Document:

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                                  EXHIBIT 10.2
                            PEOPLE'S BANCSHARES, INC.
                      1996 STOCK OPTION AND INCENTIVE PLAN
   (AS ASSUMED BY FIRSTFED AMERICA BANCORP, INC., EFFECTIVE FEBRUARY 28, 2002)

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                            PEOPLE'S BANCSHARES, INC.
                      1996 STOCK OPTION AND INCENTIVE PLAN

SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS

        The name of the plan is the People's Bancshares, Inc. 1996 Stock Option
and Incentive Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the officers, employees, directors and other key persons of People's
Bancshares, Inc. (the "Company") and its Subsidiaries upon whose judgment,
initiative and efforts the Company largely depends on the successful conduct of
its business to acquire a proprietary interest in the Company. It is anticipated
that providing such persons with a direct stake in the Company's welfare will
assure a closer identification of their interests with those of the Company,
thereby stimulating their efforts on the Company's behalf and strengthening
their desire to remain with the Company.

        The following terms shall be defined as set forth below:

        "ACT" means the Securities Exchange Act of 1934, as amended.

        "AWARD" or "AWARDS," except where referring to a particular category of
grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Restricted Stock Awards, and Unrestricted Stock Awards.

        "BOARD" means the Board of Directors of the Company.

        "CAUSE" as such term relates to the termination of any person means the
occurrence of one or more of the following: (i) such person is convicted of,
pleads guilty to, or confesses to any felony or any act of fraud,
misappropriation or embezzlement which has an immediate and materially adverse
effect on the Company or any Subsidiary, as determined by the Board in good
faith in its sole discretion, (ii) such person engages in a fraudulent act to
the material damage or prejudice of the Company or any Subsidiary or in conduct
of activities materially damaging to the property, business or reputation of the
Company or any Subsidiary, all as determined by the Board in good faith in its
sole discretion; (iii) any material act or omission by such person involving
malfeasance or negligence in the performance of such person's duties to the
Company or any Subsidiary to the material detriment of the Company or any
Subsidiary, as determined by the Board in good faith in its sole discretion,
which has not been corrected by such person within 30 days after written notice
from the Company of any such act or omission; (iv) failure by such person to
comply in any material respect with the terms of his employment agreement, if
any, or any written policies or directives of the Board as determined by the
Board in good faith in its sole discretion, which has not been corrected by such
person within 30 days after written notice from the Company of such failure; or
(v) material breach by such person of his noncompetition agreement with the
Company, if any, as determined by the Board in good faith in its sole
discretion.

        "CHANGE OF CONTROL" is defined in Section 12.

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        "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

        "COMMITTEE" means the Committee of the Board referred to in Section 2.

        "DISABILITY" means an individual's inability to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or which has lasted
or can be expected to last for a continuous period of not less than 12 months.

        "DISINTERESTED PERSON" means an Independent Director who qualifies as
such under Rule 16b-3(c)(2)(i) promulgated under the Act, or any successor
definition under said Rule.

        "EFFECTIVE DATE" means the data on which the Plan is approved by
stockholders as set forth in section 14.

        "ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the related rules, regulations and interpretations.

        "FAIR MARKET VALUE" on any given date means the closing price per share
of Stock or, if no Stock is traded on such date the next preceding date on which
Stock was traded, as reflected on the Nasdaq National Market.

        "INCENTIVE STOCK OPTION" means any Stock Option designated and qualified
as an "incentive stock option" as defined in Section 422 of the Code.

        "INDEPENDENT DIRECTOR" means a member of the Board who is not also an
employee of the Company or any Subsidiary.

        "NON-QUALIFIED STOCK OPTION" means any Stock Option that is not an
Incentive Stock Option.

        "STOCK OPTION" means any option to purchase shares of Stock granted
pursuant to Section 5.

        "RESTRICTED STOCK AWARD" means Awards granted pursuant to Section 6.

        "STOCK" means the Common Stock, par value $.10 per share, of the
Company, subject to adjustments pursuant to Section 3.

        "SUBSIDIARY" means any corporation or other entity (other than the
Company) including, without limitation, People's Savings Bank of Brockton (the
"Bank"), in any unbroken chain of corporations or other entities, beginning with
the Company if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain.

        "UNRESTRICTED STOCK AWARD" means any Award granted pursuant to Section
7.

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SECTION 2.  ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT
            PARTICIPANTS AND DETERMINE AWARDS

        (a) Committee. The Plan shall be administered by the Option Committee,
            ---------
which shall consist of not less than two Independent Directors as appointed by
the Board from time to time. Each member of the Committee shall be a
Disinterested Person and an "outside director" within the meaning of Section
162(m) of the Code and the regulations promulgated thereunder.

        (b) Powers of Committee. The Committee shall have the power and
            -------------------
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

               1.     to select the officers, employees and key persons of the
Company and its Subsidiaries to whom Awards may from time to time be granted;

               2.     to determine the time or times of grant, and the extent,
if any, of Incentive Stock Options, Non-Qualified Stock Options, Restricted
Stock Awards, Unrestricted Stock Awards, or any combination of the foregoing,
granted to any one or more participants;

               3.     to determine the number of shares of Stock to be covered
by any Award;

               4.     to determine and modify from time to time the terms and
conditions, including restrictions, not inconsistent with the terms of the Plan,
of any Award, which terms and conditions may differ among individual Awards and
participants, and to approve the form of written instruments evidencing the
Awards;

               5.     to accelerate at any time the exercisability or vesting of
all or any portion of any Award.

               6.     subject to the provisions of Section 5(a)(ii), to extend
at any time the period in which Stock Options may be exercised;

               7.     to determine at any time whether, to what extent, and
under what circumstances Stock and other amounts payable with respect to an
Award shall be deferred either automatically or at the election of the
participant and whether and to what extent the Company shall pay or credit
amounts constituting interest (at rates determined by the Committee) or
dividends or deemed dividends on such deferrals; and

               8.     at any time to adopt, alter and repeal such rules,
guidelines and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and provisions of
the Plan and any Award (including related written instruments); to make all
determinations it deems advisable for the administration of the Plan; to decide
all disputes arising in connection with the Plan; and to otherwise supervise the
administration of the Plan.

        All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

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SECTION 3.  STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

        1. Stock Issuable. The maximum number of shares of Stock reserved and
           --------------
available for issuance under the Plan shall be 334,000 shares. For purposes of
this limitation. the shares of Stock underlying any Awards which are forfeited,
canceled, reacquired by the Company, satisfied without the issuance of Stock or
otherwise terminated (other than by exercise) shall be added back to the shares
of Stock available for issuance under the Plan. Subject to such overall
limitation, shares of Stock may be issued up to such maximum number pursuant to
any type or types of Award. The shares available for issuance under the Plan may
be authorized but unissued shares of Stock or shares of Stock reacquired by the
Company.

        Notwithstanding the foregoing, the sum of the aggregate number of shares
of Stock underlying (i) outstanding Options granted under the Plan, (ii)
outstanding options granted under the People's Bancshares, Inc. Amended and
Restated Directors' Stock Option Plan, (iii) outstanding options granted under
the People's Bancshares, Inc. Amended and Restated Incentive and Nonqualified
Stock Option Plan, and (iv) outstanding warrants to purchase Stock granted by
the Bank in 1992 shall at no time exceed 20% of the aggregate number of shares
of Stock then issued and outstanding.

        2. Recapitalizations. If, through or as a result of any merger,
           -----------------
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company, or additional shares or new or
different shares or other securities of the Company or other non-cash assets are
distributed with respect to such shares of Stock or other securities, the
Committee shall make an appropriate or proportionate adjustment in (i) the
maximum number of shares reserved for issuance under the Plan, (ii) the number
of Stock Options that can be granted to any one individual participant, (iii)
the number and kind of shares or other securities subject to any then
outstanding Awards under the Plan, and (iv) the price for each share subject to
any then outstanding Stock Options under the Plan, without changing the
aggregate exercise price (i.e., the exercise price multiplied by the number of
Stock Options) as to which such Stock Options remain exercisable. The adjustment
by the Committee shall be final, binding and conclusive. No fractional shares of
Stock shall be issued under the Plan resulting from any such adjustment, but the
Committee in its discretion may make a cash payment in lieu of fractional
shares.

        3. Mergers. Upon consummation of a consolidation or merger or sale of
           -------
all or substantially all of the assets of the Company in which outstanding
shares of Stock are exchanged for securities, cash or other property of an
unrelated corporation or business entity or in the event of a liquidation of the
Company, the Plan and all outstanding Options issued hereunder shall terminate,
unless provision is made in connection with such transaction for the assumption
of Options therefore granted, or the substitution for such Options of new
options of the acquiring or succeeding corporation (or an affiliate thereof),
with appropriate adjustment as to the number and kind of shares and the per
share exercise prices, as provided in Section 5(b). In the event of such
termination, all outstanding Options shall be exercisable in full for at least
15 days prior to the date of such termination whether or not otherwise
exercisable during such period.

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        4. Substitute Awards. The Committee may grant Awards under the Plan in
           -----------------
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.

SECTION 4.  ELIGIBILITY

        Participants in the Plan will be such full or part-time officers and
other employees and key persons of the Company and its Subsidiaries who are
responsible for or contribute to the management, growth or profitability of the
Company and its Subsidiaries as are selected from time to time by the Committee,
in its sole discretion. Independent Directors are also eligible to participate
in the Plan but only to the extent provided in Section 5(b) below.

SECTION 5.  STOCK OPTIONS

        Any Stock Option granted under the Plan shall be in such form as the
Committee may from time to time approve.

        Stock Options granted under the Plan may be either Incentive Stock
Options or Non-Qualified Stock Options. Incentive Stock Options may be granted
only to employees of the Company or any Subsidiary that is a "subsidiary
corporation" within the meaning of Section 424(f) of the Code. To the extent
that any Option does not qualify as an Incentive Stock Option, it shall be
deemed a Non-Qualified Stock Option.

        No Incentive Stock Option shall be granted under the Plan after March
26, 2006.

        (a) Stock Options Granted to Employees and Key Persons. The Committee in
            --------------------------------------------------
its discretion may grant Stock Options to eligible employees and key persons of
the Company or any Subsidiary. No person shall be eligible to receive any Option
under this Section 5(a) if at the date of grant such person beneficially owns in
excess of 10% of the outstanding Stock of the Company. Stock Options granted
pursuant to this Section 5(a) shall be subject to the following terms and
conditions and shall contain such additional terms and conditions not
inconsistent with the terms of the Plan, as the Committee shall deem desirable:

               (i) Exercise Price. The exercise price per share for the Stock
                   --------------
covered by a Stock Option granted pursuant to this Section 5(a) shall be
determined by the Committee at the time of grant but shall not be less than 100%
of the Fair Market Value on the date of grant. If an employee owns or is deemed
to own (by reason of the attribution rules applicable under Section 424(d) of
the Code) more than 10% of the combined voting power of all classes of stock of
the Company or any Subsidiary or parent corporation and an Incentive Stock
Option is granted to such employee, the option price of such Incentive Stock
Option shall be not less than 110% of the Fair Market Value on the grant date.

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               (ii) Option Term. The term of each Stock Option shall be
                    -----------
determined by the Committee but no Incentive Stock Option shall be exercisable
more than ten years after the date the option is granted. If an employee owns or
is deemed to own (by reasons of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes of stock of the
Company or any Subsidiary or parent corporation and an Incentive Stock Option is
granted to such employee, the term of such Incentive Stock Option shall be no
more than five years from the date of grant.

               (iii) Exercisability; Rights of a Stockholder. Stock Options
                     ---------------------------------------
shall become vested and exercisable at such time or times, whether or not in
installments, as shall be determined by the Committee at or after the grant
date. The Committee may at any time accelerate the exercisability of all or any
portion of any Stock Option. An optionee shall have the rights of a stockholder
only as to shares acquired upon the exercise of a Stock Option and not as to
unexercised Stock Options.

               (iv) Method of Exercise. Stock Options may be exercised in whole
                    ------------------
or in part, by giving written notice of exercise to the Company, specifying the
number of shares to be purchased. Payment of the purchase price may be made by
one or more of the following methods.

                      (A) In cash, by certified or bank check or other
instrument acceptable to the Committee;

                      (B) In the form of shares of Stock that are not then
subject to restrictions under any Company plan and that have been held by the
optionee for at least six months, if permitted by the Committee in its
discretion. Such surrendered shares shall be valued at Fair Market Value on the
exercise date; or

                      (C) By the optionee delivering to the Company a properly
executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the
Company to pay the purchase price; provided that in the event the optionee
chooses to pay the purchase price as so provided, the optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity
and other agreements as the Committee shall prescribe as a condition of such
payment procedure.

Payment instruments will be received subject to collection. The delivery of
certificates representing the shares of Stock to be purchased pursuant to the
exercise of a Stock Option will be contingent upon receipt from the optionee (or
a purchaser acting in his stead in accordance with the provisions of the Stock
Option) by the Company of the full purchase price for such shares and the
fulfillment of any other requirements contained in the Stock Option or
applicable provisions of laws.

               (v) Termination by Reason of Death. If an optionee's employment
                   ------------------------------
by (or other business relationship with) the Company and its Subsidiaries is
terminated by reason of death, any Stock Option held by such optionee may
thereafter be exercised, to the extent it was exercisable on the date of death,
by the legal representative or legatee of the optionee, for a period of 12
months (or such longer period as the Committee shall specify at any time) from
the date of death, or until the expiration of the

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stated term of the Option, if earlier. To the extent that any portion of any
Stock Option is not exercisable on the date of such death, such portion of the
Stock Option shall terminate immediately and be of no force or effect.

               (vi)   Termination by Reason of Disability.
                      -----------------------------------

                      (A) If an optionee's employment by (or other business
relationship with) the Company and its Subsidiaries is terminated by reason of
Disability, any Stock Option held by such optionee may thereafter be exercised,
to the extent it was exercisable on the date of termination of employment (or
business relationship), for a period of 12 months (or such longer period as the
Committee shall specify at any time) from the date of such termination of
employment (or business relationship), or until the expiration of the stated
term of the Option, if earlier. To the extent that any portion of any Stock
Option is not exercisable on the date of such termination of employment (or
business relationship), such portion of the Stock Option shall terminate
immediately and be of no force or effect.

                      (B) The Committee shall have sole authority and discretion
to determine whether a participant's employment (or business relationship) has
been terminated by reason of Disability.

                      (C) Except as otherwise provided by the Committee at any
time, the death of an optionee during the period provided in this Section
5(a)(vi) for the exercise of a Stock Option shall extend such period for 12
months from the date of death, subject to termination on the expiration of the
stated term of the Option, if earlier.

               (vii) Termination for Cause. If any optionee's employment by (or
business relationship with) the Company and its Subsidiaries is terminated by
resignation or other voluntary reason (other than retirement) or for Cause, any
Stock Option held by such optionee, including any Stock Option that is
immediately exercisable at the time of such termination, shall terminate
immediately and be of no further force and effect.

               (viii) Other Termination. Unless otherwise determined by the
Committee, if an optionee's employment by (or business relationship with) the
Company and its Subsidiaries terminates for any reason other than death,
Disability, voluntary action (other than retirement), or for Cause, any Stock
Option held by such optionee may thereafter be exercised, to the extent it was
exercisable on the date of termination of employment (or business relationship),
for three months (or such longer period as the Committee shall specify at any
time) from the date of termination of employment (or business relationship) or
until the expiration of the stated term of the Option, if earlier. To the extent
that any portion of any Stock Option is not exercisable on the date of such
termination of employment (or business relationship), such portion of the Stock
Option shall terminate immediately and be of no force or effect.

               (ix) Annual Limit on Incentive Stock Options. To the extent
                    ---------------------------------------
required for "incentive stock option" treatment under Section 422 of the Code,
the aggregate Fair Market Value (determined

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as of the time of grant) of the shares of Stock with respect to which Incentive
Stock Options granted under this Plan and any other plan of the Company or its
parent and subsidiary corporations become exercisable for the first time by an
optionee during any calendar year shall not exceed $100,000. To the extent that
any Stock Option exceeds this limit, it shall constitute a Non-Qualified Stock
Option.

        (b)    Stock Options Granted to Independent Directors.
               ----------------------------------------------

               (i)    Automatic Grant of Options.
                      --------------------------

                      (A) Upon initial election or appointment to the Board of
the Company or the Board of Directors of the Bank, as the case may be, an
Independent Director shall automatically be granted a Stock Option to acquire
1,000 shares of Stock. Each Independent Director who is serving as an
Independent Director of the Company on the Friday after each annual meeting of
stockholders, beginning with the 1997 annual meeting, shall automatically be
granted on such day a Stock Option to acquire 1,000 shares of Stock, provided,
                                                                     --------
however, that in no event shall the aggregate number of shares of Stock
-------
underlying options granted to any Independent Director pursuant to the Plan or
the Company's Amended and Restated Directors' Stock Option Plan exceed 10,000
shares. A grant of a Stock Option under this subsection shall be reduced to the
extent necessary to comply with the proviso in the foregoing sentence.

                      (B) The exercise price per share for the Stock covered by
a Stock Option granted under this Section 5(b) shall be equal to the Fair Market
Value of the Stock on the date the Stock Option is granted.

               (ii)   Exercise; Termination.
                      ---------------------

                      (A) Subject to Section 12, any Option granted under this
Section 5(b) shall be exercisable upon the completion by the Independent
Director of one year of service as an Independent Director of the Company or
Subsidiary; provided that any Option so granted shall become immediately
exercisable upon the termination of service of the Independent Director because
of Disability or death. An Option issued under this Section 5(b) shall not be
exercisable after the expiration of ten years from the date of grant.

                      (B) Any Option granted to an Independent Director and
outstanding on the date of his death may be exercised by the legal
representative or legatee of the optionee for a period of 12 months from the
date of death or until the expiration of the stated term of the Option, if
earlier.

                      (C) Any Option granted to an Independent Director and
outstanding on the date of his Disability may be exercised by the optionee for a
period of 12 months from the date of Disability or until the expiration of the
stated term of the Option, if earlier.

                      (D) Any Option granted to an Independent Director and
outstanding on the date of his resignation from the Board may be exercised by
the optionee for a period of 12 months from the date of such resignation or
until the expiration of the stated term of the Option, if earlier.

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                      (E) If a Director ceases to be an Independent Director for
any reason other than those set forth in Sections 5(b)(ii)(D), any Option held
by such Independent Director, including any Option that is immediately
exercisable at the time of such termination, shall terminate immediately and be
of no further force and effect.

                      (F) Options granted under this Section 5(b) may be
exercised only by written notice to the Company specifying the number of shares
to be purchased. The minimum number of shares with respect to which an Option
may be exercised at any one time shall be 100 shares or such lesser number as is
subject to exercise under the Option at such time. Payment of the full purchase
price of the shares to be purchased may be made by one or more of the methods
specified in Section 5(a)(iv). An optionee shall have the rights of a
stockholder only as to shares acquired upon the exercise of a Stock Option and
not as to unexercised Stock Options.

               (iii) Limited to Independent Directors. The provisions of this
                     --------------------------------
Section 5(b) shall apply only to Options granted or to be granted to Independent
Directors, and shall not be deemed to modify, limit or otherwise apply to any
other provision of this Plan or to any Option issued under this Plan to a
participant who is not an Independent Director of the Company. To the extent
inconsistent with the provisions of any other Section of this Plan, the
provisions of this Section 5(b) shall govern the rights and obligations of the
Company and Independent Directors respecting Options granted or to be granted to
Independent Directors. The provisions of this Section 5(b) which affect the
price, date of exercisability, option period or amount of shares of Stock under
an Option shall not be amended more than once in any six-month period, other
than to comport with changes in the Code or ERISA.

        (c) Non-transferability of Options. No Stock Option shall be
            ------------------------------
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee may provide in an option agreement that the optionee may transfer,
without consideration for the transfer, his Stock Options to members of his
immediate family, to trusts for the benefit of such family members and to
partnerships in which such family members are the only partners.

        (d) Form of Settlement. Shares of Stock issued upon exercise of a Stock
            ------------------
Option shall be free of all restrictions under the Plan, except as otherwise
provided in the Plan.

SECTION 6.  RESTRICTED STOCK AWARDS

        (a) Nature of Restricted Stock Awards. The Committee may grant
            ---------------------------------
Restricted Stock Awards to any employee or key person of the Company or any
Subsidiary. A Restricted Stock Award is an Award entitling the recipient to
acquire, at par value or such other purchase price determined by the Committee,
shares of Stock subject to such restrictions and conditions as the Committee may
determine at the time of grant ("Restricted Stock"). Conditions may be based on
continuing employment (or other business relationship) and/or achievement of
pre-established performance goals and objectives.

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        (b) Rights as a Stockholder. Upon execution of a written instrument
            -----------------------
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below.

        (c) Restrictions. Restricted Stock may not be sold, assigned,
            ------------
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates for any reason,
the Company shall have the right to repurchase Restricted Stock with respect to
which conditions have not lapsed at their purchase price, from the participant
or the participant's legal representative.

        (d) Vesting of Restricted Stock. The Committee at the time of grant
            ---------------------------
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the
non-transferability of the Restricted Stock and the Company's right of
repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or
the attainment of such pre-established performance goals, objectives and other
conditions, the shares on which all restrictions have lapsed shall no longer be
Restricted Stock and shall be deemed "vested." Except as may otherwise be
provided by the Committee at any time, a participant's rights in any shares of
Restricted Stock that have not vested shall automatically terminate upon the
participant's termination of employment (or other business relationship) with
the Company and its Subsidiaries and such shares shall either be forfeited or
subject to the Company's right of repurchase as provided in Section 6(c) above.

        (e) Waiver, Deferral and Reinvestment of Dividends. The written
            ----------------------------------------------
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

SECTION 7.  UNRESTRICTED STOCK AWARDS

        (a) Grant or Sale of Unrestricted Stock. The Committee may, in its sole
            -----------------------------------
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Stock Award to any employee or key person of the Company or any
Subsidiary, pursuant to which such employee or key person may receive shares of
Stock free of any restrictions ("Unrestricted Stock") under the Plan.
Unrestricted Stock Awards may be granted or sold as described in the preceding
sentence in respect of past services or other valid consideration, or in lieu of
any cash compensation due to such employee or key person.

        (b) Elections to Receive Unrestricted Stock in Lieu of Compensation.
            ---------------------------------------------------------------
Upon the request of an employee or a key person of the Company or any Subsidiary
and with the consent of the Committee, each employee or key person may, pursuant
to an irrevocable written election delivered to the Company no later than the
date or dates specified by the Committee, receive a portion of the cash
compensation otherwise due to such employee or key person in the form of shares
of Unrestricted Stock at Fair Market Value on the date or dates the cash
compensation would otherwise be paid. With respect to any

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employee who is subject to Section 16 of the Act, such irrevocable election
shall become effective no earlier than six months and one day following the date
of such election and the revocation of such election shall be effective six
months and one day following the date of the revocation.

        (c) Restrictions on Transfers. The right to receive Unrestricted Stock
            -------------------------
on a deferred basis may not be sold, assigned, transferred, pledged or otherwise
encumbered, other than by will or the laws of descent and distribution.

SECTION 8.  TAX WITHHOLDING

        (a) Payment by Participant. Each participant shall, no later than the
            ----------------------
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any Federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

        (b) Payment in Stock. A participant may elect to have such tax
            ----------------
withholding obligation satisfied, in whole or in part, by (i) authorizing the
Company to withhold from shares of Stock to be issued pursuant to any Award a
number of shares with an aggregate Fair Market Value (as of the date the
withholding is effected) that would satisfy the withholding amount due, or (ii)
transferring to the Company shares of Stock owned by the participant with an
aggregate Fair Market Value (as of the date the withholding is effected) that
would satisfy the withholding amount due. With respect to any participant who is
subject to Section 16 of the Act, the following additional restrictions shall
apply:

               (A) the election to satisfy tax withholding obligations relating
to an Award in the manner permitted by this Section 8(b) shall be made either
(1) during the period beginning on the third business day following the date of
release of quarterly or annual summary statements of sales and earnings of the
Company and ending on the twelfth business day following such date, or (2) at
least six months prior to the date as of which the receipt of such an Award
first becomes a taxable event for Federal income tax purposes;

               (B)    such election shall be irrevocable;

               (C)    such election shall be subject to the consent or
disapproval of the Committee; and

               (D) the Stock withheld to satisfy tax withholding must pertain to
an Award which has been held by the participant for at least six months from the
date of grant of the Award.

        Notwithstanding the foregoing, the provision of Section 8(b)(A)(1) shall
not be applicable until the Company has been subject to the reporting
requirements of Section 13(a) of the Act for at least one year prior to the
election and has filed all reports and statements required to be filed pursuant
to that Section for that year.

                                       11

<PAGE> 13

SECTION 9.  TRANSFER, LEAVE OF ABSENCE, ETC.

        For purposes of the Plan, the following events shall not be deemed a
termination of employment:

        (a)    a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

        (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 10.  AMENDMENTS AND TERMINATION

        The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards at the same or reduced exercise or purchase price in a manner
not inconsistent with the terms of the Plan, but such price, if any, must
satisfy the requirements which would apply to the substitute or amended Award if
it were then initially granted under this Plan) for the purpose of satisfying
changes in law or for any other lawful purpose, but no such action shall
adversely affect rights under any outstanding Award without the holder's
consent. If and to the extent determined by the Committee to be required by the
Act to ensure that Awards granted under the Plan are exempt under Rule 16b-3
promulgated under the Act, or that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code, Plan amendments shall be
subject to approval by the Company stockholders entitled to vote at a meeting of
stockholders.

SECTION 11.  STATUS OF PLAN

        With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trust or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

SECTION 12.  CHANGE OF CONTROL PROVISIONS

        Upon the occurrence of a Change of Control as defined in this Section
12:

        (a)    Each outstanding Stock Option shall automatically become fully
exercisable.

        (b)    Each Restricted Stock Award shall be subject to such terms, if
any, with respect to a Change of Control as have been provided by the Committee
in connection with such Award.

                                       12

<PAGE> 14

        (c)    "Change of Control" shall mean the occurrence of any one of the
following events:

               (i) any "person," as such term is used in Sections 13(d) and
14(d) of the Act (other than the Company, any of its Subsidiaries, or any
trustee, fiduciary or other person or entity holding securities under any
employee benefit plan or trust of the Company or any of its Subsidiaries),
together with all "affiliates" and "associates" (as such terms are defined in
Rule 12b-2 under the Act) of such person, shall become the "beneficial owner"
(as such term is defined in Rule 13d-3 under the Act), directly or indirectly,
of securities of the Company representing 25% or more of either (A) the
combined voting power of the Company's then outstanding securities having the
right to vote in an election of the Company's Board of Directors ("Voting
Securities") or (B) the then outstanding shares of Stock of the Company (in
either such case other than as a result of an acquisition of securities directly
from the Company); or

               (ii) persons who, as of the Effective Date, constitute the
Company's Board of Directors (the "Incumbent Directors") cease for any reason,
including, without limitation, as a result of a tender offer, proxy contest,
merger or similar transaction, to constitute at least a majority of the Board,
provided that any person becoming a director of the Company subsequent to the
Effective Date whose election or nomination for election was approved by a vote
of at least a majority of the Incumbent Directors shall, for purposes of this
Plan, be considered an Incumbent Director; or

               (iii) the stockholders of the Company shall approve (A) any
consolidation or merger of the Company or any Subsidiary where the stockholders
of the Company, immediately prior to the consolidation or merger, would not,
immediately after the consolidation or merger, beneficially own (as such term is
defined in Rule 13d-3 under the Act), directly or indirectly, shares
representing in the aggregate 80% or more of the voting shares of the
corporation issuing cash or securities in the consolidation or merger (or of its
ultimate patent corporation, if any), (B) any sale, lease, exchange or other
transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of the Company or (C) any plan or proposal for the liquidation or
dissolution of the Company.

        Notwithstanding the foregoing, a Change of Control shall not be deemed
to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Company which, by reducing the number of
shares of Stock or other voting Securities outstanding, increases (x) the
proportionate number of shares of Stock beneficially owned by any person to 25%
or more of the shares of Stock then outstanding or (y) the proportionate voting
power represented by the Voting Securities beneficially owned by any person to
25% or more of the combined voting power of all then outstanding Voting
Securities; PROVIDED, HOWEVER, that if any person referred to in clause (x) or
(y) of this sentence shall thereafter become the beneficial owner of any
additional shares of Stock or other Voting Securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change of Control"
shall be deemed to have occurred for purposes of the foregoing clause (i).

                                       13

<PAGE> 15

SECTION 13.  GENERAL PROVISIONS

        (a)  No Distribution; Compliance with Legal Requirements. The Committee
             ---------------------------------------------------
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

        No shares of Stock shall be issued pursuant to an Award until all
applicable securities laws and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.

        (b)  Delivery of Stock Certificates. Delivery of stock certificates to
             ------------------------------
participants under this Plan shall be deemed effected for all purposes when the
Company or a stock transfer agent of the Company shall have mailed such
certificates in the United States mail, addressed to the participant, at the
participant's last known address on file with the Company.

        (c)  Release of Financial Information. A copy of the Company's annual
             --------------------------------
report to stockholders shall be delivered to each optionee at the time such
report is distributed to the Company's stockholders. Upon request the Company
shall furnish to each optionee a copy of its most recent annual report and each
quarterly report and current report filed under the Act since the end of the
Company's prior fiscal year.

        (d)  Other Compensation Arrangements; No Employment Rights. Nothing
             -----------------------------------------------------
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.

SECTION 14.  EFFECTIVE DATE OF PLAN

        This Plan shall become effective upon approval by the holders of a
majority of the shares of Stock of the Company present or represented and
entitled to vote at a meeting of stockholders. Subject to such approval by the
stockholders and to the requirement that no Stock may be issued hereunder prior
to such approval, Stock Options and other Awards may be granted hereunder on and
after adoption of this Plan by the Board.

SECTION 15.  GOVERNING LAW

        This Plan shall be governed by Massachusetts law except to the extent
such law is preempted by federal law.

Date approved by Board of Directors:  March 26, 1996

Date approved by Stockholders:  May 14, 1996

                                       14<PAGE> 1

                                  EXHIBIT 10.3
                     FORM OF FIRSTFED AMERICA BANCORP, INC.
               ASSUMPTION AGREEMENT FOR PEOPLE'S BANCSHARES, INC.
                AMENDED AND RESTATED DIRECTORS' STOCK OPTION PLAN

<PAGE> 2

                                     FORM OF
                         FIRSTFED AMERICA BANCORP, INC.
                        STOCK OPTION ASSUMPTION AGREEMENT

OPTIONEE:             [name]

        THIS STOCK OPTION ASSUMPTION AGREEMENT is hereby issued as of the ___
day of ________________, 2002, by FIRSTFED AMERICA BANCORP, INC., a Delaware
corporation ("FIRSTFED"), pursuant to Section 1.8(d) of the Agreement and Plan
of Merger dated as of October 1, 2001 (the "Merger Agreement"), by and between
People's Bancshares, Inc. ("People's") and FIRSTFED.

        WHEREAS, the undersigned individual ("Optionee") holds one or more
outstanding options to purchase shares of People's common stock, pursuant to the
People's Amended and Restated Directors' Stock Option Plan (the "Stock Plan");
and

               WHEREAS, Section 1.8 of the Merger Agreement provides that, as of
the Effective Time of the Merger (as defined in the Merger Agreement), each
share of People's common stock issued and outstanding pursuant to the Stock
Plan[/s] shall be converted into an option to purchase shares of FIRSTFED common
stock.

        NOW, THEREFORE, it is hereby agreed as follows:

        1. The shares of People's common stock subject to outstanding stock
options under the Stock Plan, and the exercise price per share, held by Optionee
immediately prior to the Effective Time are set forth in Exhibit A hereto.

        2. FIRSTFED hereby assumes, as of the Effective Time, the duties and
obligations of People's under the Stock Plan, Award Agreement or similar
documentation containing the terms and conditions of a stock option grant.

        3. The number of shares of FIRSTFED common stock subject to each
outstanding People's option, and the exercise price per share, shall be adjusted
in accordance with the provisions of Section 1.8 of the Merger Agreement.
Accordingly, the number of shares of FIRSTFED common stock subject to each
outstanding People's stock option, and the exercise price per share of FIRSTFED
common stock, shall be as specified in Exhibit A hereto.

        4.     The following additional provisions shall govern each People's
option hereby assumed by FIRSTFED:

               (a) Unless the context otherwise requires, references in the
applicable plan document or Award Agreement issued by People's to the "Company"
shall mean FIRSTFED, to

<PAGE> 3

"Common Stock" or "Stock" shall mean FIRSTFED common stock, to the "Board of
Directors" shall mean the Board of Directors of FIRSTFED, to the "Committee"
shall mean to the Committee of FIRSTFED that administers the Plan and to the
"Bank" shall mean to First Federal Savings Bank of America.

               (b) The grant date and the expiration date for each assumed
People's stock option and all other provisions governing either the exercise or
termination of the stock options shall remain in effect, and shall accordingly
govern Optionee's rights with respect to such stock options.

               (c) The adjusted exercise price payable for the FIRSTFED common
stock subject to each assumed People's stock option shall be payable in any of
the forms authorized by the applicable Stock Plan and/or Award Agreement issued
by People's.

               (d) In order to exercise each assumed People's stock option,
Optionee must deliver to FIRSTFED a written notice of exercise, indicating the
number of shares of FIRSTFED common stock to be purchased, accompanied by
payment of the adjusted exercise price. Such notice and payment shall be
delivered to FIRSTFED at the following address:

                                    FIRSTFED AMERICA BANCORP, INC.
                                    One FIRSTFED Park
                                    Swansea, Massachusetts 02777

               (e) Except to the extent specifically modified by this Stock
Option Assumption Agreement, the terms and conditions of each Award Agreement in
effect prior to the Merger shall continue in full force and effect.

                                       2

<PAGE> 4

        IN WITNESS WHEREOF, FIRSTFED has caused this Stock Option Assumption
Agreement to be executed on its behalf by its duly authorized officer as of the
____ day of _____________________, 2002.

                                            FIRSTFED AMERICA BANCORP, INC.

                                            By: ________________________________

                                            Title: _____________________________

                                 ACKNOWLEDGMENT

        The undersigned Optionee acknowledges receipt of this Stock Option
Assumption Agreement and understands and acknowledges that all rights and
liabilities with respect to each People's stock option hereby assumed by
FIRSTFED are as set forth only in the applicable Award Agreement, Stock Plan or
this Stock Option Assumption Agreement, and that no other agreements exist with
respect to such People's stock options. The undersigned Optionee also
acknowledges that, except to the extent specifically modified by this Stock
Option Assumption Agreement, all of the terms and conditions of the Award
Agreement in effect immediately prior to the Effective Time, shall continue in
full force and effect and shall not be otherwise affected by this Stock Option
Assumption Agreement. The undersigned further acknowledges that the People's
stock options described in Exhibit A hereto constitute all of the options or
other rights to purchase People's common stock that the undersigned Optionee
owned immediately prior to the Effective Time of the Merger.

                                    OPTIONEE

                                            ____________________________________
                                            [name]

                                            DATE: ______________________________

                                       3

<PAGE> 5

                                    EXHIBIT A

              OPTIONEE'S OUTSTANDING OPTIONS TO PURCHASE SHARES OF
                     PEOPLE'S BANCSHARES, INC. COMMON STOCK
                                  (PRE-MERGER)

DATE OF OPTION GRANT         NUMBER OF OUTSTANDING      EXERCISE PRICE PER SHARE
                                STOCK OPTIONS

              OPTIONEE'S OUTSTANDING OPTIONS TO PURCHASE SHARES OF
                         FIRSTFED AMERICA BANCORP, INC.
                                  (POST-MERGER)

DATE OF OPTION GRANT         NUMBER OF OUTSTANDING      EXERCISE PRICE PER SHARE
                                 STOCK OPTIONS

                                       4

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