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                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

     AGREEMENT dated as of May 16, 1991, by and among ANDOVER BANCORP, INC., a
Delaware corporation (the "Company") and its subsidiary, ANDOVER SAVINGS BANK, a
Massachusetts savings bank with its main office in Andover, Massachusetts (the
"Bank") (the Bank and the Company shall be hereinafter sometimes collectively
referred to as the "Employers") and GERALD T. MULLIGAN, currently of West
Roxbury, Massachusetts (the "Executive").

                                   WITNESSETH

     WHEREAS, the parties hereto desire to provide for the Executive's
employment by the Employers;

     NOW THEREFORE, in consideration of the mutual covenants contained herein,
the Employers and the Executive agree as follows:

     1.   EMPLOYMENT. The Employers agree to employ the Executive and the
Executive agrees to continue in the employ of the Employers on the terms and
conditions hereinafter set forth.

     2.   CAPACITY. The Executive shall serve the Company and the Bank as
President and Chief Executive Officer, subject to his election by the respective
Boards of Directors of the Company and the Bank.

     3.   EFFECTIVE DATE AND TERM. The commencement date (the "Commencement
Date") of this Agreement shall be the date first above written. Subject to the
provisions of Section 7, the term of the Executive's employment hereunder shall
be for three years from the Commencement Date; provided, however, that the term
hereof shall automatically extend for periods of one year commencing on the
third anniversary of the Commencement Date and on each subsequent anniversary
date thereafter unless the Company or the Bank, as the case may be, gives
written notice to the Executive at least six months prior to such anniversary
date that such term is not being extended. The last day of such term, as may be
so extended from time to time, is herein sometimes referred to as the
"Expiration Date."

     4.   COMPENSATION AND BENEFITS. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:

          (a)  SALARY. For all services rendered by the Executive under this
     Agreement, the Employers shall pay the Executive a total salary at the rate
     of $190,000 per year.

The Executive's salary shall be payable in periodic installments in accordance
with the Employers' usual practices for their senior executives.


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          (b)  REGULAR BENEFITS. The Executive shall also be entitled to
     participate in any and all bonus incentive plans, stock option plans,
     employee stock ownership plans, employee benefit plans, medical insurance
     plans, life insurance plans, disability income plans, retirement plans, and
     other benefit plans from time to time in effect for senior executives of
     the Employers. Such participation shall be subject to (i) the terms of the
     applicable plan documents and applicable federal and state laws, (ii)
     generally applicable policies of the Employers, and (iii) the discretion of
     the respective Boards of Directors or of the Company and the Bank or any
     administrative or other committee provided for in or contemplated by such
     plan.

          (c)  OTHER BENEFITS. The Employers shall also provide the Executive
     with the use of an American-model automobile having a listed purchase price
     not in excess of $25,000, and payment of the initial registration and
     annual membership fees in the Lanam Club.

          (d)  BUSINESS EXPENSES. The Employers shall reimburse the Executive
     for all reasonable travel and other business expenses incurred by him in
     the performance of his duties and responsibilities, subject to such
     reasonable requirements with respect to substantiation and documentation as
     may be specified by the Employers.

          (e)  VACATION. The Executive shall be entitled to four weeks of
     vacation per year, to be taken at such times and intervals as shall be
     determined by the Executive with the approval of the Employers, which
     approval shall not be unreasonably withheld.

          (f)  STOCK OPTIONS. In addition to the regular stock options
     contemplated by Section 4(b) above, following execution of this agreement,
     and subject to approval by the Board of Directors of the Company, the
     Company shall grant to the Executive stock options evidencing the right to
     purchase 20,000 shares of the Common Stock of the Company at a purchase
     price per share equal to the fair market value of a share of the Company's
     Common Stock as of the grant date, which options shall vest as follows:
     10,000 on May 16, 1991, 5,000 on May 16, 1992, and 5,000 on May 16, 1993.

     5.   EXTENT OF SERVICE. During his employment hereunder, the Executive
shall, subject to the direction and supervision of the respective Boards of
Directors of the Company and the Bank, devote his full business time, best
efforts and business judgment, skill and knowledge to the advancement of the
Employers' interests and to the discharge of his duties and responsibilities
hereunder. He shall not engage in any other business activity, except as any be
approved by their respective Boards of Directors; PROVIDED, HOWEVER, that
nothing herein shall be construed as preventing the Executive from:


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          (a)  investing his assets in a manner not prohibited by Section 9(a)
     hereof, and in such from or manner as shall not require any material
     services on his part in the operations or affairs of the companies or other
     entities in which such investments are made;

          (b)  serving on the board of directors of any company subject to the
     prohibition set forth in Section 9(a) and provided that he shall not be
     required to render any material services with respect to the operations or
     affairs of any such company; or

          (c)  engaging in religious, charitable or other community or
     non-profit activities which do not impair his ability to fulfill his duties
     and responsibilities under this Agreement.

     5.   Relocation and Residence.

          (a)  The Executive agrees to relocate and established his principal
     resident and domicile within the Towns of Andover, North Andover or
     Boxford, Massachusetts on or before September 1, 1991. The Executive
     further agrees to maintain his principal residence and domicile with in the
     Towns of Andover, North Andover or Boxford, Massachusetts for the term of
     this Agreement. The Executive hereby acknowledges that the Employers have
     relied upon the Executive's covenant in this Section 6 in executing this
     Agreement and have conditioned his continued employment with them on the
     Executive's continued compliance with said covenant.

          (b)  The employers shall reimburse the Executive for all reasonable
     moving expenses incurred by the Executive in transporting the personal
     property of the Executive and his family to the Towns of Andover, North
     Andover or Boxford, Massachusetts, subject to such reasonable and
     documentation as may be specified by the Employers. In the event that such
     moving expenses are deemed not deductible by the Executive for federal
     income tax purposes, the Employers shall pay the Executive an additional
     sum sufficient to cover the Executive" federal income taxes on any such
     taxable moving expenses.

          (c)  Upon written request by the Executive given at any time during
     the six months following the execution of this Agreement, the Employers
     shall purchase the Executive's present residence located within West
     Roxbury, Massachusetts (the "Residence") in accordance with the terms and
     conditions set forth below. Following receipt by the Employers of written
     notice from the Executive requesting their purchase of the residence, the
     executive and the Employers shall each select a professional real estate
     appraiser who shall render an opinion as to the fair market value of the
     Residence. If the lower of the two appraised values is more than or equal
     to 90% of the higher


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     appraised value, the Employers shall purchase the Residence from the
     Executive at a purchase price equal to one-half of the sum of the two
     appraised values. If the lower of the two appraised values is less than 90%
     of the higher appraised value, the Executive and the Employers (or the two
     appraisers, if the Executive and the Employers cannot agree) shall select a
     third professional appraiser who shall render an opinion as to the fair
     market value of the Residence. Thereupon, the Employers shall purchase the
     Residence from the Executive at a purchase price equal to one-third of the
     sum of the three appraised values. The reasonable fees and disbursements of
     the appraisers shall be borne by the Employers.

     7.   TERMINATION AND TERMINATION BENEFITS.

     Notwithstanding the provisions of Section 3, the Executive's employment
hereunder shall terminate under the following circumstances:

          (a)  DEATH. In the event of the Executive's death during the
     Executive's employment hereunder, the Executive's employment shall
     terminate on the date of his death; provided, however, that the Executive's
     beneficiary or estate, as the case may be, shall be entitled to any unpaid
     amounts of compensation accrued to the date of death, plus the following
     benefits:

               (i)  For a period of six months subsequent to the date of the
               Executive's death, the Employers shall continue to pay an amount
               equal to the Executive's salary to the Executive's beneficiary
               designated in writing to the Employers prior to his death (or to
               his estate, if he fails to make such designation) at the salary
               rate in effect on the date of his death (unless an increased rate
               shall previously have been authorized to take effect as of a
               later date, in which case such increased rate shall apply), said
               payments to be made on the same periodic dates as salary payments
               would have been made to the Executive had he not died.

               (ii) For a period of six months subsequent to the date of the
               Executive's death, the Executive's beneficiary designated in
               writing to the Employers prior to his death (or to his estate, if
               he fails to make such designation) shall continue to receive all
               benefits described in Section 4(b) above existing on the date of
               death (except for any cash bonus plans which shall be pro-rated
               through the date of death). For purposes of application of such
               benefits, the Executive shall be treated as if he had remained in
               the employ of the Employers, with an annual total salary at the
               rate in effect on the date of death (unless an increased rate
               shall previously have been authorized to take effect as of a
               later date, in which case such increased rate shall


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               apply), and service credits will continue to accrue during such
               period as if the Executive has remained in the employ of the
               Employers.
               (iii) If, in spite of the provisions of Section 7(a)(ii) above,
               benefits or service credits under any benefit plan shall not be
               payable or accrued under any such plan to the Executive, or to
               the Executive's beneficiary or estate, because the Executive is
               no longer deemed to be an employee of the employers, the
               Employers themselves shall pay or provide for payment of such
               benefits (calculated as if all such service credits had been
               accrued) to or for the benefit of the Executive, or to the
               Executive's beneficiary or estate.

          (b)  TERMINATION BY THE EMPLOYERS FOR CAUSE. The Executive's
     employment hereunder may be terminated without further liability on the
     part of the Employers effective immediately by a resolution of the Board of
     Directors of the Company or the Bank, as the case may be, for cause by
     written notice to the Executive setting forth in reasonable detail the
     nature of such cause. Only the following shall constitute "cause" for such
     termination:

               (i)  Deliberate dishonesty of the Executive with respect to the
               Employers or any subsidiary or affiliate thereof.

               (ii) Conviction of the Executive of a crime involving moral
               turpitude.

Gross and willful failure to perform a substantial portion of his duties and
responsibilities hereunder.

          (a)  TERMINATION BY THE EXECUTIVE. The Executive's employment
     hereunder may be terminated effective immediately by the Executive by
     written notice to the Board immediately by the Executive by written notice
     to the Board of Directors of the Company or the Bank, as the case may be,
     in the event of material breach by either of the Employers of this
     Agreement. From and after the effective date of any termination by the
     Executive of his employment hereunder, in the absence of such a breach by
     the Company or the Bank, as the case may be, the Employers will have no
     further liability to the Executive for salary or other compensation or
     benefits, except as provided pursuant to compensation or benefits, except
     as provided pursuant to any other agreement to which the Executive and the
     Employers are parties or any compensation or benefit plan of the Employers
     in which the Executive is a participant.

          (b)  TERMINATION BY THE EMPLOYERS WITHOUT CAUSE. The Executive's
     employment with the Company or the Bank, as the case may be, may be
     terminated without cause by a resolution of the


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     Board of Directors of the Company or the Bank, respectively, on written
     notice to the Executive.

          (c)  CERTAIN TERMINATION BENEFITS. In the event of termination
     pursuant to the first sentence of Section 7(c) or pursuant to Section 7(d),
     the Executive shall be entitled to the following benefits:

               (i)  For the period subsequent to the date of termination until
               the Expiration Date, the Employers shall continue to pay the
               Executive a total salary at the rate in effect on the date of
               termination (unless an increased rate shall previously have been
               authorized to take effect as of a later date, in which case such
               increased rate shall apply).
               (ii) For the period subsequent to the date of termination until
               the Expiration Date, the Executive shall continue to receive all
               benefits described in Section 4(b) above existing on the date of
               termination (except for any cash bonus plans, which shall be
               pro-rated through the date of termination). For purposes of
               application of such benefits, the Executive shall be treated as
               if he had remained in the employ of the employers, with an annual
               total salary at the rate in effect on the date of termination
               (unless an increased rate shall previously have been authorized
               to take effect as of a later date, in which case such increased
               rate shall apply) and service credits will continue to accrue
               during such period as if the Executive had remained in the employ
               of the Employers.
               (iii) If, in spite of the provisions of Section 7(e)(ii) above,
               benefits or service credits under any benefit plan shall not be
               payable or accrued under any such plan to the Executive, or to
               the Executive's dependents, beneficiaries or estate, because the
               Executive is no longer deemed to be an employee of the Employers,
               the Employers themselves shall pay or provide for payment of such
               benefits (calculated as if all such service credits had been
               accrued) to or for the benefit of the Executive or the
               Executive's dependents, beneficiaries or estate.

               (a)  SET-OFF. The Employers shall be entitled to set off against
          any cash compensation to be provided to the Executive under Section
          7(e)(i) above, one-half of the amount of any cash compensation
          received by the Executive from other employment during the period in
          which the Executive receives cash compensation under Section 7(e)(i).
          The Executive shall inform the Employers of any such amounts of cash
          compensation and shall refund to the Employers any amounts which the
          Employers have paid which exceed the amounts due from the employers
          after application of the set-off provided for in this paragraph.
          Notwithstanding the foregoing and any other provision of this
          Agreement, the Executive shall be under no obligation to seek or
          accept any employment after termination of employment with the
          Employers for any reason.


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     8.   DISABILITY. If, due to physical or mental illness, the Executive shall
be disabled so as to be unable to perform substantially all of his duties and
responsibilities hereunder, the Board of Directors of the Company or the Bank,
as the case may be, may designate another executive to act in his place during
the period of such disability. Notwithstanding any such designation, the
Executive shall continue to receive his full salary and benefits under Section 4
of this Agreement until he becomes eligible for disability income under the
employers' disability income plan. While receiving disability income payments
under such plan, the Executive shall not receive any salary under Section 4(a),
but shall continue to participate in the Employers' benefit plans and to receive
other benefits as specified in Section 4 until the Expiration Date. In the
absence of a disability income plan at the time of such disability, the
Employers shall pay the Executive benefits equal to those the Executive would
have received if the Employers' current disability income plan were in effect at
such time. If any question shall arise as to whether during any period the
Executive was disabled so as to be unable to perform substantially all of his
duties and responsibilities and at the request of the Employers will, submit to
the Employers a certification in reasonable detail by a physician selected by
the Executive or his guardian to whom the employers have no reasonable objection
as to whether the Executive was so disabled and such certification shall for the
purposes of this Agreement be conclusive of the issue. If such question shall
arise and the Executive shall fail to submit such certification, the Employer's
determination of such issue shall be binding on the Executive.

     9.   NONCOMPETITION AND CONFIDENTIAL INFORMATION.

          (a)  NONCOMPETITION. During the term of the Executive's employment
     hereunder, and either (i) a period of one year following the date of
     termination of the Executive's employment with either the Company or the
     Bank by the Executive or by either of the Employers for cause pursuant to
     Section 7(b) hereof, or (ii) the period during which the Employers continue
     to provide benefits to the Executive pursuant to Sections 7(e)(i) - (iii)
     hereof in the event of termination pursuant to the first sentence of
     Section 7(c) or pursuant to Section 7(d), the Executive shall not directly
     or indirectly, whether as owner, partner, shareholder (other than as the
     owner of less than 2% of the outstanding capital stock of a publicly-traded
     corporation), consultant, agent, employee, co-venturer or otherwise, of or
     through any Person (as defined in Section 11) having its main office in the
     Employers' market area (defined as the Massachusetts municipalities of
     Andover, North Andover, Lawrence, Methuen and Tewksbury) compete in said
     market area with the banking or any other business conducted by either of
     the Employers during the period of his employment hereunder, nor will he
     attempt to hire any employee of either of the Employers, assist in such
     hiring by any other Person, encourage any such


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     employee to terminate his or her relationship with either of the Employers,
     or solicit or encourage any customer of either of the Employers to
     terminate its relationship with such Employer or to conduct with any other
     Person any business or activity which such customer conducts or could
     conduct with such Employer.

          (b)  CONFIDENTIAL INFORMATION. The Executive will not disclose to any
     other Person (except as required by applicable law or in connection with
     the performance of his duties and responsibilities hereunder), or use for
     his own benefit or gain, any confidential information of either of the
     Employers obtained by him incident to his employment with the Employers.
     The term "confidential information" includes, without limitation, financial
     information, business plans, prospects and opportunities (such as lending
     relationships, financial product developments, or facilities) which have
     been discussed or considered by the management of the Employers but does
     not include any information which has become part of the public domain by
     means other than the Executive's non-observance of his obligations
     hereunder. Notwithstanding anything to the contrary herein, this provision
     shall survive any termination of this Agreement.

          (c)  RELIEF; INTERPRETATION. The Executive agrees that the Employers
     shall be entitled to injunctive relief for any breach by him of the
     covenants contained in Sections 9(a) or 9(b). In the event that any
     provision of this Section 9 shall be determined by any court of competent
     jurisdiction to be unenforceable by reason of its being extended over too
     great a period of time, too large a geographic area, or too great a range
     of activities, it shall be interpreted to extend only over the maximum
     period of time, geographic area, or range of activities as to which it may
     be enforceable. For purposes of this Section 9, the term "Employers" shall
     mean the Company, the Bank and any of their respective subsidiaries or
     affiliates.

     10.  CONFLICTING AGREEMENTS. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of hi obligations
hereunder will not breach or be in conflict with any other agreement to which he
is a party or is bound, and that he is not now subject to any covenants against
competition or similar convenants which would affect the performance of his
obligations hereunder.

     11.  DEFINITION OF "PERSON". For purposes of this Agreement, the term
"Person" shall mean an individual, a corporation, an association, a partnership,
an estate, a trust and any other entity or organization.

     12.  WITHHOLDING. All payments made by the Employers under this Agreement
shall be net of any tax or other amounts required to be withheld by the
Employers under applicable law.


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     13.  Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof shall be settled by arbitration
in accordance with the laws of the Commonwealth of Massachusetts by three
arbitrators, one of whom shall be appointed by the Employers, one by the
Executive and the third by the first two arbitrators. If the first two
arbitrators cannot agree on the appointment of a third arbitrator, then the
third arbitrator shall be appointed by the American Arbitration Association in
the City of Boston. Such arbitration shall be conducted in the City of Boston in
accordance with the rules of the American Arbitration Association, except with
respect to the selection of arbitrators which shall be as provided in this
Section 13. Judgment upon the award rendered by the arbitrators may be entered
in any court having jurisdiction thereof. In the event that it shall be
necessary or desirable for the Executive to retain legal counsel and/or incur
other costs and expenses in connection with the enforcement of any or all of the
Executive's rights under this Agreement, the Employers shall pay (or the
Executive shall be entitled to recover from the Employers, as the case may be)
the Executive's reasonable attorneys' fees and other reasonable costa and
expenses in connection the enforcement of said rights (including the enforcement
of any arbitration award in court) regardless of the final outcome, unless and
to the extent the arbitrators shall determine that under the circumstances
recovery by the Executive of all or a part of any such fees and costs and
expenses would be unjust.

     14.  Assignment; Successors and Assigns, etc. Neither the Employers nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employers may assign its rights under this
Agreement without the consent of the Executive in the event either of the
Employers shall hereafter effect a reorganization, consolidate with or merge
into any other Person, or transfer all or substantially all of its properties or
assets to any other Person. This Agreement shall inure to the benefit of and be
binding upon the Employers and the Executive, their respective successors,
executors, administrators, heirs and permitted assigns. In the event of the
Executive's death prior to the completion by the employers of all payments due
him under this Agreement, the Employers shall continue such payments to the
Executive's beneficiary designated in writing to the Employers prior to his
death (or to his estate, if he fails to make such designation).

     15.  Enforceability. If any portion or provision of this Agreement shall to
any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.


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     16.  ALLOCATION OF OBLIGATIONS BETWEEN EMPLOYERS. The obligations of the
Employers under this Agreement are intended to be the joint and several
obligations of the Bank and the Company and the Employers shall, as between
themselves, allocate these obligations in a manner agreed upon by them.

     17.  WAIVER. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

     18.  NOTICES. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage prepaid, to the
Executive at the last address the Executive has filed in writing with the
Employers or, in the case of the Bank, at its main offices, attention of the
Clerk or, in the case of the Company, at its main office, attention of the
Secretary.

     19.  AMENDMENT. This Agreement may be amended or modified only be a written
instrument signed by the Executive and by a duly authorized representative of
each of the Employers.

     20.  GOVERNING LAW. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts.

     IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Executive and by the Employers, by its duly authorized officer, as of the
date first above written.


                                                  /s/Gerald T. Mulligan
                                                  ---------------------
                                                  GERALD T. MULLIGAN


                                                  ANDOVER SAVINGS BANK


                                                  /s/Robert M. Henderson
                                                  ----------------------
                                                  Title: Chairman


                                                  ANDOVER BANCORP, INC.


                                                  /s/ Robert M. Henderson
                                                  -----------------------
                                                  Title: Chairman