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Form Of Severance Compensation Plan

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PLAN PURPOSE


The purpose of the Bay State Federal Savings Bank Employee Severance Compensation Plan is to assure for Bay State Federal Savings Bank (the "Bank") the services of Employees of the Bank in the event of a Change in Control (capitalized terms are defined in section 2.1) of the Bay State Bancorp, Inc. (the "Holding Company") or the Bank. The benefits contemplated by the Plan recognize the value to the Bank of the services and contributions of the Employees of the Bank and the effect upon the Bank resulting from the uncertainties of continued employment, reduced Employee benefits, management changes and relocations that may arise in the event of a Change in Control of the Bank or the Holding Company. The Bank's and the Holding Company's Boards of Directors believe that it is in the best interests of the Bank and the Holding Company to provide Employees of the Bank who have been with the Bank for a minimum of five years with such benefits in order to defray the costs and changes in Employee status that could follow a Change in Control. The Board of Directors believes that the Plan will also aid the Bank in attracting and retaining highly qualified individuals who are essential to its success and the Plan's assurance of fair treatment of the Bank's Employees will reduce the distractions and other adverse effects on Employees' performance in the event of a Change in Control.


ARTICLE I
ESTABLISHMENT OF PLAN


1.1 Establishment of Plan


As of the Effective Date of the Plan as defined herein, the Bank hereby establishes an employee severance compensation plan to be known as the "Bay State Federal Savings Bank Employee Severance Compensation Plan." The purposes of the Plan are as set forth above.


1.2 Applicability of Plan


The benefits provided by this Plan shall be available to all Employees of the Bank, who, at or after the Effective Date, meet the eligibility requirements of Article III, except for those executive officers who have entered into, or who enter into in the future, and continue to be subject to an employment or change in control agreement with the Employer.


1.3 Contractual Right to Benefits


This Plan establishes and vests in each Participant a contractual right to the benefits to which each Participant is entitled hereunder, enforceable by the Participant against the Employer, Bank, or both. 3
ARTICLE II
DEFINITIONS AND CONSTRUCTION


2.1 Definitions


Whenever used in the Plan, the following terms shall have the meanings set forth below.


(a) "Annual Compensation" of a Participant means and includes all wages, salary, bonus, and cash compensation, if any, paid (including accrued amounts) by an Employer as consideration for the Participant's service during the 12 months ended the date as of which Annual Compensation is to be determined, which are or would be includable in the gross income of the Participant receiving the same for federal income tax purposes.


(b) "Bank" means Bay State Federal Savings Bank or any successor as provided for in Article VII hereof.


(c) "Change in Control" shall mean an event of a nature that: (i) would be required to be reported in response to Item 1(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the "Exchange Act"); or (ii) results in a Change in Control of the Bank or the Holding Company within the meaning of the Change in Bank Control Act and the Rules and Regulations promulgated by the Federal Deposit Insurance Corporation ("FDIC") at 12 C.F.R. Section 303.4(a) with respect to the Bank and the Board of Governors of the Federal Reserve System ("FRB") at 12 C.F.R. Section 225.41(b) with respect to the Holding Company, as in effect on the date hereof; or (iii) results in a transaction requiring prior FRB approval under the Bank Holding Company Act of 1956 and the regulations promulgated thereunder by the FRB at 12 C.F.R. Section 225.11, as in effect on the date hereof except for the Holding Company's acquisition of the Bank; or (iv) without limitation such a Change in Control shall be deemed to have occurred at such time as (A) any "person" (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or the Holding Company representing 20% or more of the Bank's or the Holding Company's outstanding securities except for any securities of the Bank purchased by the Holding Company in connection with the conversion of the Bank to the stock form and any securities purchased by any tax qualified employee benefit plan of the Bank; or (B) individuals who constitute the Board of Directors on the date hereof (the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Holding Company's stockholders was approved by the same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (B), considered as though he were a member of the Incumbent Board; or (C) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Holding Company or similar transaction occurs in which the Bank or Holding Company is not the resulting entity; or (D) solicitations of shareholders of the Holding Company, by someone other than the current management of the Holding Company, seeking stockholder approval of a plan of reorganization, merger or


2 4 consolidation of the Holding Company or Bank or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan or transaction are exchanged for or converted into cash or property or securities not issued by the Bank or the Holding Company shall be distributed; or (E) a tender offer is made for 20% or more of the voting securities of the Bank or the Holding Company.


(d) "Disability" means the permanent and total inability by reason of mental or physical infirmity, or both, of an employee to perform the work customarily assigned to him. Additionally, a medical doctor selected or approved by the Board of Directors must advise the Board that it is either not possible to determine if or when such Disability will terminate or that it appears probable that such Disability will be permanent during the remainder of said employees lifetime.


(e) "Effective Date" means the date the Plan is approved by the Board of Directors of the Bank, or such other date as the Board shall designate in its resolution approving the Plan.


(f) "Employee" means any Employee of the Bank or any subsidiary thereof who has completed at least one year of service with the Bank, or any subsidiary thereof, provided, however, that any Employee who is covered or hereinafter becomes covered by an employment contract or change in control agreement with the Employer shall not be considered to be an Employee for purposes of this Plan.


(g) "Employer" means the Bank or a subsidiary of the Bank or a parent of the Bank which has adopted the Plan pursuant to Article VI hereof.


(h) "ERISA" means Employee Retirement Income Security Act of 1974, as amended.


(i) "Expiration Date" means a date ten (10) years from the Effective Date unless earlier terminated pursuant to Section 8.2 or extended pursuant to Section 8.1.


(j) "Just Cause" shall mean termination because of Participant's personal dishonesty, incompetence, willful misconduct, any breach of fiduciary duty involving personal profit, intentional failure or unjustified neglect to perform stated duties, conviction of or pleading guilty or nolo contendere to any crime or offense punishable as a felony or to any crime or offense involving moral turpitude, or violation of any final cease-and desist order. In determining incompetence, the acts or omissions shall be measured against standards generally prevailing in the savings institutions industry.


(k) "Leave of Absence" and "LOA" mean (i) the taking of an authorized or approved leave of absence under the provisions of the federal Family and Medical Leave Act ("FMLA"), (ii) any state law providing qualitatively similar benefits as the FMLA, or (iii) a leave of absence authorized under the policies of the Bank. "Leave of Absence" and "LOA" are defined in this paragraph for the exclusive purposes of this Plan.


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(l) "Payment" means the payment of severance compensation as provided in Article IV hereof.


(m) "Participant" means an Employee who meets the eligibility requirements of Article III.


(n) "Plan Year" means the period beginning on the Effective Date and ending on _____________ and the 12 consecutive-month period ending each year thereafter.


(o) "Plan" means Richmond County Savings Bank Employee Severance Compensation Plan.


(p) "Year of Service" means each consecutive 12 month period, beginning with an Employee's date of hire and running without a termination of employment in which an Employee is credited with at least one hour of service in each of the 12 calendar months in such period. The taking of a LOA shall not el
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