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EXHIBIT 10.1
SETTLEMENT AGREEMENT
 
            THIS SETTLEMENT AGREEMENT (the “Settlement Agreement”), dated this
7th day of November 2008, is by and among Prudential Mutual Holding Company (the
“MHC”), Prudential Bancorp, Inc. of Pennsylvania (the “Company”) and Prudential
Savings Bank (the “Bank,” and collectively with the MHC and the Company,
“Prudential”), and Stilwell Value Partners I, L.P. (“Stilwell Value Partners”),
Stilwell Partners, L.P., Stilwell Value LLC, Joseph Stilwell, an individual, and
John Stilwell, an individual (collectively, the “Stilwell Group,” individually,
a “Stilwell Group Member”).
 
RECITALS
 
    WHEREAS, on October 4, 2006, Stilwell Value Partners filed suit in the
United States District Court for the Eastern District of Pennsylvania (the
“Court”), Docket No. 06-CV-4432 (the “Stilwell Litigation”), against the MHC,
the Company and the directors of the MHC and the Company;
 
    WHEREAS, the Court by order dated August 15, 2007 dismissed all claims in
the Stilwell Litigation, except for one claim against MHC; the Court granted MHC
summary judgment on a portion of this remaining claim by order dated April 24,
2008; and Stilwell Value Partners voluntarily withdrew the remaining portion of
the claim with prejudice;
 
    WHEREAS, on June 11, 2008, Stilwell Value Partners appealed to the United
States Court of Appeals for the Third Circuit, Docket No. 08-2702 (the
“Appeal”), a portion of the Court’s August 15, 2007 order;
 
    WHEREAS, by letter dated May 14, 2008, Stilwell Value Partners demanded that
various actions be taken by the Company (the “Stilwell Demand”);
 
    WHEREAS, in light of the foregoing, Prudential and the Stilwell Group have
agreed that it is in their mutual interests to enter into this Settlement
Agreement; and
 
    WHEREAS, Prudential and the Stilwell Group are entering into a separate,
concurrent agreement with respect to certain expenses incurred by the Stilwell
Group in connection with the Stilwell Litigation and related matters (the
“Expense Agreement”).
 
    NOW THEREFORE, in consideration of the Recitals and the representations,
warranties, covenants and agreements contained herein and other good and
valuable consideration, and intending to be legally bound hereby, the parties
hereto agree as follows:
 
            1.         Representations and Warranties of the Stilwell Group
Members.  The Stilwell Group Members represent and warrant to Prudential, as
follows:
 
(a)        The Stilwell Group has fully disclosed in Exhibit A to this
Settlement Agreement the total number of shares of common stock of the Company,
par value $0.01 per share (“Company Common Stock”) as to which it has beneficial
ownership and neither the Stilwell Group nor any Stilwell Group Member nor any
of their affiliates has (i) a right to acquire a beneficial ownership interest
in any capital stock of the Company, or (ii) a right to vote any shares of
capital stock of the Company other than as set forth in Exhibit A;

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(b)        The Stilwell Group and the Stilwell Group Members have full power and
authority to enter into and perform their obligations under this Settlement
Agreement and the Expense Agreement, and the execution and delivery of this
Settlement Agreement and the Expense Agreement by the Stilwell Group and
Stilwell Group Members has been duly authorized by the principals of the
Stilwell Group.  This Settlement Agreement and the Expense Agreement constitute
valid and binding obligations of the Stilwell Group and the Stilwell Group
Members and the performance of their respective terms shall not constitute a
violation of any limited partnership agreement, operating agreement, bylaws, or
any agreement or instrument to which the Stilwell Group or any Stilwell Group
Member is a party;
 
(c)        There are no other persons who, by reason of their personal,
business, professional or other arrangement with the Stilwell Group or any
Stilwell Group Member, have agreed, in writing or orally, explicitly or
implicitly, to take any action on behalf of or in lieu of the Stilwell Group or
any Stilwell Group Member that would be prohibited by this Settlement Agreement;
and
 
(d)        There are no arrangements, agreements or understandings concerning
the subject matter of this Settlement Agreement and the Expense Agreement
between the Stilwell Group or any Stilwell Group Member and Prudential other
than as set forth in this Settlement Agreement and the Expense Agreement.
 
2.         Representations and Warranties of the MHC, the Company and the Bank.
 
(a)        The MHC, the Company and the Bank hereby represent and warrant to the
Stilwell Group that the MHC, the Company and the Bank have full power and
authority to enter into and perform their respective obligations under this
Settlement Agreement and the Expense Agreement and that the execution and
delivery of this Settlement Agreement and the Expense Agreement by the MHC, the
Company and the Bank has been duly authorized by the Board of Directors of the
MHC, the Company and the Bank.  This Settlement Agreement and the Expense
Agreement constitute valid and binding obligations of the MHC, the Company and
the Bank and the performance of their respective terms shall not constitute a
violation of their respective articles of incorporation or bylaws or any
agreement or instrument to which the MHC, the Company or the Bank is a party.
 
(b)        Prior to the date of this Settlement Agreement, the Company has
repurchased 1,493,884 shares of Company Common Stock and the MHC has purchased
149,000 shares of Company Common Stock, for a total of 1,642,884 shares
(collectively referred to as the “Prior Repurchases”).
 
(c)        The MHC, the Company and the Bank hereby represent and warrant to the
Stilwell Group that there are no arrangements, agreements, or understandings
concerning the subject matter of this Settlement Agreement and the Expense
Agreement between the Stilwell Group or any Stilwell Group Member and Prudential
other than as set forth in this Settlement Agreement and the Expense Agreement.
 
3.         Covenants.
 
(a)        During the term of this Settlement Agreement, Prudential covenants
and agrees as follows:
 
(i)                  In connection with this Settlement Agreement, each of the
Boards of Directors of the MHC, the Company and the Bank has adopted a
resolution stating that it is the intention of Prudential to complete a second
step conversion, whereby Prudential would reorganize from the mutual holding
company form of organization to the stock holding company form of organization
(the “Second Step Conversion”), by no later than the annual meeting of
shareholders for 2013, currently expected to be held in February 2013 (the “2013
Annual Meeting”).  Such intention is subject to the Prudential Boards’ exercise
of their fiduciary duties and their ongoing evaluation of the merits of
proceeding with the Second Step Conversion in light of a variety of
considerations, including but not limited to market conditions and the Bank’s
and the Company’s capital needs.
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(ii)                Promptly after entering into the Settlement Agreement, the
Company will issue a press release announcing that (A) conducting the Second
Step Conversion is an integral part of Prudential’s long-term strategic plan and
(B) proceeding with the Second Step Conversion under the time frames outlined in
Section 3(a)(i) above will be a function of, among other things, an evaluation
of market conditions, which currently are not favorable but which the Company
believes will improve over the next several years.
 
 
(iii)               Subject to market conditions and Prudential’s capital needs
and the fiduciary duties of the respective Boards of Directors, the Company and
the MHC, between them, will repurchase, in the case of the Company, or purchase,
in the case of the MHC, at least 1,357,116 additional shares of Company Common
Stock by September 30, 2011 (the “Proposed Share Repurchase Plan”).  Upon
completion of the Proposed Share Repurchase Plan, the Company and the MHC will
have repurchased or purchased, as the case may be, when aggregated with the
Prior Repurchases, a total of 3,000,000 shares of Company Common Stock.
 
(iv)              (A)       In the event that the MHC and the Company do not
complete the Proposed Share Repurchase Plan by purchasing and/or repurchasing a
total of 3,000,000 shares of Company Common Stock by September 30, 2011 (not
including any shares that may be repurchased pursuant to the Benefit Plan
Repurchases (as hereinafter defined)), Prudential will by October 15, 2011
either (X) adopt a plan of conversion pursuant to which the Second Step
Conversion will be effected (the “Plan of Conversion”), or (Y) appoint to the
Boards of Directors of the MHC, the Company and the Bank an individual nominated
by the Stilwell Group (“the Stilwell Representative”) who (1) is acceptable to
Prudential, which acceptance will not be unreasonably withheld; (2)(a) resides
in Bucks, Chester, Delaware, Montgomery, or Philadelphia Counties, Pennsylvania
or Camden County, New Jersey; and (b) has significant financial expertise and/or
banking experience.
 
                                   (B)       The determination of whether to
take the action in subclause (X) in Section 3(a)(iv)(A) above or instead to take
the action in subclause (Y) in Section 3(a)(iv)(A) above shall be solely at the
discretion of Prudential and is not subject to challenge by the Stilwell Group.
 In the event Prudential determines to appoint the Stilwell Representative to
the Boards of Directors of the MHC, the Company and the Bank, the Stilwell
Representative will be appointed by October 15, 2011 to the class of directors
of the Boards of Directors of the MHC, the Company and the Bank whose terms will
expire at the respective entity’s annual meeting held in 2014 (the “2014
Class”).  Such annual meetings are currently expected to be held in February
2014.  Prudential would take such corporate action as is necessary to permit the
appointment of the Stilwell Representative to the three Boards of Directors.  In
the event the Stilwell Representative is appointed to the Boards of Directors of
each of the Company, the Bank and the MHC, the Boards of Directors of each of
the Company, the Bank and the MHC will nominate the Stilwell Representative for
an additional three year term expiring at the respective entity’s annual meeting
held in 2017 and for an additional two year term thereafter expiring at the
respective entity’s annual meeting held in 2019, provided, however, that the
Stilwell Representative will resign from the Board of Directors of each entity
upon the expiration date of this Settlement Agreement. The Company will
recommend to its shareholders the election of the Stilwell Representative at
each of the Company's annual meetings at which the Stilwell Representative is a
nominee for re-election, subject to satisfaction of all legal and governance
requirements regarding service as a director of the Company. The Company shall
use its reasonable best efforts to have the Stilwell Representative elected as a
director of the Company and the Company shall solicit proxies for such person to
the same extent as it does for any of its other nominees to the Board of
Directors. The MHC agrees to vote the shares of Company Common Stock held
thereby in favor of the Stilwell Representative’s election at the Company’s
annual meetings of shareholders at which the Stilwell Representative is a
nominee for re-election.
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The Company agrees to vote the shares of the common stock of the Bank owned
thereby in favor of the re-election of the Stilwell Representative at the annual
meetings of the Bank at which the Stilwell Representative is a nominee for
re-election. In addition, the Board of Directors of the MHC will re-appoint the
Stilwell Representative to the Board of the MHC at the annual meetings thereof
at which the Stilwell Representative is a nominee for re-appointment. The
Stilwell Group shall have the power to designate the Stilwell Representative's
replacement upon the death, resignation, retirement, disqualification or removal
from office of such director, subject to (i) satisfaction of all legal and
governance requirements regarding service as a director of Prudential and (ii)
the acceptance of Prudential, which acceptance will not be unreasonably
withheld, and the compliance with the provisions of Section 3(a)(iv)(A)(Y). The
Boards of Directors of each of the MHC, the Company and the Bank will promptly
take all action reasonably required to fill any such vacancy so occurring.
 
                                    (C)       In the event that Prudential takes
the action described above in subparagraph (X) in Section 3(a)(iv)(A) above and
completes the Second Step Conversion by June 30, 2012, Prudential’s obligations
under this Settlement Agreement to purchase and/or repurchase shares of Company
Common Stock will cease.
 
(v)                In the event that the Plan of Conversion is adopted pursuant
to Section 3(a)(iv)(A) but the Second Step Conversion is not completed by June
30, 2012 and Prudential has not previously appointed the Stilwell Representative
to the Boards of Directors of the MHC, the Company and the Bank, the Boards of
Directors of such entities shall promptly appoint the Stilwell Representative to
the 2014 Class.
 
(vi)              In the event the Second Step Conversion is completed by
September 30, 2011, there will be no obligation to appoint the Stilwell
Representative to the Boards of Directors of the MHC, the Company and the Bank.
 
(vii)             The Company may adopt and implement, including seeking
shareholder approval, the Stock Option Plan and the Management Recognition and
Retention Plan (collectively, the “Stock Benefit Plans”), covering an aggregate
of 791,517 shares of Company Common Stock at any time subsequent to the
execution of this Agreement by the parties hereto.  Option grants and restricted
stock awards may be made promptly after receipt of shareholder approval
notwithstanding any other provision of this Settlement Agreement and shall vest
in accordance with the terms of the Stock Benefit Plans.
 
(viii)           Until and unless a Second Step Conversion has been completed,
Prudential will fund awards granted pursuant to the Stock Benefit Plans through
the repurchase by the Company of the necessary shares through open market or
privately negotiated transactions (“Benefit Plan Repurchases”), such repurchases
being in addition to the shares being repurchased pursuant to the Proposed Share
Repurchase Plan. In addition, Prudential will engage an independent benefits
consulting firm of its choosing to advise Prudential with regard to
administration of the Stock Benefit Plans, including assistance in determining
grant levels.
 
(ix)              Any stock option and/or recognition and retention stock plans
adopted by Prudential subsequent to the completion of a Second Step Conversion
(the “Second Step Stock Benefit Plans”) will be funded with shares of common
stock held in treasury by the then public holding company for the Bank (the “New
Holding Company”).  Furthermore, the New Holding Company will engage an
independent benefits consulting firm to advise the New Holding Company with
respect to the Second Step Stock Benefit Plans.
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(x)                In connection with the Second Step Conversion, the New
Holding Company will disclose in the prospectus used to offer its stock to
depositors and existing shareholders of the Company that it intends to consider
a variety of capital management strategies which will include, among others,
share repurchases.  It is anticipated that possible share repurchases by the New
Holding Company will be considered by the Board of Directors of the New Holding
Company beginning promptly after the one year anniversary of the Second Step
Conversion.
 
(xi)       During the term of this Settlement Agreement, neither Prudential nor
any of its directors  shall make any public statement, whether by press release,
advertisement, comment to any news media, filings under federal securities laws
or federal or state banking laws or otherwise, regarding the affairs of the
Stilwell Group or any Stilwell Group Member that (A) reflects negatively against
Stilwell Group or any Stilwell Group Member or (B) is inconsistent with the
description of and disclosure regarding this Settlement Agreement as agreed to
by Prudential and the Stilwell Group pursuant to Section 7 hereof; provided,
however, that no party shall be required to revise or amend any prior
disclosures or descriptions of the Stilwell Litigation, the Appeal, the Stilwell
Demand or the circumstances leading up to such matters.
 
(b)        For purposes of Section 3(b), reference to the Company and the
Company Common Stock will be deemed to include references to the New Holding
Company and its common stock (“New Holding Company Common Stock”) with respect
to the periods subsequent to the completion of the Second Step Conversion. 
During the term of this Settlement Agreement, the Stilwell Group and each
Stilwell Group Member covenant and agree not to do the following, directly or
indirectly, alone or in concert with any other affiliate, group or other person:
 
                        (i)         own, acquire, offer or propose to acquire or
agree to acquire, whether by purchase, tender or exchange offer, or through the
acquisition of control of another person or entity (including by way of merger
or consolidation), the beneficial ownership of, or the right to vote, any
additional shares of the outstanding Company Common Stock or any securities
convertible into Company Common Stock (except by way of stock splits, stock
dividends, stock reclassifications or other distributions or offerings made
available and, if applicable, exercised on a pro rata basis, to holders of the
Company Common Stock generally);
 
                        (ii)        without the Company’s prior written consent,
directly or indirectly, sell, transfer or otherwise dispose of any interest in
the Stilwell Group’s shares of Company Common Stock to any person the Stilwell
Group believes, after reasonable inquiry, would beneficially own immediately
after any such sale or transfer more than 5% of the outstanding shares of the
Company Common Stock;
 
         (iii)       (A) propose or seek to effect a merger, consolidation,
recapitalization, reorganization, sale, lease, exchange or other disposition of
substantially all the assets of, or other business combination involving, or a
tender or exchange offer for securities of, the Company or the Bank or any
material portion of the Company’s or the Bank’s business or assets or any other
type of transaction that would result in a change in control of the Company (any
such action described in this clause (A) is a “Company Transaction Proposal”),
(B) seek to exercise any control or influence over the management of the Company
or the Boards of Directors of the Company, the MHC or the Bank or any of the
businesses, operations or policies of the Company, the MHC or the Bank, provided
that if the Stilwell Representative is appointed to the Boards of Directors of
the Company, the MHC and the Bank, such individual can take action as is
necessary to fulfill his or her duties as a director, (C) present to the
Company, its shareholders or any third party any proposal constituting or that
could reasonably be expected to result in a Company Transaction Proposal, or (D)
seek to effect a change in control of the Company; 
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            (iv)       publicly suggest or announce its willingness or desire to
engage in a transaction or group of transactions or have another person engage
in a transaction or group of transactions that would constitute or could
reasonably be expected to result in a Company Transaction Proposal or take any
action that might require the Company to make a public announcement regarding
any such Company Transaction Proposal;
 
            (v)        initiate, request, induce, encourage or attempt to induce
or give encouragement to any other person to initiate any proposal constituting
or that can reasonably be expected to result in a Company Transaction Proposal,
or otherwise provide assistance to any person who has made or is contemplating
making, or enter into discussions or negotiations with respect to, any proposal
constituting or that can reasonably be expected to result in a Company
Transaction Proposal;  
 
                         (vi)       solicit proxies or written consents or
assist or participate in any other way, directly or indirectly, in any
solicitation of proxies or written consents, or otherwise become a “participant”
in a “solicitation,” or assist any “participant” in a “solicitation” (as such
terms are defined in Rule 14a-1 of Regulation 14A and Instruction 3 of Item 4 of
Schedule 14A, respectively, under the Securities Exchange Act of 1934) in
opposition to any recommendation or proposal of the Company’s Board of
Directors, or recommend or request or induce or attempt to induce any other
person to take any such actions, or seek to advise, encourage or influence any
other person with respect to the voting of (or the execution of a written
consent in respect of) the Company Common Stock, or execute any written consent
in lieu of a meeting of the holders of the Company Common Stock or grant a proxy
with respect to the voting of the capital stock of the Company to any person or
entity other than the Board of Directors of the Company;
 
            (vii)      initiate, propose, submit, encourage or otherwise solicit
shareholders of the Company for the approval of one or more shareholder
proposals or induce or attempt to induce any other person to initiate any
shareholder proposal, or seek election to, or seek to place a representative or
other affiliate or nominee on, the Company’s Board of Directors (other than with
respect to the provisions of Sections 3(a)(iv)(A) and (v), providing for the
possible appointment of the Stilwell Representative) or seek removal of any
member of the Company’s Board of Directors;
 
                       (viii)         form, join in or in any other way
(including by deposit of the Company’s capital stock) participate in a
partnership, pooling agreement, syndicate, voting trust or other group with
respect to Company Common Stock, or enter into any agreement or arrangement or
otherwise act in concert with any other person, for the purpose of acquiring,
holding, voting or disposing of Company Common Stock;
 
                        (ix)       (A) join with or assist any person or entity,
directly or indirectly, in opposing, or make any statement in opposition to, any
proposal or director nomination submitted by the Company’s Board of Directors to
a vote of the Company’s shareholders, or (B) join with or assist any person or
entity, directly or indirectly, in supporting or endorsing (including
supporting, requesting or joining in any request for a meeting of shareholders
in connection with), or make any statement in favor of, any proposal submitted
to a vote of the Company’s shareholders that is opposed by the Company’s Board
of Directors;
 
                        (x)        vote for any nominee or nominees for election
to the Board of Directors of the Company other than those nominated or supported
by the Company’s Board of Directors or consent to become a nominee for election
as a director of the Company;
 
                        (xi)       except in connection with the enforcement of
this Settlement Agreement, initiate or participate, by encouragement or
otherwise, in any litigation against or derivatively on behalf of the Company,
the MHC or the Bank or their respective officers and directors, except for
testimony which may be required by law; 
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                        (xii)      make any public statement, whether by press
release, advertisement (including the posting of billboards), comment to any
news media, filings under federal securities laws or federal or state banking
laws or otherwise, regarding the affairs of Prudential that (A) reflects
negatively against Prudential or the Boards of Directors of Prudential or any of
the directors or officers of the MHC, the Company or the Bank or (B) is
inconsistent with the description of and disclosure regarding this Settlement
Agreement as agreed to by Prudential and the Stilwell Group pursuant to Section
7 hereof; provided, however, that no party shall be required to revise or amend
any prior disclosures or descriptions of the Stilwell Litigation, the Appeal,
the Stilwell Demand or the circumstances leading up to such matters; and
 
                        (xiii)      advise, assist, encourage or finance (or
arrange, assist or facilitate financing to or for) any other person in
connection with any of the matters restricted by, or otherwise seek to
circumvent the limitations of, this Settlement Agreement.
 
            (c)     The Stilwell Group shall within five (5) business days of
the execution of this Settlement Agreement remove any and all existing
billboards or signs erected at the Stilwell Group’s direction making reference
to Prudential.
 
            (d)        Stilwell Value Partners shall within five (5) business
days of the execution of this Settlement Agreement enter into a stipulation for
the dismissal, with prejudice, of the Appeal, in the form attached as Exhibit
B.  Upon execution of this Settlement Agreement, the Stilwell Demand shall be
deemed to have been withdrawn.
 
            (e)        During the term of this Settlement Agreement, the
Stilwell Group and each Stilwell Group Member covenant and agree, and shall
require each of their affiliates, to vote the shares of Company Common Stock
beneficially owned by them in favor of the approval of the Stock Benefit Plans,
the Plan of Conversion, the Second Step Conversion and the Second Step Stock
Benefit Plans (the “Proposals”) and will not make any public statement in
opposition to the Proposals.
 
            (f)        In connection with the announcement of the execution of
this Settlement Agreement, the Stilwell Group will state publicly, in the press
release attached as Exhibit C, that the shares of Company Common Stock that it
beneficially owns may be sold from time to time in open market transactions.
 
            (g)        (i) In the event that at any time from the date of this
Settlement Agreement through September 30, 2011, the closing sales price per
share of the Company’s Common Stock on the Nasdaq Global Market is $12.50 per
share or higher (“First Threshold”), the Company and/or the MHC have the right
to purchase from the Stilwell Group up to 260,000 shares of Company Common Stock
(or all of the shares owned by the Stilwell Group if at such time the Stilwell
Group does not beneficially own 260,000 or more shares of Company Common Stock)
at $12.50 per share (“First Call Option”).  Once the Company and/or the MHC
become aware that the First Threshold has been reached, the Company and/or the
MHC will provide written notice within three (3) business days to the Stilwell
Group that the First Call Option is exercisable.  The Company and/or the MHC can
exercise the First Call Option at any time during the fifteen (15) business day
period after written notice is given to the Stilwell Group that the First Call
Option is exercisable.  The Company and/or the MHC can exercise the First Call
Option in full or in part in their complete discretion.  If the Company and/or
the MHC choose to exercise the First Call Option in full or in part, settlement
of the purchase of the shares being sold by the Stilwell Group pursuant to the
First Call Option will be within three (3) business days of such exercise, with
payment by wire transfer to an account identified by the Stilwell Group.
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                        (ii)  In the event that at any time from the date of
this Settlement Agreement through September 30, 2011, the closing sales price
per share of the Company Common Stock is $13.50 per share or higher (“Second
Threshold”), the Company and/or the MHC have the right to purchase from the
Stilwell Group up to an additional 260,000 shares of Company Common Stock (or
all of the shares owned by the Stilwell Group if at such time the Stilwell Group
does not beneficially own 260,000 or more shares of Company Common Stock) at
$13.50 per share (the “Second Call Option”).  Once the Company and/or the MHC
become aware that the Second Threshold has been reached, the Company and/or the
MHC will provide written notice within three (3) business days to the Stilwell
Group that the Second Call Option is exercisable.  The Company and/or the MHC
can exercise the Second Call Option at any time during the fifteen (15) business
days after written notice is given to the Stilwell Group that the Second Call
Option is exercisable.  The Company and/or the MHC can exercise the Second Call
Option in full or in part in their complete discretion.  The ability of the
Company and/or the MHC to exercise the Second Call Option is not contingent on
whether the First Call Option was exercised in full or in part.  If the Company
and/or the MHC chooses to exercise the Second Call Option in full or in part,
settlement of the purchase of the shares being sold by the Stilwell Group
pursuant to the Second Call Option will be within three (3) business days of
such exercise, with payment by wire transfer to an account identified by the
Stilwell Group.
 
            (h) In the event that prior to September 30, 2011, the Stilwell
Group ceases to beneficially own 5.0% or more (the “Minimum Share Ownership”) of
the issued and outstanding shares of Company Common Stock, Prudential will have
no obligation to adopt a Plan of Conversion and complete a Second Step
Conversion or to appoint the Stilwell Representative as provided by Section
3(a)(iv)(A); provided, however, the decline in the Stillwell Group’s beneficial
ownership below the Minimum Share Ownership level shall not affect the
obligations of Prudential set forth in Sections 3(a)(iii) and 3(a)(viii).  The
Stilwell Group shall notify Prudential in writing of the decline in the Stilwell
Group’s beneficial ownership below the Minimum Share Ownership within three (3)
business days of the date that its beneficial ownership falls below the Minimum
Share Ownership threshold.
 
            4.         Notice of Breach and Remedies.
 
            The parties expressly agree that an actual or threatened breach of
this Settlement Agreement by any party will give rise to irreparable injury that
cannot adequately be compensated by damages. Accordingly, in addition to any
other remedy to which it may be entitled, each party shall be entitled to seek a
temporary restraining order or injunctive relief to prevent a breach of the
provisions of this Settlement Agreement or to secure specific enforcement of its
terms and provisions.
 
The Stilwell Group and each Stilwell Group Member expressly agree that they will
not be excused or claim to be excused from performance under this Settlement
Agreement as a result of any material breach by Prudential unless and until
Prudential is given written notice of such breach and thirty (30) business days
either to cure such breach or seek relief in court.  If Prudential seeks relief
in court, the Stilwell Group and each Stilwell Group Member irrevocably
stipulate that any failure to perform by the Stillwell Group and/or any Stilwell
Group Member or any assertion by the Stilwell Group and/or any Stilwell Group
Member that they are excused from performing their obligations under this
Settlement Agreement would cause Prudential irreparable harm, that Prudential
shall not be required to provide further proof of irreparable harm in order to
obtain equitable relief and that the Stilwell Group and each Stilwell Group
Member shall not deny or contest that such circumstances would cause Prudential
irreparable harm.  If, after such thirty (30) business day period, Prudential
has not either reasonably cured such material breach or obtained relief in
court, the Stilwell Group or each Stilwell Group Member may terminate this
Settlement Agreement by delivery of written notice to Prudential. 
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Prudential expressly agrees that it will not be excused or claim to be excused
from performance under this Settlement Agreement as a result of any material
breach by the Stilwell Group or any Stilwell Group Member unless and until the
Stilwell Group and each Stilwell Group Member is given written notice of such
breach and thirty (30) business days either to cure such breach or seek relief
in court.  If the Stilwell Group or any Stilwell Group Member seeks relief in
court, Prudential irrevocably stipulates that any failure to perform by
Prudential or any assertion by Prudential that it is excused from performing its
obligations under this Settlement Agreement would cause the Stilwell Group and
each Stilwell Group Member irreparable harm, that the Stilwell Group or any
Stilwell Group Member shall not be required to provide further proof of
irreparable harm in order to obtain equitable relief and that Prudential shall
not deny or contest that such circumstances would cause the Stilwell Group and
each Stilwell Group Member irreparable harm.  If, after such thirty (30)
business day period, the Stilwell Group or the Stilwell Group Member has not
either reasonably cured such material breach or obtained relief in court,
Prudential may terminate this Settlement Agreement by delivery of written notice
to the Stilwell Group and each Stilwell Group Member.
 
5.         Release.  Prudential, the Stilwell Group and each Stilwell Group
Member, on behalf of themselves and their subsidiaries, affiliates, officers,
directors, partners, members, employees, agents, assigns, successors, heirs and
legal representatives, hereby mutually release and forever discharge each and
every other party to this Agreement (and any subsidiaries, affiliates, officers,
directors, partners, members, employees, attorneys, financial advisors, agents,
assigns, successors, heirs and legal representatives) from any and all actions,
causes of actions, claims, demands, debts, damages and liabilities of whatsoever
kind and nature, known and unknown, at law or in equity, in contract or in tort,
fixed or contingent, liquidated or unliquidated, which each party now has,
claims, threatens or asserts, or might or could hereafter have, claim, threaten
or assert, against any or all of the other parties to this Agreement (or any of
such parties’ subsidiaries, affiliates, officers, directors, partners, members,
employees, attorneys, financial advisors, agents, assigns, successors, heirs and
legal representatives) arising or alleged to arise out of or in any manner
related to any contracts, transactions, acts or omissions by any party on or
prior to the date of this Settlement Agreement.  Notwithstanding the foregoing,
this mutual release neither extends to nor includes the obligations and
liabilities created by this Agreement.  The mutual release set forth in this
Section is understood and intended by the parties to constitute a general
release.
 
6.         Term.  This Settlement Agreement shall be effective upon the
execution of the Settlement Agreement, and will remain in effect for a period of
ten (10) years.
 
7.         Publicity.  Promptly upon the execution and delivery of this
Settlement Agreement, Prudential and the Stilwell Group shall issue the joint
press release attached as Exhibit C, which has been mutually agreed to by the
parties.  Furthermore, attached as Exhibit D is the mutually agreed upon
disclosure the Stilwell Group shall include in an amendment to its Prudential
Schedule 13D, reporting the Settlement Agreement.  Attached as Exhibit E is the
mutually agreed upon disclosure the Company shall include in its Form 8-K,
reporting the Settlement Agreement.  In addition, Prudential and the Stilwell
Group shall each provide to the other party for such party’s prior review and
approval any additional future disclosure proposed to be made by Prudential or
the Stilwell Group concerning this Settlement Agreement unless such additional
future disclosure is substantially identical to or consistent with the
disclosures mutually agreed to in Exhibits C-E.  All future disclosures
concerning the Settlement Agreement will be consistent with the disclosures
mutually agreed to in Exhibits C-E.  No party, however, will be required to
revise or amend any prior disclosure or descriptions of the Stilwell Litigation,
the Appeal, the Stilwell Demand or the circumstances leading up to such matters.
 During the term of this Settlement Agreement, no party to this Settlement
Agreement shall cause, discuss, cooperate or otherwise aid in the preparation of
any press release or other publicity concerning any other party to this
Settlement Agreement or its operations without the prior approval of such other
party other than press releases or other publicity substantially identical to or
consistent with the disclosures mutually agreed to in Exhibits C-E.  
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8.         Notices.  All notices, communications and deliveries required or
permitted by this Agreement shall be made in writing signed by the party making
the same, shall specify the Section of this Agreement pursuant to which it is
given or being made and shall be deemed given or made (a) on the date delivered
if delivered by telecopy or in person, (b) on the third Business Day after it is
mailed if mailed by registered or certified mail (return receipt requested)
(with postage and other fees prepaid) or (c) on the day after it is delivered,
prepaid, to an overnight express delivery service that confirms to the sender
delivery on such day, as follows:
 
Stilwell Group:
Joseph Stilwell
26 Broadway, 23rd Floor
New York, New York 10004
Facsimile: 212-269-2675
 
 
With a copy to:
 
Spencer L. Schneider, Esq.
70 Lafayette Street, 7th Floor
New York, New York 10013
Facsimile: 212-233-9713
 
 
Prudential:
 
Thomas A. Vento
President and Chief Executive Officer
Prudential Mutual Holding Company
Prudential Bancorp, Inc. of Pennsylvania
Prudential Savings Bank
1834 Oregon Avenue
Philadelphia, Pennsylvania 19145
Facsimile: 215-755-7521
 
 
With a copy to:
 
Raymond A. Tiernan., Esq.
Philip R. Bevan, Esq.
Elias, Matz, Tiernan & Herrick L.L.P.
734 15th Street, 11th Floor
Washington, DC  20005
Facsimile: 202-347-2172
 
 
 
and
 
 
 
 
Edward M. Posner, Esq.
William M. McSwain, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, Pennsylvania 19103-6996
Facsimile: 215-988-2757

 
            9.         Governing Law and Choice of Forum.  Unless applicable
federal law or regulation is deemed controlling, Pennsylvania law shall govern
the construction and enforceability of this Settlement Agreement.  Any and all
actions concerning any dispute arising hereunder shall be filed and maintained
in the United States District Court for the Eastern District of Pennsylvania or,
if there is no basis for federal jurisdiction, in the Philadelphia Court of
Common Pleas.  The Stilwell Group and the Stilwell Group Members agree that the
United States District Court for the Eastern District of Pennsylvania and the
Philadelphia Court of Common Pleas may exercise personal jurisdiction over them
in any such actions.
 
            10.        Severability.  If any term, provision, covenant or
restriction of this Settlement Agreement is held by any governmental authority
or a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this
Settlement Agreement shall remain in full force and effect and shall in no way
be affected, impaired or invalidated. 
 
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11.        Successors and Assigns.  This Settlement Agreement shall be binding
upon and shall inure to the benefit of and be enforceable by the successors and
assigns, and transferees by operation of law, of the parties.  Except as
otherwise expressly provided, this Settlement Agreement shall not inure to the
benefit of, be enforceable by or create any right or cause of action in any
person, including any shareholder of the Company, other than the parties to the
Settlement Agreement.  Nothing contained herein shall prohibit Stilwell Value
Partners and Stilwell Partners from being permitted to transfer any portion or
all of the shares of Company Common Stock owned thereby at any time to any
affiliate of Stilwell Value Partners or Stilwell Partners but only if the
transferee agrees in writing for the benefit of Prudential (with a copy thereof
to be furnished to Prudential prior to such transfer) to be bound by the terms
of this Settlement Agreement (any such transferee shall be included in the terms
“Stilwell Group” and “Stilwell Group Member”).
 
            12.        Survival of Representations, Warranties and Covenants.
All representations, warranties and covenants shall survive the execution and
delivery of this Settlement Agreement and shall continue for the term of this
Settlement Agreement unless otherwise provided.
 
13.        Amendments.  This Settlement Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by all of the parties.
 
14.        Definitions.  As used in this Settlement Agreement, the following
terms shall have the meanings indicated, unless the context otherwise requires:
 
            (a)        The term “acquire” means every type of acquisition,
whether effected by purchase, exchange, operation of law or otherwise.
 
            (b)        The term “acting in concert” means (i) knowing
participation in a joint activity or conscious parallel action towards a common
goal, whether or not pursuant to an express agreement, or (ii) a combination or
pooling of voting or other interests in the securities of an issuer for a common
purpose pursuant to any contract, understanding, relationship, agreement or
other arrangement, whether written or otherwise.
 
            (c)        The term “affiliate” means, with respect to any person, a
person or entity that directly, or indirectly through one or more
intermediaries, controls or is controlled by, or is under common control with
such other person.
 
            (d)        The terms “beneficial ownership” or “beneficially owned”
mean all Company Common Stock owned or held in the name of a Stilwell Group
Member or an associate thereof, individually or jointly with any other person;
by any trust in which a Stilwell Group Member is a settlor, trustee, or
beneficiary; by any corporation in which a Stilwell Group Member is a
shareholder (owning, together with all other Stilwell Group Members and their
respective affiliates, more than five percent (5%) of the outstanding voting
power), director or officer; by any partnership in which a Stilwell Group Member
is a limited partner (owning, together with all other Stilwell Group Members and
their respective affiliates, more than five percent (5%) of the outstanding
beneficial interests), general partner, employee or agent; or by any other
entity in which a Stilwell Group Member holds, together with all other Stilwell
Group Members and their respective affiliates, more than five percent (5%) of
the outstanding beneficial interests. 
 
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            (e)        The term “change in control” denotes circumstances under
which: (i) any person or group becomes the beneficial owner of shares of capital
stock of the Company, the New Holding Company or the Bank representing 25% or
more of the total number of votes that may be cast for the election of the
Boards of Directors of the Company, the New Holding Company or the Bank, (ii)
the persons who were directors of the Company, the New Holding Company or the
Bank cease to be a majority of the Board of Directors, in connection with any
tender or exchange offer (other than an offer by the Company, the New Holding
Company or the Bank), merger or other business combination, sale of assets or
contested election, or combination of the foregoing, or (iii) shareholders of
the Company, the New Holding Company or the Bank approve a transaction pursuant
to which substantially all of the assets of the Company, the New Holding Company
or the Bank will be sold.
 
            (f)        The term “control” (including the terms “controlling,”
“controlled by,” and “under common control with”) means the possession, direct
or indirect, of the power to direct or cause the direction of the management,
activities or policies of a person or organization, whether through the
ownership of capital stock, by contract, or otherwise.
 
(g)        The term “group” has the meaning as defined in Section 13(d)(3) of
the Securities Exchange Act of 1934.
 
            (h)        The term “person” includes an individual, group acting in
concert, corporation, partnership, association, joint stock company, trust,
unincorporated organization or similar company, syndicate, or any other group
formed for the purpose of acquiring, holding or disposing of the equity
securities of the Company or the New Holding Company.
 
            (i)         The term “transfer” means, directly or indirectly, to
sell, gift, assign, pledge, encumber, hypothecate or similarly dispose of (by
operation of law or otherwise), either voluntarily or involuntarily, or to enter
into any contract, option or other arrangement or understanding with respect to
the sale, gift, assignment, pledge, encumbrance, hypothecation or similar
disposition of (by operation of law or otherwise), any Company Common Stock or
New Holding Company Common Stock, or any interest in any Company Common Stock or
New Holding Company Common Stock; provided, however, that a merger or
consolidation in which the Company or the New Holding Company is a constituent
corporation shall not be deemed to be the transfer of any common stock
beneficially owned by the Stilwell Group or a Stilwell Group Member.
 
            (j)         The term “vote” means to vote in person or by proxy, or
to give or authorize the giving of any consent as a stockholder on any matter.
 
            15.        Counterparts; Facsimile.  This Agreement may be executed
in any number of counterparts and by the parties in separate counterparts, and
signature pages may be delivered by facsimile, each of which when so executed
shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
 
            16.        Duty to Execute.  Each party agrees to execute any and
all documents, and to do and perform any and all acts and things necessary or
proper to effectuate or further evidence the terms and provisions of this
Agreement.
 
            17.        Termination.  This Agreement shall cease, terminate and
have no further force and effect upon the expiration of the term as set forth in
Section 6, unless earlier terminated by mutual written agreement of the parties.
 
 
 
 
 
 
 
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IN WITNESS WHEREOF, this Agreement has been duly executed by the undersigned and
is effective as of the day and year first above written.
 
 
 
STILWELL VALUE PARTNERS I, LLC
 
PRUDENTIAL MUTUAL HOLDING COMPANY
 
 
 
 
 
 
/s/ Joseph Stilwell
 
/s/ Thomas A. Vento
By:
STILWELL VALUE LLC
By:
Thomas A. Vento
 
General Partner
 
President and Chief Executive officer
 
 
 
 
 
 
 
 
 
 /s/ Joseph Stilwell
 
 
By:
Joseph Stilwell
 
 
 
Managing and Sole Member
 
 
 
 
 
 
STILWELL PARTNERS, L.P
PRUDENTIAL BANCORP, INC. OF 
   PENNSYLVANIA
 
 
 
 
 
 
   /s/ Joseph Stilwell    /s/ Thomas A. Vento
By:
STILWELL VALUE LLC
By:
Thomas A. Vento
 
General Partner
 
President and Chief Executive Officer
 
 
 
 
   /s/ Joseph Stilwell  
By:
Joseph Stilwell
 
 
Managing and Sole Member
 
 
 
 
 
 
 
STILWELL VALUE LLC
PRUDENTIAL SAVINGS BANK
 
 
 
     
 
 
 
   /s/ Joseph Stilwell    /s/ Thomas A. Vento
By:
Joseph Stilwell
By:
Thomas A. Vento
 
Managing and Sole Member
 
President and Chief Executive Officer
 
 
 
 
 
 
 
 
 
JOSEPH STILWELL
 
 
 
 
 
/s/ Joseph Stilwell
 
 
Joseph Stilwell
 
 
 
 
 
 
 
 
JOHN STILWELL
 
 
 
 
 
/s/ John Stilwell
 
 
John Stilwell