to Bancorp true and correct copies of any of the foregoing disclosures to the auditors or audit committee that have been made in writing from January 1, 2003 through the date hereof, and will promptly provide to Bancorp true and correct copies of any such disclosure that is made after the date hereof.

(c)     FMS has designed and maintains a system of internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) sufficient to provide reasonable assurance concerning the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP, including reasonable assurance (i) that transactions are executed in accordance with management’s general or specific authorizations and recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (ii) access to assets is permitted only in accordance with management’s general or specific authorizations, and (iii) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any difference.

(d)     No personal loan or other extension of credit by FMS or any FMS Subsidiary to any of its or their executive officers or directors has been made or modified (other than as permitted by Section 13 of the Exchange Act and Section 402 of the Sarbanes-Oxley Act).

(e)     Since January 1, 2003, (i) neither FMS nor any of FMS Subsidiaries nor, to the Knowledge of FMS, any director, officer, employee, auditor, accountant or representative of FMS or any of FMS Subsidiaries has received any written complaint, allegation, assertion, or claim that FMS or any FMS Subsidiary has engaged in improper or illegal accounting or auditing practices or maintains improper or inadequate internal accounting controls and (ii) no attorney representing FMS or any FMS Subsidiary, whether or not employed by FMS or any FMS Subsidiary, has reported evidence of a material violation of U.S. federal or state securities laws, a material breach of fiduciary duty or similar material violation by FMS, any of FMS Subsidiaries or any of their respective officers, directors, employees or agents to any officer of FMS, the Board of Directors of FMS or any member or committee thereof.

 

 

Bancorp hereby represents and warrants to FMS that:

5.1          Organization and Capitalization; Business.

(a)     Bancorp is a federally chartered mid-tier savings and loan holding company duly organized, validly existing and in good standing under the HOLA. Beneficial MHC is a federally chartered mutual holding company duly organized and validly existing and in good standing under HOLA. BMSB is a Pennsylvania-chartered stock savings bank duly organized and validly existing and in good standing under the laws of the Commonwealth of Pennsylvania. The deposits of BMSB are insured by the Deposit Insurance Fund of the FDIC to the extent provided by the FDIA and BMSB has paid all premiums and assessments required thereunder. BMSB is a member in good standing of the FHLB of Pittsburgh. Each of the other Bancorp Subsidiaries is duly organized, validly existing and in good standing under the laws of the state of its incorporation. Each of Bancorp and the Bancorp 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 (“Bancorp 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 Bancorp Approvals would not, individually or in the aggregate, have a Material Adverse Effect on Bancorp, and neither Bancorp nor any Bancorp Subsidiary has received any notice of proceedings relating to the revocation or modification of any Bancorp Approvals.

(b)     Each of Bancorp and BMSB 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 Bancorp.

(c)     Bancorp and/or one or more of the Bancorp Subsidiaries owns beneficially and of record all of the outstanding shares of capital stock of each of the Bancorp Subsidiaries. Bancorp 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.

 

 

(d)     Bancorp, Beneficial MHC and BMSB each have full corporate power and authority and those Permits necessary to carry on their respective business as it is now conducted and to own, lease and operate their respective assets and properties.

(e)     Copies of the Charter and Bylaws of Bancorp, Beneficial MHC and BMSB have been delivered to FMS. Such copies are complete and correct copies of such documents, and are in full force and effect. None of Bancorp, Beneficial MHC, or BMSB is in violation of any of the provisions of its Charter or Bylaws.

5.2          Authorization; Enforceability. The entering into, execution, delivery and performance of this Agreement and all of the documents and instruments required by this Agreement to be executed and delivered by each of Beneficial MHC, Bancorp and BMSB is within their respective corporate powers, and: (a) has been duly and validly authorized by the requisite vote of their respective Board of Directors; and (b) upon receipt of all Regulatory Approvals, shall be duly and validly authorized by all necessary corporate action on their part. This Agreement is, and the other documents and instruments required by this Agreement to be executed and delivered by Beneficial MHC, Bancorp and BMSB will be, when executed and delivered by Beneficial MHC, Bancorp and BMSB, the valid and binding obligations of Beneficial MHC, Bancorp and BMSB, enforceable against 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.

5.3          No Violation or Conflict. Subject to the receipt of the Regulatory Approvals, 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 Beneficial MHC, Bancorp or BMSB do not and will not conflict with or result in a breach of any Law or their respective Charter or Bylaws or 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 Contract of Beneficial MHC, Bancorp or BMSB or any Permit held by any of them or the creation of any Lien upon any of their respective properties or assets which would have a Material Adverse Effect on Bancorp.

5.4          Litigation. (a) Neither Bancorp nor any Bancorp Subsidiary is subject to any continuing order of, or written agreement or memorandum of understanding with, or, to the Knowledge of Bancorp, any continuing material investigation by, any federal or state savings and loan, banking 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 Bancorp, proposed or threatened, against or relating to Bancorp or any Bancorp Subsidiary, nor is to the Knowledge of Bancorp is there any basis for any such material action; (c) there are no actions, suits or proceedings pending or, to the Knowledge of Bancorp, proposed or threatened, against Bancorp 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 Bancorp or any Bancorp Subsidiary as a result of an examination by any regulatory authority.

 

 

5.5          Governmental Approvals. No permission, approval, determination, consent or waiver by, or any declaration, filing or registration with, any governmental or regulatory authority is required in connection with the execution, delivery and performance of this Agreement by Bancorp except for the Regulatory Approvals and except for any consent the failure of which to obtain would not, individually or in the aggregate, have a Material Adverse Effect on Bancorp.

5.6          Cash Payment. Bancorp has sufficient funds or has financing arranged as part of the Minority Stock Offering to pay the cash payment required under Section 2.5 of this Agreement and such payment will not cause BMSB to fail to meet any regulatory capital requirements to which it is subject.

5.7          Compliance with Laws. Bancorp is in compliance in all material respects with all applicable Laws including, without limitation, the federal Bank Secrecy Act, as amended, and its implementing regulations (31 C.F.R. Part 103), the USA PATRIOT Act of 2001, Public Law 107-56 (the “USA PATRIOT Act”), and the regulations promulgated thereunder, any order issued with respect to anti-money laundering by the U.S. Department of the Treasury’s Office of Foreign Assets Control, or any other applicable anti-money laundering statute, rule or regulation.

5.8          Consummation. Bancorp has no reason to believe that it will be unable to obtain the Regulatory Approvals on a timely basis.

5.9          Banking Reports; Books and Records.

(a)     Since January 1, 2005, Beneficial MHC, Bancorp and BMSB have filed all reports, together with any amendments required to be made with respect thereto, that were and are required to be filed under any Law with: (i) the OTS; (ii) the FHLB of Pittsburgh; (iii) the FDIC; and (iv) any other applicable state securities or savings bank authorities (all such reports and other documents are collectively referred to herein as the “Bancorp Reports”). When filed, each of the Bancorp 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 Bancorp included in the Bancorp Reports 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) and each fairly presents the consolidated financial condition of Bancorp 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 Beneficial MHC, Bancorp and the Bancorp Subsidiaries 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. The accounting books and records of Bancorp: (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 Bancorp.

5.10        Absence of Certain Changes. Since June 30, 2006 there has not been any:

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

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

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

(d)     change in the method of accounting or accounting practices of Bancorp or any Bancorp Subsidiary.

5.11        Taxes.

(a)     Except as may arise as a result of the transactions contemplated by this Agreement: Beneficial MHC, Bancorp and the Bancorp Subsidiaries have timely and properly filed all federal, state, local and foreign tax returns (including but not limited to income, franchise, sales, payroll, employee withholding and social security and unemployment) which were required to be filed except where the failure to have filed timely or properly would not have a Material Adverse Effect on Bancorp; Beneficial MHC, Bancorp and the Bancorp Subsidiaries have paid or made adequate provision, in reserves reflected in its financial statements included in the Bancorp Reports in accordance with generally accepted accounting principles, for the payment of all taxes (including interest and penalties) and withholding amounts owed by them or assessable against them; no tax deficiencies have been assessed or proposed against Bancorp or any Bancorp Subsidiary and to the Knowledge of Bancorp there is no basis in fact for the assessment of any tax or penalty tax against Beneficial MHC, Bancorp or any Bancorp Subsidiary.

(b)     As of the date of this Agreement, there are no fiscal years of Bancorp currently under examination by the IRS or the New Jersey or Pennsylvania Departments of Revenue, and none of the open years has been examined by the IRS or the New Jersey or Pennsylvania Departments of Revenue. Bancorp and the Bancorp Subsidiaries have not consented to any extension of the statute of limitation with respect to any open tax returns.

 

 

(c)     There are no tax Liens upon any property or assets of Bancorp or any Bancorp Subsidiary except for Liens for current taxes not yet due and payable.

(d)     As soon as practicable after the date of this Agreement, Bancorp and the Bancorp Subsidiaries will deliver to FMS correct and complete copies of all tax returns and reports of Bancorp filed for all periods not barred by the applicable statute of limitations. No examination or audit of any tax return or report for any period not closed by audit or not barred by the applicable statute of limitations has occurred, no such examination is in progress and, to the Knowledge of Bancorp, no such examination or audit is planned.

(e)     Except where the failure to withhold, pay or file would not have a Material Adverse Effect on Bancorp, Bancorp and the Bancorp Subsidiaries have properly withheld and timely paid all withholding and employment taxes which they were required to withhold and pay relating to salaries, compensation and other amounts heretofore paid to their employees or other Persons. All Forms W-2 and 1099 required to be filed with respect thereto have been timely and properly filed.

5.12        Title to Assets; Leases. 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, Bancorp 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 Bancorp or BMSB leases from others real or personal property, any default by Bancorp, BMSB or, to the best of Bancorp’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 Bancorp.

5.13        Contingent and Undisclosed Liabilities. Bancorp and BMSB have no material liabilities of any nature (contingent or otherwise) except for those which: (a) are disclosed in the Bancorp Reports; or (b) arise in the ordinary course of business since June 30, 2006 and are not required to be disclosed in the Bancorp Reports or arise pursuant to this Agreement.

5.14        Insurance Policies. All real and personal property owned or leased by Bancorp or BMSB has been and is being insured against, and Bancorp or BMSB maintains liability insurance against, such insurable risks. Such Insurance Policies constitute all insurance coverage owned by Bancorp or BMSB and are in full force and effect and neither Bancorp nor BMSB has received notice of or is otherwise aware of any cancellation or threat of cancellation of such insurance. No property damage, personal injury or liability claims have been made, or are pending, against Bancorp or BMSB that are not covered by insurance. Within the past two (2) years, no insurance company has canceled any insurance (of any type) maintained by Bancorp or BMSB. Neither Bancorp nor BMSB has any liability for unpaid premiums or premium adjustments for any insurance policy. To the Knowledge of Bancorp, the cost of any insurance currently maintained by Bancorp or BMSB will not increase significantly upon renewal other than increases consistent with the general upward trend in the cost of obtaining insurance.

 

 

5.15         Employee Benefit Plans.

(a)     Bancorp has furnished FMS with a complete and accurate copy of each Bancorp Existing Plan and a complete and accurate copy of each material document prepared in connection with each such Bancorp Existing Plan, including, without limitation and where applicable, a copy of (i) each trust or other funding arrangement, (ii) the most recent summary plan description and all summaries of material modifications applicable thereto, (iii) the most recently filed IRS Form 5500, (iv) the most recently received IRS determination letter, and (v) the most recently prepared actuarial report and financial statement.

(b)     Neither Bancorp nor BMSB maintains or contributes to, or within the two years preceding the Effective Time has maintained or contributed to, an employee pension benefit plan subject to Title IV of ERISA other than its defined benefit plan. None of the Bancorp Existing Plans or Bancorp Existing Contracts obligates Bancorp or BMSB to pay material separation, severance, termination or similar-type benefits solely as a result of any transaction contemplated by this Agreement or as a result of a “change in control,” within the meaning of such term under Section 280G of the Code. None of the Bancorp Existing Plans or the Bancorp Existing Contracts provides for or promises retiree medical, disability or life insurance benefits to any current or former employee, officer or director of Bancorp or BMSB.

(c)     To the Knowledge of Bancorp, each Bancorp Existing Plan has always been operated in material compliance with the requirements of all applicable Law. Bancorp and BMSB have performed in all material respects all obligations required to be performed by either of them under, are not in any material respect in default under or in violation of, and have no Knowledge of any material default or violation by any party to, any Bancorp Existing Plan. No legal action, suit or claim is pending or, to the Knowledge of Bancorp, threatened with respect to any Bancorp Existing Plan (other than claims for benefits in the ordinary course) and no fact or event exists to the knowledge of Bancorp that could give rise to any such action, suit or claim other than as a result of the transactions contemplated by this Agreement.

(d)     Each Bancorp Existing Plan that is intended to be qualified under Section 401(a) of the Code or Section 401(k) of the Code has received a favorable determination letter from the IRS that it is so qualified, and to the Knowledge of Bancorp no fact or event has occurred since the date of such determination letter from the IRS to adversely affect the qualified status of any such Bancorp Existing Plan. No trust maintained or contributed to by Bancorp or BMSB is intended to be qualified as a voluntary employees’ beneficiary association or is intended to be exempt from federal income taxation under Section 501(c)(9) of the Code.

(e)     To the Knowledge of Bancorp, there has been no non-exempt prohibited transaction (within the meaning of Section 406 of ERISA or Section 4975 of the Code) with respect to any Bancorp Existing Plan. Neither Bancorp nor BMSB has incurred any liability for any excise tax arising under Section 4972 or 4980B of the Code and no fact or event exists that could give rise to any such liability.

 

 

(f)     All contributions, premiums or payments required to be made with respect to any Bancorp Existing Plan have been made on or before their due dates. To the Knowledge of Bancorp, there is no accumulated funding deficiency, within the meaning of ERISA or the Code, in connection with the Bancorp Existing Plans and no reportable event, as defined in ERISA, has occurred in connection with the Bancorp Existing Plans.

5.16         Labor Matters.

(a)     There is no present or former employee of Bancorp or BMSB who has any claim against any of such entities (whether under Law, under any employee agreement or otherwise) on account of or for: (i) overtime pay, other than overtime pay for the current payroll period; (ii) wages or salaries, other than wages or salaries for the current payroll period; or (iii) vacations, sick leave, time off or pay in lieu of vacation, sick leave or time off, other than vacation, sick leave or time off (or pay in lieu thereof) earned in the twelve-month period immediately preceding the date of this Agreement or incurred in the ordinary course of business and appearing as a liability on the most recent financial statements included in the Bancorp Reports.

(b)     There are no pending and unresolved claims by any Person against Bancorp or BMSB arising out of any Law relating to discrimination against employees or employee practices or occupational or safety and health standards. There is no pending or, to the knowledge of Bancorp, threatened, nor has Bancorp or BMSB, since December 31, 2000, experienced any, labor dispute, strike or work stoppage which affected, affects or may affect the business of Bancorp or BMSB or which did, may or would interfere with the continued operation of Bancorp or BMSB.

(c)     Neither Bancorp nor BMSB is a party to any collective bargaining agreement. There is not now pending or, to the Knowledge of Bancorp, threatened, any charge or complaint against Bancorp or BMSB by or before the National Labor Relations Board or any representative thereof, or any comparable state agency or authority. No union organizing activities are in process, or to Bancorp’s Knowledge contemplated, and no petitions have been filed for union organization or representation of employees of Bancorp or BMSB, and Bancorp and BMSB have not committed any unfair labor practices which have not heretofore been corrected and fully remedied.

5.17        Disclosure. No statement of fact by Bancorp contained in this Agreement or any other document furnished or to be furnished by Bancorp contains or will contain any untrue statement of a material fact or omits or will omit to state a material fact necessary in order to make the statements herein or therein contained, in the light of the circumstances under which they were made, not misleading as of the date to which it speaks.

5.18        Information Supplied. None of the information supplied or to be supplied by Bancorp for inclusion or incorporation by reference in the Registration Statement or the Proxy Statement will, at the date the Registration Statement becomes effective, the date(s) the Proxy Statement is mailed to the FMS Shareholders and at the time(s) of the FMS Meeting, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations of the SEC thereunder. The Registration Statement will comply as to form in all material respects with the provisions of the Securities Act and the rules and regulations of the SEC thereunder.

 

 

5.19        Environmental Protection.

(a)     Bancorp and the Bancorp Subsidiaries: (i) are in material compliance with all applicable Environmental Laws; and (ii) have not received any communication (written or oral), from a governmental authority or other Person, that alleges that Bancorp is not in compliance with applicable Environmental Laws.

(b)     Bancorp and BMSB have obtained all Environmental Permits, and all such Environmental Permits are in good standing and Bancorp and BMSB are in material compliance with all terms and conditions of their Environmental Permits.

(c)     There is no Environmental Claim pending or, to the Knowledge of Bancorp, threatened against Bancorp, BMSB or against any Person whose liability for any Environmental Claim Bancorp or BMSB has or may have retained or assumed either contractually or by operation of Law, or against any real or personal property or operations which Bancorp or BMSB owns, leases or manages.

(d)     To the Knowledge of Bancorp there have been no Releases of any Hazardous Material by Bancorp or by any Person on real property owned (including REO properties of BMSB), used, leased or operated by Bancorp or BMSB.

(e)     No real property at any time owned (including REO properties of BMSB), operated, used or controlled by Bancorp or BMSB is currently listed on the National Priorities List or the Comprehensive Environmental Response, Compensation and Liability Information System, both promulgated under the CERCLA, or on any comparable state list, and Bancorp has not received any written notice from any Person under or relating to CERCLA or any comparable state or local Law relating to potential listing on such lists.

(f)     To the Knowledge of Bancorp, no off-site location at which Bancorp or BMSB has disposed or arranged for the disposal of any waste is listed on the National Priorities List or on any comparable state list and neither Bancorp nor BMSB has received any written notice from any Person with respect to any off-site location, of potential or actual liability or a written request for information from any Person under or relating to CERCLA or any comparable state or local Law.

5.20        Community Reinvestment Act. BMSB received a rating of “satisfactory” or better on its most recent Community Reinvestment Act examination.

 

 

6.1          Conduct of Business by FMS Until the Effective Time. During the period commencing on the date hereof and continuing until the Effective Time, FMS agrees (except as expressly contemplated by this Agreement or to the extent that Bancorp shall otherwise consent in writing which consent shall not be unreasonably withheld) that:

(a)     Except as contemplated by this Agreement, FMS and each FMS Subsidiary will carry on their respective businesses in, the usual, regular and ordinary course in substantially the same manner as heretofore conducted (including ongoing review, testing, maintenance and assessment of disclosure controls and procedures and internal control over financial reporting), maintain their respective books in accordance with GAAP, conduct their respective business and operations only in accordance with safe and sound banking and business practices, and, except as set forth on Schedule 6.1(a) of the FMS Disclosure Schedule, use all reasonable efforts to (i) preserve intact their present business organizations, (ii) generally keep available the services of their present officers and employees, and (iii) preserve their relationships with customers, suppliers, agents, brokers and others having business dealing with them to the end that their respective goodwill and going businesses shall be unimpaired at the Effective Time.

(b)     FMS will, and will cause each FMS Subsidiary to, use their best efforts to comply promptly with all requirements which Federal or state law may impose on any of them with respect to the Merger and will promptly cooperate with and furnish information to Bancorp in connection with any such requirements imposed upon any of them in connection with the Merger.

(c)     FMS will, and will cause each FMS Subsidiary to, use their best efforts to obtain (and to cooperate with Bancorp in obtaining) any consent, authorization or approval of, or any exemption by, any governmental authority or agency, or other third party, required to be obtained or made by any of them in connection with the Merger or the taking of any action contemplated hereby. FMS will not, nor will it permit any of FMS Subsidiaries to, knowingly or willfully take any action that would adversely affect the ability of such party to perform its obligations under this Agreement.

(d)     FMS will not declare or pay any cash dividends on or make other distributions with respect to capital stock, except that until the Effective Date occurs, FMS will be permitted to declare and pay a regular quarterly cash dividend not exceeding $0.03 per share, so long as no dividend would be payable for that quarter on any Bancorp Common Stock to be issued as a result of the Merger. FMS shall not make any changes in its normal practice of declaring dividends or establishing dividend record or dividend payment dates.

(e)     FMS will not, and will not permit any FMS Subsidiary to, sell, lease or otherwise dispose of any assets, except in the ordinary course of business, which are material, individually or in the aggregate, to the business or financial condition of FMS on a consolidated basis.

 

 

(f)     FMS will not, and will not permit any FMS Subsidiary to, acquire by merging or consolidating with, purchasing substantially all of the assets of or otherwise, any business or any corporation, partnership, association or other business organization or division thereof.

(g)     Except as otherwise contemplated by this Agreement or pursuant to the exercise of outstanding options, FMS will not, and will not permit any FMS Subsidiary to, or enter into any agreement to, issue, sell, grant, authorize or propose the issuance or sale of, or purchase or propose the purchase of, permit the conversion of or otherwise acquire or transfer for any consideration any shares of their respective capital stocks or any class or securities convertible into, or rights, warrants or options to acquire, any such shares or other convertible securities, or to increase or decrease the number of shares of capital stock by split-up, reclassification, reverse split, stock dividend, stock split or change in par or stated value. No additional shares of FMS Common Stock shall become subject to new grants of employee stock options, stock appreciation rights, limited rights, stock grants or similar stock-based employee compensation rights.

(h)     FMS will not, and will not permit any FMS Subsidiary to, create or incur any liabilities, in a single transaction or a series of related transactions, in excess of $50,000 other than the taking of deposits and other liabilities incurred in the ordinary course of business or consistent with past practices, or permit or suffer the imposition on any shares of stock held by it or by any FMS Subsidiary of any material lien, charge or encumbrance. Notwithstanding the foregoing, in no event will FMS or any FMS Subsidiary incur any liabilities or indebtedness relating to: (i) brokered deposits or internet deposits; (ii) borrowed money other than fixed-rate Federal Home Loan Bank advances in the ordinary course of business with a term not in excess of two and one-half (2.5) years. In addition, such advances shall not have embedded options in their terms that are exercisable by the Federal Home Loan Bank.

(i)     FMS will not, and will not permit any FMS Subsidiary to, (i) grant to any director, officer or employee any increase in compensation (except in accordance with past practices for those employees who are not executive or senior management), (ii) make contributions to any FMS Existing Plans (except in accordance with past practices or the terms of such plans or agreements as currently in effect as of the date of this Agreement provided that no contributions shall be made to any FMS plan that is a defined benefit plan), or (iii) pay any bonus (except in accordance with past practices or plans or agreements with respect to employees other than executive or senior management) or increase any severance or termination pay, or enter into or amend any employment, special termination, change in control, retention, covenant not to compete, severance, SERP or other compensation related agreement with any such person except as contemplated in this Agreement; provided, however, that nothing shall prevent FMS from paying out accrued but unused vacation time in excess of five (5) days for the 2006 calendar year consistent with past practice.

(j)     Neither FMS, nor any FMS Subsidiary, will enter into, renew, extend, amend or modify any lease or license with respect to any property, whether real or personal with a term of more than one (1) year or payments greater than $50,000.

 

 

(k)     Except as set forth on Schedule 6.1(k) to the FMS Disclosure Schedule, neither FMS, nor any FMS Subsidiary, will enter into or amend any continuing contract or series of related contracts involving in excess of $50,000 for the purchase of materials, supplies, equipment or services which cannot be terminated without cause with less than ninety (90) days’ notice and without payment of any amount as a penalty, bonus, premium or other compensation for such termination except as contemplated or permitted by this Agreement.

(l)     FMS will not, and will not permit any FMS Subsidiary to, adopt or amend in any material respect any collective bargaining, employee pension, profit-sharing, retirement, employee stock ownership, insurance, incentive compensation, severance, vacation, stock option, or other plan, agreement, trust, fund or arrangement for the benefit of employees, except as contemplated herein.

(m)     FMS will, and will cause each FMS Subsidiary to, use their best efforts to maintain their respective properties and assets in their present states of repair, order and condition, reasonable wear and tear excepted, and to maintain and keep in full force and effect all policies of insurance presently in effect, including the insurance of accounts with the FDIC. FMS will, and will cause each FMS Subsidiary to, take all requisite action (including without limitation the making of claims and the giving of notices) pursuant to their directors’ and officers’ liability insurance policies in order to preserve all rights thereunder with respect to all matters known by FMS which could reasonably give rise to a claim prior to the Effective Time.

(n)     FMS will not, and will not permit any FMS Subsidiary to, amend their respective Certificate of Incorporation, Charters, or Bylaws, except as contemplated by this Agreement.

(o)     Except as contemplated on Schedule 6.1(o) to the FMS Disclosure Schedule, FMS will not, and will not permit any FMS Subsidiary to, enter into, renew, modify or increase: (i) any loan secured by lease receivables, (ii) any loan secured by commercial real estate involving an amount in excess of $1,250,000, or any amount which, when aggregated with any and all loans to the same or related borrowers, would be in excess of $2,500,000 (and in any event only if such loan has an existing debt service coverage ratio of not less than 1.20 and a loan value ratio in accordance with regulatory guidelines), (iii) any business loan involving an amount in excess of $250,000, or in any amount which, when aggregated with any and all loans to the same or related borrowers, would be in excess of $500,000 (and in any event only if such loan has an existing debt service coverage ratio of not less than 1.20), (iv) any loan or credit commitment (including letters of credit) which is secured by property located outside of New Jersey and Pennsylvania; and (v) any loan or credit commitment (including letters of credit) to, or make any investment or agree to make an investment in, any person or entity or modify any of the material provisions or renew or otherwise extend the maturity date of any existing loan, credit commitment or investment: (A) to any person or entity involving an amount in excess of $1,250,000 or in any amount which, when aggregated with any and all loans or credit commitments of FMS and FMB to such person or entity or related entities, would be in excess of $2,500,000 (and in any event only if such loan has a loan to value ratio of not greater than 80% unless private mortgage insurance is purchased); (B) to any person other than in accordance with its lending policies as in effect on the date hereof; or (C) to any person or entity any of the loans or other extensions of credit to which, or investments in which, are delinquent, non-performing or on a “watch list” or similar internal report of FMS or FMB; provided, however, that nothing in this subsection shall prohibit FMS or FMB from honoring any contractual obligation in existence on the date of this Agreement.

 

 

(p)     FMS will not, and will not permit any FMS Subsidiary to (i) make any fixed rate loan, loan commitment or renewal or extension with a term longer than ten (10) years, except on such terms and in such amounts as are consistent with past practice and in any event no more than $2.0 million in aggregate principal amount on average in any month of fixed rate loans with terms 30 years or longer unless such loans confirm to the FNMA/FHLMC standards, or (ii) purchase any loan or loan participation except FMS may purchase up to $5.0 million per month of adjustable rate loans or loan participations with initial fixed rate periods of five (5) years or less that are secured by 1-4 family residences and have loan to value ratios of not greater than 80% unless private mortgage insurance is purchased.

(q)     FMS will not, and will not permit any FMS Subsidiary to, take any action which would, or fail to take any action contemplated by this Agreement if such failure would, disqualify the Merger as a tax-free reorganization under Section 368(a) of the Code.

(r)     FMS will not, and will not permit any FMS Subsidiary to, materially restructure or materially change its investment securities portfolio, through purchases, sales or otherwise, or change the manner in which the portfolio is classified or reported (in accordance with FAS 115 or otherwise), or execute individual investment transactions in excess of $50,000, except that individual investment and mortgage-backed securities purchases will be limited to $3.0 million per issue, will be of the two highest investment grade categories, and no fixed-rate non-mortgage related security should have a final maturity of more than two (2) years and no fixed-rate mortgage-related security should have an average life of greater than three (3) years at Bloomberg consensus prepayment speeds.

(s)     Except as required by applicable law or regulation, FMS (i) will not, and will not permit any FMS Subsidiary to, implement or adopt any material change in its interest rate and other risk management policies, procedures or practices, and (ii) will, and will cause each FMS Subsidiary to, follow its existing policies and practices with respect to managing its exposure to interest rate and other risk and to use commercially reasonable means to avoid any material increase in its aggregate exposure to interest risk.

(t)     FMS will not, and will not permit any FMS Subsidiary to, enter into any new, or modify, amend or extend the terms of any existing, contracts relating to the purchase or sale of financial or other futures, derivative or synthetic mortgage product or any put or call option relating to cash, securities or commodities or any interest rate swap agreements or other agreements relating to the hedging of interest rate risks.

(u)     FMS will not, and will not permit any FMS Subsidiary to, enter into, increase or renew any loan or credit commitment (including letters of credit) to any executive officer or director of FMS or any FMS Subsidiary, any five percent stockholder of FMS, or any entity controlled, directly or indirectly, by any of the foregoing or engage in any transaction with any of the foregoing which is of the type or nature sought to be regulated in 12 U.S.C. 371c and 12 U.S.C. 371c-1. For purposes of this Subsection, “control” shall have the meaning associated with that term under 12 U.S.C. 371c.

 

 

(v)     FMS will promptly advise Bancorp orally and in writing of any event or series of events which has a FMS Material Adverse Effect.

(w)     Notwithstanding any of the foregoing, at or immediately prior to the Effective Time, if and as so required by Bancorp, FMS and FMB (i) shall cause any outstanding inter-company debt to be repaid to the extent permitted by the instrument or indenture governing such debt, and (ii) cause dividends to be paid to FMS in such amounts as specified by Bancorp, subject to any regulatory notice or approval requirement.

(x)     Except as set forth in the FMS Disclosure Schedule, neither FMS, nor any FMS Subsidiary, will enter into any contract or agreement to buy, sell, exchange or otherwise deal in any tangible assets in a single transaction or a series of related transactions in excess of $75,000 in aggregate value.

(y)     Neither FMS, nor any FMS Subsidiary, will make any one capital expenditure or any series of related capital expenditures (other than emergency repairs and replacements), the amount or aggregate amount of which (as the case may be) is in excess of $75,000; provided, further, any computer or network equipment acquired by FMS or FMB shall satisfy certain standards and specifications acceptable to Bancorp.

(z)     Neither FMS, nor any FMS Subsidiary, will file any application to relocate operations from existing locations.

(aa)     Neither FMS, nor any FMS Subsidiary, will create or incur any mortgage, lien, pledge, or security interest, against or in respect of any property or right of FMS or any FMS Subsidiary securing any obligation in excess of $75,000, except for any pledge or security interests given in connection with the acceptance of repurchase agreements or government deposits or if in the ordinary course of business consistent with past practice.

(bb)     Neither FMS, nor any FMS Subsidiary, will discharge or satisfy any mortgage, lien, charge or encumbrance other than as a result of the payment of liabilities in accordance with the terms thereof, or except in the ordinary course of business, if the cost to FMS or any FMS Subsidiary to discharge or satisfy any such mortgage, lien, charge or encumbrance is in excess of $75,000, unless such discharge or satisfaction is covered by general or specific reserves.

(cc)     Neither FMS, nor any FMS Subsidiary, will settle or agree to settle any claim, action or proceeding, whether or not initiated in a court of law, involving an expenditure in excess of $75,000.

 

 

(dd)     Neither FMS, nor any FMS Subsidiary, will change in any material respect any basic policies and practices with respect to liquidity management and cash flow planning, marketing, deposit origination, lending, budgeting, profit and tax planning, personnel practices, accounting or any other material aspects of its business or operations, except for such changes as may be required by the rules of the AICPA or the FASB or by Governmental Authorities or by law.

(ee)     Neither FMS, nor any FMS Subsidiary, will knowingly or intentionally default under the terms of any material agreement to which FMS or any FMS Subsidiary is party.

6.2          Acquisition Transactions. (a) Promptly following the execution of this Agreement, FMS shall take affirmative steps necessary to discontinue, and thereafter not initiate, solicit or knowingly encourage (including by way of furnishing any information or assistance), or take any other action to facilitate, any inquiries or the making of any proposal that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, or negotiate with any person in furtherance of such inquires or to obtain an Acquisition Proposal, or agree to endorse, or endorse, any Acquisition Proposal, or authorize or permit any of its officers, directors or employees or any investment banker, financial advisor, attorney, accountant or other representative retained by FMS or any of the FMS Subsidiaries to take any such action, and FMS shall promptly notify Bancorp orally, and confirm in writing, subject to disclosure being consistent with the fiduciary duties of the Board of Directors of FMS, all of the relevant details relating to all inquiries and proposals which FMS or a FMS Subsidiary may receive relating to any of such matters; provided, however, that nothing contained in this Section 6.14 shall prohibit the Board of Directors of FMS from: (A) complying with its disclosure obligations under federal or state law; (B) providing information in response to a request therefore by a Person who has made an unsolicited bona fide written Acquisition Proposal if the FMS Board of Directors receives from the Person so requesting such information an executed confidentiality agreement substantially similar to that entered into with Bancorp; (C) engaging in any negotiations or discussions with any Person who has made an unsolicited bona fide written Acquisition Proposal or (D) recommending such an Acquisition Proposal to the shareholders of FMS, if and only to the extent that, in each such case referred to in clause (B), (C) or (D) above, (i) the FMS Board of Directors determines in good faith (after consultation with outside legal counsel) that such action would be required in order for its directors to comply with their respective fiduciary duties under applicable law, and (ii) the FMS Board of Directors determines in good faith (after consultation with its financial advisor) that such Acquisition Proposal, if accepted, is at least as reasonably likely to be consummated, taking into account all legal, financial and regulatory aspects of the proposal and the Person making the proposal and, if consummated, would result in a transaction more favorable to the FMS shareholders from a financial point of view than the Merger. An Acquisition Proposal which is received and considered by FMS in compliance with this section 6.14 and which meets the requirements set forth in clause (D) of the preceding sentence is herein referred to as a “Superior Proposal.” FMS agrees that it will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted heretofore with respect to any Acquisition Proposal. FMS agrees that it will notify Bancorp immediately if any such inquiries, proposals or offers are received by, any such information is requested from, or any such discussions or negotiations are sought to be initiated or continued with FMS or any of its representatives after the date hereof, and the identity of the person making such inquiry, proposal or offer and the substance thereof and will keep Bancorp informed of any material developments with respect thereto immediately upon the occurrence thereof.

 

 

(b)     In the event that the Board of Directors of FMS determines in good faith, after consultation with its financial advisor and upon advice from outside counsel, that it desires to accept a Superior Proposal, it shall notify Bancorp in writing of its intent to terminate this Agreement in order to enter into an acquisition agreement with respect to, or recommend acceptance of, the Superior Proposal. Such notice shall specify all of the material terms and conditions of such Superior Proposal and identify the Person making such Superior Proposal. Bancorp shall have three calendar days to evaluate and respond to FMS’ notice. If Bancorp notifies FMS in writing prior to the expiration of the three calendar day period provided above that it shall increase the Merger Consideration to an amount at least equal to that of such Superior Proposal (the “Bancorp Proposal”), then FMS shall not be permitted to enter into an acquisition agreement with respect to, or permit its Board to recommend acceptance to its shareholders of, such Superior Proposal. Such notice by Bancorp shall specify the new Merger Consideration. FMS shall have three calendar days to evaluate the Bancorp Proposal.

(c)     In the event that the Board of Directors FMS determines in good faith, upon the advice of its financial advisor and outside counsel, that the Bancorp Proposal is not at least equal to the Superior Proposal, FMS can terminate this Agreement in order to execute an acquisition agreement with respect to, or to allow its Board to adopt a resolution recommending acceptance to FMS’ shareholders of, the Superior Proposal as provided in Section 8.1(k).

6.3          Minority Stock Offering. Within 60 days of the date hereof, Bancorp shall adopt a Plan of Minority Stock Issuance in connection with the Minority Stock Offering. Such Plan shall conform in all respects with HOLA and the requirements and regulations of the OTS. Subject to the terms and conditions of this Agreement, including without limitation Section 2.5(b), such Plan shall provide for a percentage of shares of Bancorp Common Stock to be issued in the Minority Stock Offering to persons other than Beneficial MHC so as to permit the maximum number of shares of Bancorp Common Stock to be issued in the Merger to FMS Shareholders. Bancorp shall promptly prepare and file with the OTS a Form MHC-2 and shall prepare and file with the SEC a registration statement on Form S-1 (the “S-1”) in connection with the Minority Stock Offering. The initial filings of the MHC-2 and the S-1 shall contain financial information for both Bancorp and FMS at and for the year ended December 31, 2006. Bancorp shall promptly respond to any and all comments it receives on such filings from the respective staffs of the OTS and SEC and shall use its best efforts to obtain approval of the MHC-2 and have the S-1 declared effective. Bancorp will commence the Minority Stock Offering promptly after receipt of all requisite regulatory clearances and approvals.

6.4          Formation of Merger Corp. Bancorp shall take all actions necessary to incorporate and organize Merger Corp.

6.5          Change in Bank Control Act Filings. In the event that an FMS shareholder who is requested to execute a Voting Agreement is required to or may elect to make any filings pursuant to 12 C.F.R. Part 574, Bancorp shall cooperate with any such filings and use its best efforts to assist in obtaining the requisite approval or non-objection from the OTS.

 

 

6.6          FMS Options. FMS shall use its best efforts to cause each holder of an option outstanding under the FMS Stock Option Plan to agree in writing to cancel any of their outstanding options to acquire shares of FMS Common Stock in exchange for the consideration set forth in Section 2.5 herein.

7.1          Conditions to Each Parties Obligations to Effect the Merger. The respective obligations of Bancorp and FMS to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing and as of the Effective Time of the following conditions precedent:

(a)     No Litigation. No suit, action or other proceeding shall be pending or overtly threatened before any court in which the consummation of the transactions contemplated by this Agreement is restrained or enjoined or in which the relief requested is to restrain, enjoin or prohibit the consummation of the transactions contemplated by this Agreement and, in either case, where in the reasonable judgment of either Bancorp or FMS, such suit, action or other proceeding, is likely to have a Material Adverse Effect with respect to such party’s interest.

(b)     Approval of FMS Shareholders. This Agreement and the Merger shall have received the requisite approval and authorization of the FMS Shareholders.

(c)     Regulatory Approvals.

  (i)     The Merger, this Agreement, the transactions contemplated hereby, shall have been approved by the OTS and any other governmental entities whose approval is necessary, all conditions required to be satisfied prior to the Effective Time imposed by the terms of such approvals shall have been satisfied, and all waiting periods relating to such approvals shall have expired. The Minority Stock Offering also shall have been approved by the OTS and any other governmental entity whose approval is necessary in order for Bancorp to proceed with the Minority Stock Offering.

   (ii)     No permission, approval, determination, consent or waiver received pursuant to Section 7.1(c)(i) of this Agreement shall contain any condition applicable to Bancorp which is, in the reasonable judgment of Bancorp, materially burdensome upon the conduct of Bancorp’s business or which would so adversely impact the economic and business benefits of the Merger to Bancorp so as to render it inadvisable to proceed with the Merger.

(d)     Minority Stock Offering. The Minority Stock Offering shall have occurred. All such events which shall occur simultaneously with the Closing shall occur simultaneously with Closing.

 

 

(e)     Registration Statement. The Registration Statement shall have been declared effective and no stop order shall have been instituted or threatened.

7.2          Conditions to Obligation of Bancorp. The obligation of Bancorp to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing and as of the Effective Time of the following additional conditions precedent:

(a)     Compliance with Agreement. FMS shall have performed and complied in all material respects with all of its covenants, agreements and other obligations under this Agreement which are to be performed or complied with by it prior to or on the Closing Date and as of the Effective Time.

(b)     Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to Bancorp, and FMS shall have made available to Bancorp for examination the originals or true and correct copies of all documents Bancorp may reasonably request in connection with the transactions contemplated by this Agreement.

(c)     Representations and Warranties of FMS. Each of the representations and warranties of FMS contained in Article IV of this Agreement, after giving effect to any update to the FMS Disclosure Schedule Change, shall be true and correct, as of the Effective Time with the same force and effect as though made on and as of the Effective Time, except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), and except for those breaches which individually or in the aggregate do not or would not be reasonably likely to have a Material Adverse Effect on FMS.

(d)     No Material Adverse Change. During the period from the date of this Agreement to the Closing Date and as of the Effective Time there shall not have occurred, and there shall not exist on the Closing Date and as of the Effective Time, any condition(s) or fact(s) having individually or in the aggregate a Material Adverse Effect on FMS.

(e)     Deliveries at Closing. FMS shall have delivered to Bancorp such certificates and documents of officers of FMS and public officials as shall be reasonably requested by Bancorp to establish the existence of FMS and the due authorization of this Agreement and the transactions contemplated by this Agreement by FMS.

(f)     Accountant(s) Letters. Bancorp shall have received a copy of the following letter(s) from PricewaterhouseCoopers LLP and/or Grant Thornton LLP, which shall be in form and substance reasonably satisfactory to Bancorp and shall contain information concerning the financial condition of FMS: (i) the letter(s) described in Section 3.6 of this Agreement; (ii) similar letter(s) dated the Closing Date.

(g)     Stock Listing. FMS Common Stock shall continue to have been listed on the Nasdaq Global Market.

 

 

(h)     Stock Options. FMS shall have used its best efforts to cause all of the FMS Stock Options outstanding immediately prior to the Effective Time to have been terminated or canceled as contemplated in Section 2.4 herein.

(i)      Cash in Lieu of Options. The cash payment contemplated in Section 6.15 herein shall have been made, and the written agreement contemplated in Section 6.15 herein shall have been entered into.

(j)      Required Consents.     In addition to Regulatory Approvals, FMS and Bank shall have obtained all necessary third party consents or approvals in connection with the Merger, the absence of which would materially and adversely affect FMS and FMS Subsidiaries, taken as a whole.

7.3          Conditions to Obligation of FMS. The obligation of FMS to effect the transactions contemplated by this Agreement shall be subject to the fulfillment at or prior to the Closing and as of the Effective Time of the following additional conditions precedent:

(a)     Compliance with Agreement. Bancorp shall have performed and complied in all material respects with all of its covenants, agreements and other obligations under this Agreement which are to be performed or complied with by it prior to or on the Closing Date and as of the Effective Time.

(b)     Proceedings and Instruments Satisfactory. All proceedings, corporate or other, to be taken in connection with the transactions contemplated by this Agreement, and all documents incident thereto, shall be reasonably satisfactory in form and substance to FMS, and Bancorp shall have made available to FMS for examination the originals or true and correct copies of all documents which FMS may reasonably request in connection with the transactions contemplated by this Agreement.

(c)     Representations and Warranties of Bancorp. Each of the representations and warranties of Bancorp contained in Article V of this Agreement, after giving effect to any Bancorp Disclosure Schedule Change, shall be true and correct as of the Effective Time with the same force and effect as though made on and as of the Effective Time, except for those representations and warranties which address matters only as of a particular date (which shall remain true and correct as of such date), and except for those breaches which individually or in the aggregate do not or would not be reasonably likely to have a Material Adverse Effect on Bancorp.

(d)     No Material Adverse Change. During the period from the date of this Agreement to the Closing Date and as of the Effective Time there shall not have occurred, and there shall not exist on the Closing Date and as of the Effective Time, any condition(s) or fact(s) having individually or in the aggregate a Material Adverse Effect (irrespective of whether any such condition or fact was disclosed in a Bancorp Disclosure Schedule Change) on Bancorp.

 

 

(e)     Deliveries at Closing. Bancorp shall have delivered to FMS such certificates and documents of officers of Bancorp and of public officials as shall be reasonably requested by FMS to establish the existence of Bancorp and the due authorization of this Agreement and the transactions contemplated by this Agreement by Bancorp.

(f)     Opinion of Financial Advisor. FMS shall have received the opinion of Ryan Beck & Co. dated the date on which the FMS Proxy Statement is first mailed to FMS Shareholders, to the effect that the consideration to be received in the Merger by the FMS Shareholders is fair to the FMS Shareholders from a financial point of view and such opinion shall not have been withdrawn as of the Closing Date.

(g)     Stock Listing. Shares of Bancorp Common Stock shall have been approved for quotation on the Nasdaq Global Market.

(h)     Receipt of Merger Consideration. The Exchange Agent in its fiduciary capacity shall have certified receipt of the aggregate Merger Consideration for all shares of FMS Common Stock to be acquired hereunder.

(i)     Required Consents. In addition to Regulatory Approvals, Bancorp shall have obtained all necessary third party consents or approvals in connection with the Merger, the absence of which would materially and adversely affect Bancorp and Bancorp Subsidiaries, taken as a whole.

(j)     Tax Opinion. FMS and Bancorp shall have received an opinion of Bancorp’s counsel, in form and substance reasonably acceptable to FMS and Bancorp, to the effect that the Merger will constitute a reorganization under Section 368 of the Code and the shareholders of FMS will not recognize any gain or loss to the extent that such shareholders exchange their FMS Shares for Bancorp Shares. Each of FMS and Bancorp shall upon request execute and deliver to such counsel a certificate or certificates setting forth certain factual matters necessary to for the basis for such opinions.

8.1          Termination. This Agreement may be terminated at any time prior to the Closing Date, whether before or after approval of the Merger by the stockholders of FMS:

(a)     By the mutual written agreement of Bancorp and FMS;

(b)     By either Bancorp or FMS (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a breach of any of the representations or warranties set forth in this Agreement on the part of the other party such that the conditions set forth in Sections 7.2(c) or 7.3(c), as the case may be, would not be satisfied and such breach by its nature cannot be cured prior to the Closing Date or shall not have been cured within thirty (30) days after written notice by Bancorp to FMS (or by FMS to Bancorp) of such breach;

 

 

(c)     By either Bancorp or FMS (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) if there shall have been a failure to perform or comply with any of the covenants or agreements set forth in this Agreement on the part of the other party such that the conditions set forth in Sections 7.2(a) or 7.3(a), as the case may be, would not be satisfied and such failure by its nature cannot be cured prior to the Closing Date or shall not have been cured within thirty (30) days after written notice by Bancorp to FMS (or by FMS to Bancorp) of such failure;

(d)     By either Bancorp or FMS, if the Closing shall not have occurred by December 31, 2007 or such later date as shall have been agreed to in writing by Bancorp and FMS; provided, that no party may terminate this Agreement pursuant to this Section 8.1(d) if the failure of the Closing to have occurred on or before said date was due to such party’s breach of any of its obligations under this Agreement;

(e)     By either Bancorp or FMS if the shareholders of FMS shall have voted at the FMS Meeting and such vote shall not have been sufficient to approve the Agreement;

(f)     By either Bancorp or FMS (i) if final action has been taken by a Government Entity whose approval or non-objection is required in connection with this Agreement and the transactions contemplated hereby or thereby (other than the Minority Offering), which final action (x) has become unappealable, and (y) does not approve or state a non-objection to this Agreement or the transactions contemplated hereby or thereby, (ii) if any regulatory authority whose approval or non-objection is required in connection with this Agreement and the transactions contemplated hereby or thereby (other than the Minority Offering) has stated in writing that it will not issue the required approval or non-objection, or (iii) if any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Merger and such order, decree, ruling or other action shall have become final and nonappealable;

(g)     By either Bancorp or FMS (i) if final action has been taken by a Government Entity whose approval or non-objection is required in connection with the Minority Offering, which final action (x) has become unappealable, and (y) does not approve or state a non-objection to the Minority Offering, or (ii) if any regulatory authority whose approval or non-objection is required in connection with the Minority Offering has stated in writing that it will not issue the required approval or non-objection, (iii) if any court of competent jurisdiction or other governmental authority shall have issued an order, decree, ruling or taken any other action restraining, enjoining or otherwise prohibiting the Minority Offering an such order, decree, ruling or other action shall have become final and nonappealable;

(h)     By either Bancorp or FMS (provided that the terminating party is not then in material breach of any representation, warranty, covenant or other agreement contained herein) in the event that any of the conditions precedent to the obligations of such party to consummate the Merger, as set forth in Article VII, cannot be satisfied or fulfilled by December 31, 2007.

 

 

(i)     By Bancorp if (a) at any time prior to the FMS Meeting, the FMS Board of Directors shall have failed for any reason to make its recommendation referred to in Section 3.18, withdrawn such recommendation or modified or changed such recommendation in a manner adverse in any respect to the interests of Bancorp, or (ii) the FMS Board of Directors shall have failed for any reason to call, give notice of, convene and hold the FMS Meeting;

(j)     By Bancorp if a tender offer or exchange offer for 25% or more of the outstanding shares of FMS Common Stock is commenced (other than by Bancorp), and the FMS Board of Directors recommends that the shareholders of FMS tender their shares in such tender or exchange offer or otherwise fails to recommend that such shareholders reject such tender offer or exchange offer within the ten-Business Day period specified in Rule 14e-2(a) under the Exchange Act;

(k)     At any time prior to the FMS Meeting, by FMS in order to concurrently enter into an acquisition agreement or similar agreement (each, an “Acquisition Agreement”) with respect to a Superior Proposal which has been received and considered by FMS and the FMS Board of Directors in compliance with Section 6.2 hereof, provided, however, that this Agreement may be terminated by FMS pursuant to this Section 8.1(k) only after the third calendar day following Bancorp’s receipt of written notice from FMS advising Bancorp that FMS is prepared to enter into an Acquisition Agreement with respect to a Superior Proposal, and only if, during such three-calendar day period, Bancorp does not, in its sole discretion, make an offer to FMS that Bancorp’s Board of Directors determines in good faith, after consultation with its financial and legal advisors, is at least as favorable as the Superior Proposal; or

(l)     By FMS if any requisite approval or non-objection of the OTS contemplated in Section 6.5 shall have not been obtained.

8.2          Effect of Termination.

(a)     In the event of termination of this Agreement pursuant to any provision of Section 8.1, this Agreement shall forthwith become void and have no further force, except that (i) the provisions of Section 3.1 and Article VIII, and (ii) any other Section which, by its terms, relates to post-termination rights or obligations, shall survive such termination of this Agreement and remain in full force and effect.

(b)     In recognition of the efforts, expenses and other opportunities foregone by Bancorp while structuring and pursuing the Merger, the parties hereto agree that FMS shall pay to Bancorp a termination fee of seven million three hundred thousand dollars ($7,300,000) (the “FMS Termination Fee”) in the manner and subject to the conditions set forth below if:

(i)     this Agreement is terminated by Bancorp pursuant to Section 8.1(i) or 8.1 (j);

(ii)     this Agreement is terminated by Bancorp pursuant to Sections 8.1(b) or 8.1(c) and, in each case, within 18 months after such termination FMS or a FMS Subsidiary enters into any agreement with respect to, or consummates, any Acquisition;

 

 

(iii)     this Agreement is terminated by Bancorp pursuant to Sections 8.1(b) or 8.1(c) resulting from the intentional or willful conduct or gross negligence of FMS;

(iv)     this Agreement is terminated by either Bancorp or FMS pursuant to Section 8.1(e), and an Acquisition Proposal shall have been publicly announced or otherwise communicated or made known to the senior management of FMS or the FMS Board of Directors (or any Person shall have publicly announced, communicated or made known an intention, whether or not conditional, to make an Acquisition Proposal) at any time after the date of this Agreement and prior to the taking of the vote of the shareholders of FMS contemplated by this Agreement at the FMS Meeting; or

(v)     this Agreement is terminated by FMS pursuant to Section 8.1(k).

In the event the FMS Termination Fee shall become payable pursuant to Section 8.2(b)(i), (iii) or (iv), (x) FMS shall pay to Bancorp an amount equal to three million seven hundred thousand dollars ($3,700,000) on or before the third Business Day following termination of this Agreement, and (y) if within 18 months after such termination FMS or a FMS Subsidiary enters into any agreement with respect to, or consummates, any Acquisition, FMS shall pay to Bancorp the FMS Termination Fee (net of any payment made pursuant to clause (x) above) on the earliest of the date of execution of such agreement or consummation of the Acquisition. In the event the FMS Termination Fee shall become payable pursuant to Section 8.2(b)(ii), FMS shall pay to Bancorp the entire FMS Termination Fee on the earliest of the date of execution of such agreement or consummation of the Acquisition. In the event the FMS Termination Fee shall become payable pursuant to Section 8.2(v), FMS shall pay to Bancorp the entire FMS Termination Fee within three Business Days following the date of termination of this Agreement. Any amount that becomes payable pursuant to this Section 8.2(b) shall be paid by wire transfer of immediately available funds to an account designated by Bancorp.

(c)     In recognition of the efforts, expenses and other opportunities foregone by Bancorp while structuring and pursuing the Merger, the parties hereto agree that FMS shall pay to Bancorp a termination fee of one million eight hundred thousand dollars ($1,800,000) if FMS terminates this Agreement pursuant to Section 8.1(l) and within 18 months after such termination FMS or a FMS Subsidiary enters into any agreement with respect to, or consummates, any Acquisition (the “FMS Section 8.1(l) Termination Fee”). In the event the FMS Section 8.1(l) Termination Fee shall become payable pursuant to this Section 8.2(c), FMS shall pay to Bancorp the entire FMS Section 8.1(l) Termination Fee on the earliest of the date of execution of such agreement or consummation of the Acquisition. Any amount that becomes payable pursuant to this Section 8.2(c) shall be paid by wire transfer of immediately available funds to an account designated by Bancorp.

 

 

(d)     Except as provided in Sections 8.2(b) and 8.3, whether or not the Merger is consummated, all out of pocket expenses, including, without limitation, reasonable legal accounting and investment banking expenses incurred by such other party in connection with the entering into this Agreement and the carrying out of all acts contemplated hereunder (collectively referred to hereunder as the “Costs”) incurred in connection with this Agreement and the transactions contemplated hereby shall be borne by the party incurring such Costs.

 

(e)     In no event shall any officer, agent, or director of FMS, any FMS Subsidiary, Bancorp or any Bancorp Subsidiary, be personally liable thereunder for any default by any party in any of its obligations hereunder unless any such default was intentionally caused by such officer, agent or director.

(f)     In no event shall Bancorp be entitled to receive both the FMS Termination Fee and the FMS Section 8.1(1) Termination Fee.

8.3          Bancorp Termination Payment.

(a)     Bancorp Special Payment. As a condition of FMS’ willingness to, and in order to induce FMS to, enter into this Agreement, and to reimburse FMS for incurring the damages, costs and expenses related to entering into this Agreement and consummating the transactions contemplated by this Agreement, Bancorp hereby agrees to pay to FMS, as liquidated damages and in lieu of any other rights or remedies under this Agreement, a cash payment (the “Special Payment”) only if (i) the Agreement is terminated pursuant to Section 8.1(f) or Section 8.1(g), or (ii) Bancorp does not consummate the Minority Offering and is otherwise unable to consummate the Merger by December 31, 2007 or such later date agreed to as contemplated in Section 8.1(d) other than as a result of the failure to obtain any requisite approval or non-objection of the OTS contemplated in Section 6.5; provided, however, that Bancorp shall not have breached its obligation set forth in Section 6.5, or (iii) FMS has terminated this Agreement in accordance with Section 8.1(b) or 8.1(c) because Bancorp has intentionally and willfully breached any of its representations or warranties herein or intentionally and willfully failed to perform or comply with any of its covenants or agreements herein, to such extent as to permit such termination (each of such reasons for termination being hereinafter referred to as the “Special Payment Event”). If the Special Payment Event is pursuant to subsection (i) or (ii) of this Section 8.3(a), then the Special Payment shall amount to five million five hundred thousand dollars ($5,500,000). If the Special Payment Event is pursuant to subsection (iii) of this Section 8.3(a), then the Special Payment shall amount to three million seven hundred thousand dollars ($3,700,000). Notwithstanding the foregoing, Bancorp shall have no obligation to make the Special Payment to FMS if the Special Payment Event is primarily due to a breach of a representation or warranty of FMS (subject to the standard set forth in Section 7.2(c) of this Agreement) or a breach by FMS of one or more covenants in this Agreement, which breach of representation, warranty or covenant is the principal cause of the occurrence of the Special Payment Event.

(b)     Payment Required. Any payment required to be made under this Section 8.3 shall be paid by Bancorp to FMS by wire transfer of immediately available funds to an account designated by FMS within three (3) Business Days after demand by FMS.

 

 

(c)     Exclusivity of Remedy. Notwithstanding anything to the contrary set forth in this Agreement, if Bancorp pays or causes to be paid to FMS the Special Payment, Bancorp will not have any further obligations or liabilities to FMS with respect to this Agreement or the transactions contemplated by this Agreement.

9.1          Entire Agreement; Amendment. This Agreement, the Confidentiality Agreement and the other documents referred to in this Agreement and required to be delivered pursuant to this Agreement constitute the entire agreement among the parties pertaining to the subject matter of this Agreement, and supersede all prior and contemporaneous agreements, understandings, negotiations and discussions of the parties, whether oral or written, and there are no warranties, representations or other agreements between the parties in connection with the subject matter of this Agreement, except as specifically set forth in this Agreement. This Agreement may be amended by the parties at any time before or after approval of this Agreement by the FMS Shareholders, except that after such approval no amendment shall be made without the further approval of the FMS Shareholders if such amendment: (a) alters or changes the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of FMS Common Stock, (b) alters or changes any term of Bancorp’s Charter other than as provided herein, or (c) alters or changes any of the terms and conditions of this Agreement if such alteration or change would adversely affect the FMS Shareholders. No amendment, supplement, modification, waiver or termination of this Agreement shall be binding unless executed in writing by the party to be bound thereby. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provision of this Agreement, whether or not similar, nor shall such waiver constitute a continuing waiver unless otherwise expressly provided.

9.2          Governing Law. This Agreement shall be construed and interpreted according to the Laws of the Commonwealth of Pennsylvania except to the extent federal law may apply.

9.3          Assignment. This Agreement shall not be assigned by operation of law or otherwise.

 

 

 

 

IF TO BANCORP:	Beneficial Mutual Bancorp, Inc. George W. Nise President and Chief Executive Officer 510 Walnut Street Philadelphia, Pennsylvania 19106 Fax No.: (215) 864-1770 with a copy to:   Gary R. Bronstein, Esq. Muldoon Murphy & Aguggia LLP 5101 Wisconsin Avenue, NW Washington, DC 20016 Fax No.: (202) 966-9409
IF TO FMS:	FMS Financial Corporation Craig W. Yates President and Chief Executive Officer 3 Sunset Road Burlington, New Jersey 08016 Fax No.: (609) 386-1979 with a copy to:
	John J. Spidi, Esq. Malizia Spidi & Fisch, PC 901 New York Avenue, NW Suite 210 East Washington, DC 20001 Fax No.: (202) 434-4661

 

9.5          Counterparts; Headings. This Agreement may be executed in several counterparts, each of which shall be deemed an original, but such counterparts shall together constitute but one and the same Agreement. The Table of Contents and Article and Section headings in this Agreement are inserted for convenience of reference only and shall not constitute a part hereof.

9.6          Interpretation. Unless the context requires otherwise, all words used in this Agreement in the singular number shall extend to and include the plural, all words in the plural number shall extend to and include the singular, and all words in any gender shall extend to and include all genders.

9.7          Severability. If any provision, clause, or part of this Agreement, or the application thereof under certain circumstances, is held invalid, the remainder of this Agreement, or the application of such provision, clause or part under other circumstances, shall not be affected thereby unless such invalidity materially impairs the ability of the parties to consummate the transactions contemplated by this Agreement. If, however, any provision of this Agreement is held invalid by a court of competent jurisdiction, then the parties hereto shall in good faith amend this Agreement to include an alternative provision that accomplishes a result which is not materially different.

 

 

9.8          Specific Performance. The parties agree that the assets and business of FMS as a going concern constitute unique property. There is no adequate remedy at Law for the damage which any party might sustain for failure of the other parties to consummate the Merger and the transactions contemplated by this Agreement, and accordingly, each party shall be entitled, at its option, to the remedy of specific performance to enforce the Merger pursuant to this Agreement.

9.9          No Reliance. Except for the parties to this Agreement and any Indemnified Parties under Section 3.5 of this Agreement: (a) no Person is entitled to rely on any of the representations, warranties and agreements of the parties contained in this Agreement; and (b) the parties assume no liability to any Person because of any reliance on the representations, warranties and agreements of the parties contained in this Agreement.

9.10        Further Assurances. If, at any time after the Effective Time, any further action is necessary or desirable to carry out the purposes of this Agreement and to vest Bancorp with full right, title and possession to all assets, properties, rights, privileges, powers and franchises of FMS, the officers of Bancorp are fully authorized to take any such action in the name of FMS.

 

 

 

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement and Plan of Merger to be duly executed as of the day and year first above written.

	BENEFICIAL SAVINGS BANK MHC
	By:	/s/ George W. Nise
		George W. Nise President and Chief Executive Officer

	BENEFICIAL MUTUAL BANCORP, INC.
	By:	/s/ George W. Nise
		George W. Nise President and Chief Executive Officer

	BENEFICIAL MUTUAL SAVINGS BANK
	By:	/s/ George W. Nise
		George W. Nise President and Chief Executive Officer

	FMS FINANCIAL CORPORATION
	By:	/s/ Craig W. Yates
		Craig W. Yates President and Chief Executive Officer

	FARMERS AND MECHANICS BANK
	By:	/s/ Craig W. Yates
		Craig W. Yates President and Chief Executive Officer

with and into 

THIS CORPORATE MERGER AGREEMENT ("Plan of Merger") is entered into as of the ___ day of ________, 200__ by and between FMS FINANCIAL CORP. (“FMS”), a corporation existing under the laws of the State of New Jersey, and MERGER CORP. (“Interim”), an interim corporation organized under the laws of the United States of America by Beneficial Mutual Bancorp, Inc., a subsidiary holding company chartered and existing under the laws of the United States of America.

WHEREAS, this Plan of Merger is being entered into pursuant to the Agreement and Plan of Merger dated as of _________, 2006 (the “Merger Agreement”) by and among Beneficial Savings Bank MHC, Beneficial Mutual Bancorp, Inc., Beneficial Mutual Savings Bank, FMS Financial Corporation and Farmers and Mechanics Bank; and

WHEREAS, this Plan of Merger has been approved by the required vote of the directors of each of FMS and Interim.

NOW, THEREFORE, in consideration of the covenants and agreements of the parties contained herein, the parties hereto hereby make, adopt and approve this Plan of Merger in order to set forth the terms and conditions for the merger of FMS with and into Interim (the “Merger”).

1.

Effective Time of the Merger. The Merger shall not be effective unless and until the Merger receives any necessary approvals from the Office of Thrift Supervision pursuant to 12 C.F.R. 563.22 or such other later time specified on the Articles of Combination filed with the Office of Thrift Supervision and the Cerificate of Merger filed with the New Jersey Secretary of State (the “Effective Time”).

2.

Constituent Institutions. The name of each constituent institution to the Merger is FMS Financial Corporation and Merger Corp.

3.

Name of the Resulting Institution. The resulting institution in the Merger shall be Merger Corp. (Interim is sometimes referred to herein as the “Resulting Institution”).

4.

Terms and Conditions of Merger. Subject to the terms and conditions of this Plan of Merger, at the Effective Time, FMS shall be merged with and into Interim pursuant to the provisions of, and with the effect provided under the laws of the United States of America and the State of New Jersey. At the Effective Time, the separate existence of FMS shall cease and Interim as the resulting institution, shall continue unaffected and unimpaired by the Merger.

5.

Charter. At the Effective Time, the charter of Interim, as in effect immediately prior to the Effective Time, shall constitute the charter of the Resulting Institution unless and until the same shall be amended as provided by law and the terms of such charter.

6.

Bylaws. At the Effective Time, the bylaws of Interim, as in effect immediately prior to the Effective Time, shall be the bylaws of the Resulting Institution, unless and until amended or repealed as provided by law, its charter and such bylaws.

7.

Directors of Resulting Institution. The names of the persons who shall constitute the Board of Directors of the Resulting Institution after the Effective Time are listed in Appendix A hereto attached.

8.

Effect on Outstanding Shares of FMS Common Stock. At the Effective Time, by virtue of the Merger and without any action on the part of the holder thereof, each share of common stock, par value $.10 per share, of FMS shall automatically be converted into one share of common stock, par value $1.00 share, of Interim (“Interim Common Stock”).

9.

Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction of the conditions set forth in the Agreement and Plan of Merger.

10.

Termination. This Plan of Merger shall terminate automatically upon termination of the Agreement and Plan of Merger.

11.

Amendment. This Plan of Merger may not be amended except by an agreement in writing signed on behalf of each of the parties hereto.

12.

Governing Law. This Plan of Merger shall be governed by and construed and enforced in accordance with the laws of the United States of America.

13.

Captions. The captions heading the sections in this Plan of Merger are for convenience only and shall not affect the construction or interpretation of this Plan of Merger.

 

14.

Counterparts. This Plan of Merger may be executed in two or more counterparts, any of which may be facsimile copies, each of which shall be deemed an original instrument, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, each of the Parties has caused this Plan of Merger to be duly executed and delivered by its duly authorized officers as of the date first above written.

ATTEST:	FMS FINANCIAL CORP.
___________________________
	By: ___________________________
	Craig W. Yates
	Its:President and Chief Executive Officer
ATTEST:	BENEFICIAL MUTUAL BANCORP, INC.
___________________________	By: ___________________________
	George W. Nise
	Its:President and Chief Executive Officer

 

with and into 

THIS BANK MERGER AGREEMENT (“Plan of Bank Merger”) is entered into as of the __ day of _________, 200__ by and between FARMERS AND MECHANICS BANK, a stock savings bank chartered and existing under the laws of the United States of America, (“FMB”) and BENEFICIAL MUTUAL SAVINGS BANK, a stock savings bank chartered and existing under the laws of the Commonwealth of Pennsylvania (“BMSB”); and

WHEREAS, this Plan of Bank Merger is being entered into pursuant to the Agreement and Plan of Merger dated as of _____________, 2006 (the “Merger Agreement”) by and between Beneficial Savings Bank MHC, Beneficial Mutual Bancorp, Inc., Beneficial Mutual Savings Bank, FMS Financial Corporation and Farmers and Mechanics Bank; and

WHEREAS, this Plan of Bank Merger has been approved by the required vote of the directors of each of FMB and BMSB.

NOW, THEREFORE, in consideration of the covenants and agreements of the parties contained herein, the parties hereto hereby make, adopt and approve this Plan of Bank Merger in order to set forth the terms and conditions for the merger of FMB with and into BMSB (the “Merger”).

1.

Effective Time of the Merger. The Merger shall not be effective unless and until the Merger receives any necessary approvals from the Office of Thrift Supervision pursuant to 12 C.F.R. 563.22 or such other later time specified on the Articles of Combination filed with the Office of Thrift Supervision and the Certificate of Merger issued by the Pennsylvania Department of State (the “Effective Time”).

2.

Constituent Institutions. The name of each constituent institution to the Merger is Beneficial Mutual Savings Bank and Farmers and Mechanics Bank.

3.

Name of the Resulting Institution. The resulting institution in the Merger shall be Beneficial Mutual Savings Bank (BMSB is sometimes referred to herein as the “Resulting Institution”).

4.

Location of Home Office and Other Offices of Resulting Institution. The location of the principal office and other offices of the Resulting Institution are listed in Appendix A hereto attached.

5.

Terms and Conditions of Merger. Subject to the terms and conditions of this Plan of Bank Merger, at the Effective Time, FMB shall be merged with and into BMSB pursuant to the provisions of, and with the effect provided under the laws of, the United States of America and the State of Pennsylvania. At the Effective Time, the separate existence of FMB shall cease and BMSB as the resulting institution, shall continue unaffected and unimpaired by the Merger.

6.

Charter. At the Effective Time, the charter of BMSB, as in effect immediately prior to the Effective Time, shall constitute the charter of the Resulting Institution, unless and until the same shall be amended as provided by law and the terms of such charter.

7.

Bylaws. At the Effective Time, the bylaws of BMSB, as in effect immediately prior to the Effective Time, shall be the bylaws of the Resulting Institution, unless and until amended or repealed as provided by law, its charter and such bylaws.

8.

Savings Account Issuance by Resulting Institution. After the Effective Time, the Resulting Institution will continue to issue deposit accounts, including savings accounts, on the same basis as immediately prior to the Effective Time.

9.

Directors of Resulting Institution. The names of the persons who shall constitute the Board of Directors of the Resulting Institution after the Effective Time are listed in Appendix B hereto attached.

10.

Conditions to Each Party’s Obligation to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the satisfaction of the conditions set forth in the Merger Agreement.

11.

Termination. This Plan of Bank Merger shall terminate automatically upon termination of the Merger Agreement.

12.

Amendment. This Plan of Bank Merger may not be amended except by an agreement in writing signed on behalf of each of the parties hereto.

13.

Governing Law. This Plan of Bank Merger shall be governed by and construed and enforced in accordance with the laws of the United States of America.

14.

Captions. The captions heading the sections in this Plan of Bank Merger are for convenience only and shall not affect the construction or interpretation of this Plan of Bank Merger.

15.

Counterparts. This Plan of Bank Merger may be executed in two or more counterparts, any of which may be facsimile copies, each of which shall be deemed an original instrument, but all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, each of the Parties has caused this Plan of Bank Merger to be duly executed and delivered by its duly authorized officers as of the date first above written.

ATTEST:	BENEFICIAL MUTUAL SAVINGS BANK
___________________________	By: __________________________
	George W. Nise
	Its: President and Chief Executive Officer
ATTEST:	FARMERS AND MECHANICS BANK
___________________________	By: ___________________________
	Craig W. Yates
	Its: President and Chief Executive Officer

Location of Home Office and Other Offices of Resulting Institution

Main Office:

Branch Offices:

Directors of Resulting Institution

Name		Residence Address		Year Term Expires

 

 

October 12, 2006

 

Beneficial Mutual Bancorp, Inc.

510 Walnut Street

Philadelphia, Pennsylvania 19106

To the Board of Directors:

The undersigned is a director of FMS Financial Corporation (“FMS”) and the beneficial holder of shares of common stock of FMS (the “FMS Common Stock”).

Beneficial Mutual Bancorp, Inc. (“Bancorp”) and FMS have entered into an Agreement and Plan of Merger (the “Agreement”) that provides for the acquisition of FMS through the merger of FMS with and into a federally chartered interim company to be formed by Bancorp to effect the transactions contemplated by the Agreement (the “Merger”).

In consideration of the substantial expenses that Bancorp will incur in connection with the transactions contemplated by the Agreement and to induce Bancorp to proceed to incur such expenses, the undersigned agrees and undertakes, in his or her capacity as a stockholder of FMS, and not in his capacity as a director of FMS, as follows:

1.     While this letter agreement is in effect the undersigned shall not, directly or indirectly, except with the prior approval of Bancorp (a) sell or otherwise dispose of or encumber prior to the record date of the FMS Meeting (as defined in the Agreement) any or all of his shares of FMS Common Stock, or (b) deposit any shares of FMS Common Stock into a voting trust or enter into a voting agreement (other than this letter agreement) or arrangement with respect to any shares of FMS Common Stock or grant any proxy with respect thereto, other than to other members of the Board of Directors of FMS for the purpose of voting to approve the Agreement and the Merger and matters related thereto.

 

2.     While this letter agreement is in effect the undersigned shall vote or cause to be voted all of the shares of FMS Common Stock that the undersigned shall be entitled to so vote, whether such shares are beneficially owned by the undersigned on the date of this letter agreement or are subsequently acquired: (a) for the approval of the Agreement and the Merger at the FMS Meeting; and (b) against any Acquisition Proposal (as defined in the Agreement) (other than the Merger).

 

3.     The undersigned acknowledges and agrees that any remedy at law for breach of the foregoing provisions shall be inadequate and that, in addition to any other relief which may be available, Bancorp shall be entitled to temporary and permanent injunctive relief without having to prove actual damages.

 

 

4.     The foregoing restrictions shall not apply to shares with respect to which the undersigned may have voting or dispositive power as a fiduciary for others. In addition, this letter agreement shall only apply to actions taken by the undersigned in his or her capacity as a stockholder of FMS and, if applicable, shall not in any way limit or affect actions the undersigned may take in his or her capacity as a director or officer of FMS.

 

5.     This letter agreement shall automatically terminate upon the earlier of (i) the favorable vote of FMS’s shareholders with respect to the approval of the Agreement and the Merger, (ii) the termination of the Agreement in accordance with its terms, or (iii) the Effective Time (as that term is defined in the Agreement) of the Merger.

 

6.     As of the date hereof; the undersigned has voting power with respect to ______________ shares of FMS Common Stock.

 

 

 

IN WITNESS WHEREOF, the undersigned has executed this agreement as of the date first above written.

	Very truly yours,
		Print Name

Accepted and agreed to as of

the date first above written:

Beneficial Mutual Bancorp, Inc.

By: George W. Nise Its: President and Chief Executive Officer

 

October 12, 2006

Beneficial Mutual Bancorp, Inc.

510 Walnut Street

Philadelphia, Pennsylvania 19106

To the Board of Directors:

The undersigned is the beneficial holder of greater than 5% of the shares of common stock of FMS (the “FMS Common Stock”).

Beneficial Mutual Bancorp, Inc. (“Bancorp”) and FMS have entered into an Agreement and Plan of Merger (the “Agreement”) that provides for the acquisition of FMS through the merger of FMS with and into a federally chartered interim company to be formed by Bancorp to effect the transactions contemplated by the Agreement (the “Merger”).

In consideration of the substantial expenses that Bancorp will incur in connection with the transactions contemplated by the Agreement and to induce Bancorp to proceed to incur such expenses, the undersigned agrees and undertakes, in her capacity as a stockholder of FMS, as follows:

1.     While this letter agreement is in effect the undersigned shall not, directly or indirectly, except with the prior approval of Bancorp (a) sell or otherwise dispose of or encumber prior to the record date of the FMS Meeting (as defined in the Agreement) any or all of her shares of FMS Common Stock, or (b) deposit any shares of FMS Common Stock into a voting trust or enter into a voting agreement (other than this letter agreement) or arrangement with respect to any shares of FMS Common Stock or grant any proxy with respect thereto for the purpose of voting to approve the Agreement and the Merger and matters related thereto.

 

2.     While this letter agreement is in effect the undersigned shall vote or cause to be voted all of the shares of FMS Common Stock that the undersigned shall be entitled to so vote, whether such shares are beneficially owned by the undersigned on the date of this letter agreement or are subsequently acquired: (a) for the approval of the Agreement and the Merger at the FMS Meeting; and (b) against any Acquisition Proposal (as defined in the Agreement) (other than the Merger).

 

3.     The undersigned acknowledges and agrees that any remedy at law for breach of the foregoing provisions shall be inadequate and that, in addition to any other relief which may be available, Bancorp shall be entitled to temporary and permanent injunctive relief without having to prove actual damages.

 

 

4.     The foregoing restrictions shall not apply to shares with respect to which the undersigned may have voting power as a fiduciary for others.

 

5.     This letter agreement shall automatically terminate upon the earlier of (i) the favorable vote of FMS’ stockholders with respect to the approval of the Agreement and the Merger, (ii) the termination of the Agreement in accordance with its terms, or (iii) the Effective Time (as that term is defined in the Agreement) of the Merger.

 

6.     As of the date hereof; the undersigned has voting power with respect to ______________ shares of FMS Common Stock.

IN WITNESS WHEREOF, the undersigned has executed this agreement as of the date first above written.

	Very truly yours,
		Print Name

Accepted and agreed to as of

the date first above written:

Beneficial Mutual Bancorp, Inc.

By: George W. Nise Its: President and Chief Executive Officer

 

 

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October 12, 2006

 

Beneficial Mutual Bancorp, Inc.

510 Walnut Street

Philadelphia, Pennsylvania 19106

Ladies and Gentlemen:

I have been advised that I may be deemed to be, but do not admit that I am, an “affiliate” of FMS Financial Corporation (“FMS”), a New Jersey corporation, as that term is defined in Rule 144 and used in Rule 145 promulgated by the Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “Securities Act”). I understand that pursuant to the terms of the Agreement and Plan of Merger, dated as of __________, 2006 (the “Merger Agreement”), by and among FMS, Farmers and Mechanics Bank, Beneficial Savings Bank, MHC, Beneficial Mutual Bancorp, Inc. and Beneficial Mutual Savings Bank, FMS will be acquired by Bancorp by means of a merger (the “Merger”).

I further understand that as a result of the Merger, I may receive shares of common stock, par value $1.00 per share, of Beneficial Mutual Bancorp, Inc. (“Beneficial Mutual Common Stock”) in exchange for shares of common stock, par value $0.10 per share, of FMS (“FMS Common Stock”).

I have carefully read this letter and reviewed the Merger Agreement and discussed their requirements and other applicable limitations upon my ability to sell, transfer, or otherwise dispose of Beneficial Mutual Common Stock, to the extent I felt necessary, with my counsel or counsel for FMS.

I represent, warrant and covenant with and to Beneficial Mutual Bancorp, Inc. that in the event I receive any shares of Beneficial Mutual Common Stock as a result of the Merger:

1.     I shall not make any sale, transfer, or other disposition of such shares of Beneficial Mutual Common Stock unless (i) such sale, transfer or other disposition has been registered under the Securities Act, which is not anticipated, (ii) such sale, transfer or other disposition is made in conformity with the provisions of Rule 145 under the Securities Act (as such rule may be amended from time to time), or (iii) in the opinion of counsel in form and substance reasonably satisfactory to Beneficial Mutual Bancorp, Inc., or under a “no-action” letter obtained by me from the staff of the SEC, such sale, transfer or other disposition will not violate the registration requirements of, or is otherwise exempt from registration under, the Securities Act.

 

 

2.     I understand that, subject to the last paragraph of this letter, Beneficial Mutual Bancorp, Inc. is under no obligation to register the sale, transfer or other disposition of shares of Beneficial Mutual Common Stock by me or on my behalf under the Securities Act or to take any other action necessary to make compliance with an exemption from such registration available.

 

3.     I understand that stop transfer instructions will be given to Beneficial Mutual Bancorp, Inc.’s transfer agent with respect to shares of Beneficial Mutual Common Stock issued to me as a result of the Merger and that there will be placed on the certificates for such shares, or any substitutions therefor, a legend stating in substance:

“The shares represented by this certificate were issued as a result of the merger of FMS Financial Corporation with and into a subsidiary of Beneficial Mutual Bancorp, Inc., in a transaction to which Rule 145 promulgated under the Securities Act of 1933 applies. The shares represented by this certificate may be transferred only in accordance with the terms of a letter agreement between the registered holder hereof and Beneficial Mutual Bancorp, Inc., a copy of which agreement is on file at the principal offices of Beneficial Mutual Bancorp, Inc.”

 

4.     I understand that, unless the transfer by me of the Beneficial Mutual Common Stock issued to me as a result of the Merger has been registered under the Securities Act or such transfer is made in conformity with the provisions of Rule 145(d) under the Securities Act, Beneficial Mutual Bancorp, Inc. reserves the right, in its sole discretion, to place the following legend on the certificates for such shares, or any substitutions therefor, issued to my transferee:

“The shares represented by this certificate have not been registered under the Securities Act of 1933 and were acquired from [SHAREHOLDER] who, in turn, received such shares as a result of the merger of FMS Financial Corporation with and into a subsidiary of Beneficial Mutual Bancorp Inc., in a transaction to which Rule 145 under the Securities Act of 1933 applies. The shares have been acquired by the holder not with a view to, or for resale in connection with, any distribution thereof within the meaning of the Securities Act of 1933 and may not be offered, sold, pledged or otherwise transferred except in accordance with an exemption from the registration requirements of the Securities Act of 1933.”

It is understood and agreed that the legends set forth in paragraphs (3) and (4) above shall be removed by delivery of substitute certificates without such legends if I shall have delivered to Beneficial Mutual Bancorp, Inc. (i) a copy of a “no action” letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to Beneficial Mutual Bancorp, Inc., to the effect that such legend is not required for purposes of the Act, or (ii) evidence or representations satisfactory to Beneficial Mutual Bancorp, Inc. that Beneficial Mutual Common Stock represented by such certificates is being or has been sold in conformity with the provisions of Rule 145(d).

I further understand and agree that the provisions of Rule 145 shall apply to all shares of Beneficial Mutual Common Stock that my spouse, any relative of mine, or any relative of my spouse, any one of whom has the same home as me, receives as a result of the Merger.

 

 

By acceptance hereof, Beneficial Mutual Bancorp, Inc. agrees, for a period of two years after the Effective Time (as defined in the Agreement) that, so long as it is obligated to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, that it will use commercially reasonable efforts to timely file such reports so that the public information requirements of Rule 144(c) promulgated under the Securities Act are satisfied and the resale provisions of Rule 145(d)(1) and (2) are therefore available to me if I desire to transfer any Beneficial Mutual Common Stock issued to me in the Merger. In addition, Beneficial Mutual Bancorp, Inc. shall cause its legal counsel to respond promptly to any requests from Beneficial Mutual Bancorp Inc.’s transfer agent for the issuance of an opinion that any transfer by me that complies with the requirements of Rule 145 and 144 may be made provided such counsel receives customary representation letters and all other information and documentation reasonably required by Beneficial Mutual Bancorp from me. Further, if at any point in time I hold certificates representing shares of Beneficial Mutual Bancorp, Inc. Common Stock received by me in the Merger and such certificates bear a restrictive legend, upon expiration of the restrictions set forth in Rule 145 and applicable to me, upon my request, Beneficial Mutual Bancorp, Inc. shall cause its legal counsel to promptly issue an opinion to the transfer agent or provide other documentation reasonably acceptable to the transfer agent so as to cause such certificates to be reissued without such restrictive legend.

 

 

IN WITNESS WHEREOF, the undersigned has executed this agreement as of the date first above written.

 

	Very truly yours,
		Print Name

Accepted and agreed to as of

the date first above written:

Beneficial Mutual Bancorp, Inc.

By: George W. Nise Its: President and Chief Executive Officer

 

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Directors: 

George W. Nise

R. Joseph Barnes, Jr.

Edward G. Boehne

Frank A. Farnesi

Elizabeth H. Gemmill

Thomas F. Hayes

Paul M. Henkels

William J. Henrich, Jr., Esq.

Charles Kahn, Jr.

Thomas J. Lewis

James J. Maguire

Joseph J. McLaughlin

Michael J. Morris

Donald F. O’Neill