<PAGE>
 
                                WEST ESSEX BANK
                        EMPLOYEE STOCK OWNERSHIP TRUST
                          LOAN AND SECURITY AGREEMENT



West Essex Bancorp, Inc.                                        October 1, 1998
417 Bloomfield Avenue
Caldwell, New Jersey 07006-4980


Gentlemen:

     The undersigned, Marine Midland Bank ("Trustee"), not individually but
solely as Trustee under the West Essex Bank Employee Stock Ownership Plan Trust
(the "Trust") effective September 10, 1998 ("Borrower"), applies to you, West
Essex Bancorp, Inc., (hereinafter referred to as the "Lender"), for your
commitment, subject to all terms and conditions hereof and on the basis of the
representations hereinafter set forth, to make a loan available to the Borrower
as hereinafter set forth.  The term "Bank" as used herein refers to West Essex
Bank, the sponsoring employer of the West Essex Bank Employee Stock Ownership
Plan (the "ESOP").

SECTION ONE.  THE TERM LOAN.

     1.1  Amount and Terms.  Subject to and upon the terms and conditions herein
          ----------------                                                      
set forth, the Lender agrees to lend amounts to the Borrower, (the "Loan"), from
time to time during the period of this agreement up to but not including the
maturity date of December 31, 2007 an aggregate principal amount ("Loan Amount")
sufficient to permit the Borrower to acquire a number of shares ("Shares") of
common stock, par value $0.01 ("Common Stock") of West Essex Bancorp, Inc., a
federally-chartered corporation and the stock holding company of the Bank, equal
to 8% of the minority interest Shares issued in connection with the
reorganization and offering of the Bank from a federally-chartered mutual
savings bank to a federally-chartered stock savings bank in the mutual holding
company form of organization (the "Reorganization"), including the shares issued
to the West Essex Bancorp Charitable Foundation, a charitable foundation being
established in connection with the Reorganization.

     The Loan is intended to be an "exempt loan" as described in Section
4975(d)(3) of the Internal Revenue Code of 1986, as amended (the "Code"), as
defined in Section 54.4975-7(b) of the Treasury Regulations (the "Regulations"),
as described in Section 408(b)(3) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA") and as described in Department of Labor
Regulations Section 2550.408b-3 (collectively, the "Exempt Loan Rules").
<PAGE>
 
     1.2  The Note.  The disbursement of the Loan pursuant to Section 1.1 hereof
          --------                                                              
shall be made against and evidenced by a promissory note of the Borrower in the
form annexed hereto as Exhibit A (the "Note"), such Note is to bear interest as
hereinafter provided, and to mature in ten (10) equal annual installments
consisting of both principal and interest amortized over a ten (10) year period
in an amount sufficient to repay all borrowed amounts plus interest, commencing
on December 31, 1998 and on the last day of each and every December each year
thereafter, except that the final installment in the amount of all principal and
interest not sooner paid shall be due on December 31, 2007, the final maturity
thereof.

     Without regard to the principal amount of the Note stated on its face, the
actual principal amount at any time outstanding and owed by the Borrower on
account of the Note shall be the amount of the disbursement of the Loan made by
the Lender under Section 1.1 hereof less all payments of principal actually
received by the Lender. The amount of such disbursement made by the Lender and
any repayments of principal thereof shall be recorded by the Lender on its books
or records or, at its option, endorsed on the reverse side of the Note by the
Lender and the unpaid principal balance at any time so recorded or endorsed by
the Lender shall be prima facie evidence in any court or other proceedings
brought to enforce the Note of the principal amount remaining unpaid thereon.

     1.3  Exempt Loan Rules. Notwithstanding anything to the contrary contained
          ------------------                                                   
in this Loan and Security Agreement (the "Agreement") or in the Note, the
Borrower shall be obligated to make repayments of the Loan only to the extent
that such repayments when added to the repayments theretofore made during the
applicable plan year would not exceed an amount which would cause the
limitations of Section 415 of the Code to be exceeded for any ESOP participant.

     Except as set forth in the next succeeding sentence and to the extent
permitted by applicable law, including, without limitation, the Exempt Loan
Rules, the principal amount of the Loan and any interest thereon shall be
payable solely from contributions (other than contributions of employer
securities) made to the Trust in accordance with the ESOP, and cash dividends
received on the Shares, to enable the Borrower to pay its obligations under the
Loan and from earnings attributable to the Shares and the investment of such
contributions and dividends.

     The Lender acknowledges and agrees that it shall have no other recourse
against the Borrower for repayment of the Loan and that it shall have no
recourse against assets of the ESOP included in the Trust other than pursuant to
Sections 3 and 8 hereof.

SECTION TWO.  INTEREST AND FEES.

     2.1  Interest Rate.  The Loan shall bear interest (which the Borrower
          -------------                                                   
hereby promises to pay) prior to maturity (whether by lapse of time,
acceleration or otherwise) at a rate per annum equal at all times to the
"Interest Rate," defined for purposes of this Agreement to mean the lowest prime
rate reported in the Wall Street Journal on the date of the Reorganization.

                                       2
<PAGE>
 
     2.2  Basis and Payment Dates.  All interest accruing on the Note prior to
          -----------------------                                             
maturity shall be due and payable on a annual basis on the last day of each year
(commencing December 31, 1998) and at maturity (unless prepaid in whole prior to
such date, then on the date of such prepayment in whole) and interest accruing
after maturity shall be due and payable upon demand. All interest on the Note
shall be computed on the basis of a year of 360 days.

SECTION THREE.  COLLATERAL.

     3.1  Grant of Security Interest-Pledged Shares.  The Borrower hereby
          -----------------------------------------                      
grants, pledges and assigns to the Lender all Shares of the issued and
outstanding common stock, par value $.01 per share all of which were either (i)
purchased by the Borrower from the proceeds of the disbursement of the Loan;
(ii) acquired by the Borrower with the proceeds of a prior exempt loan within
the meaning of Section 54.4975-7(b) of the Regulations, and pledged as
collateral for such prior exempt loan, where the balance of such prior exempt
loan has been repaid with the proceeds of the disbursement of the Loan (the
"Pledged Shares" being hereinafter referred to as the "Collateral"). The Pledged
Shares shall be evidenced by a stock certificate. The assignment and pledge
herein granted and provided for is made and given to secure and shall secure the
prompt payment of principal of and interest on the Note as and when the same
becomes due and payable and the payment, observance and performance of any and
all obligations and liabilities arising under or provided for in this Agreement
or the Note or any of them in each instance as the same may be amended or
modified and whether now existing or hereafter arising.

     3.2  Further Assurances.  The Borrower covenants and agrees that it will at
          ------------------                                                    
any time and from time to time as requested by the Lender execute and deliver
such further instruments and perform such other acts as the Lender may
reasonably deem necessary or desirable to provide for or perfect the lien of the
Lender in the Collateral hereunder.

     3.3  Voting.  Upon the occurrence of a Default, as defined in Section 9
          ------                                                            
hereunder, the Lender shall have the right to transfer the Collateral or any
part thereof into its name or into the name of its nominee. The Lender shall not
be entitled to vote the Pledged Shares unless and until a Default has occurred
and so long as the same shall not have been waived by the Lender.

     3.4  Partial Releases.  The Lender agrees, provided always that no Default
          ----------------                                                     
shall have occurred and be continuing, as promptly as is practicable after
December 31 in each year (the period commencing the date hereof and ending
December 31 and each subsequent 12-month period ending on December 31 being
hereinafter referred to as a "Plan Year"), to release that number of Pledged
Shares then being held to secure the Loan which is equal to the number of such
Pledged Shares held as of the last day of the Plan Year multiplied by a
fraction, the numerator of which is the aggregate amount of all principal and
interest payments made on the Note during the Plan Year and the denominator of
which is the sum of the numerator plus the unpaid principal and interest of the
Note as of the last day of such Plan Year.

                                       3
<PAGE>
 
SECTION FOUR.  PAYMENTS.

     4.1  Place and Application.  All payments of principal, interest, fees and
          ---------------------                                                
all other amounts payable hereunder shall be made to the Lender at 417
Bloomfield Avenue, Caldwell, New Jersey 07006-4980, for the account of the
Lender (or at such other place for the account of the Lender as the Lender may
from time to time in writing specify to the Borrower) in immediately available
and freely transferable funds. All payments shall be paid in full without setoff
or counterclaim and without reduction for and free from any and all taxes,
levies, duties, fees, charges, deductions, withholdings, restrictions or
conditions of any nature imposed by any government or any political subdivision
or taxing authority thereof.

     4.2  Prepayments.  The Borrower shall have the privilege of prepaying in
          -----------                                                        
whole or in part the Note at any time upon giving three (3) Business Days' prior
notice to the Lender, each such prepayment to be made by the payment of the
principal amount to be prepaid and accrued interest thereon to the date fixed
for prepayment. The term "Business Day" shall mean any day on which savings
institutions are generally open for business in New Jersey, other than Saturday
and Sunday. All such prepayments shall be made without premium or penalty.
Prepayments shall first be applied to the several installments of the Note in
the inverse order of their respective maturities.

SECTION FIVE.  REPRESENTATIONS AND WARRANTIES.

     The Borrower represents and warrants, to the best of its knowledge, to the
Lender as follows:

     5.1  The Trust is a duly organized, validly existing employee stock
ownership trust.

     5.2  The proceeds of the disbursement of the Loan shall be applied in their
entirety to the payment of the purchase price for the Pledged Shares.

     5.3  The Borrower has full right, power and authority to enter into this
Agreement, to make the borrowings hereunder provided for, to issue the Note in
evidence thereof and to perform each and all of the matters and things herein
and therein provided for and this Agreement does not, and the Note when issued
will not, nor will the performance or observance by the Borrower of any of the
matters or things herein or therein provided, contravene any provision of law or
the Trust or any other covenant or agreement affecting the Trust or any of its
assets. As of the date of the disbursement of the Loan, the Pledged Shares will
be fully paid and non-assessable and the Pledged Shares will be owned by the
Borrower free and clear of all liens, charges and encumbrances whatsoever,
except for any lien of Lender provided for herein.

     5.4  Except as disclosed to the Lender in writing, there is no litigation
or governmental proceeding pending, nor to the knowledge of the Borrower
threatened, against the ESOP and Trust.

     5.5  The ESOP and Trust have no material liabilities, whether absolute or
contingent, except for those heretofore disclosed to the Lender.

                                       4
<PAGE>
 
SECTION SIX.  REPRESENTATIONS AND WARRANTIES OF THE LENDER

     The Lender represents and warrants that:

     6.1  The Lender is a corporation duly organized under the laws of the
United States, and is validly existing and not in violation of its federal
charter and bylaws issued under the laws of the United States. The Lender has
full power and authority and legal right to make and perform this Agreement.

     6.2  The execution, delivery and performance by the Lender of this
Agreement have been duly authorized by all necessary action by the Lender and is
not and will not violate any provisions of law applicable to the Lender, any
rules, regulations or orders applicable to the Lender or any judgments or
decrees binding upon the Lender. This Agreement is a valid and legally binding
obligation of the Lender enforceable against the Lender in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and similar laws affecting credits' rights generally
and the general principles of equity (regardless of whether considered in a
proceeding at law or in equity).

     6.3  No authorizations, approvals or consents of, and no filings or
registrations with, any governmental regulatory authority or agency are required
for the execution, delivery or performance by the Lender of this Agreement, or
any transaction contemplated hereby, or for the validity or enforceability
against the Lender hereof except as have already been received or accomplished.

     6.4  The execution, delivery and performance of the Agreement and the
consummation of the transactions contemplated hereby will not violate, conflict
with or constitute a default under (i) any of the provisions of the Lender's
Federal Charter or Bylaws, (ii) any provision of any agreement, instrument,
order, arbitration award, judgment or decree to which the Lender is a party or
by which it is or its assets are bound or (iii) any statute, rule or regulation
of any federal, state or local government or agency applicable to the Lender,
except in any such case (i), (ii), (iii) above, for any such conflicts,
violations, defaults which either individually or in the aggregate do not have a
material adverse effect on the business properties of the Lender and its
subsidiaries, taken as a whole.

     6.5  The Bank has taken such actions as are required by applicable law to
be taken by it to establish the ESOP and the Trust.

     6.6  There is no action, suit, investigation or proceeding pending, or to
the best knowledge of the Bank, threatened against or affecting the ESOP before
any court or governmental department, agency or instrumentality.

     6.7  The Loan will be an "exempt loan" as that term is defined under
Section 54.4975-7(b)(1)(iii) of the Regulations, provided the ESOP Committee
determines that the interest rate is not more than reasonable; and the
transactions contemplated by this Agreement which are 

                                       5
<PAGE>
 
"prohibited transactions" within the meaning of Section 4975 of the Code or
Section 406(a) of ERISA are subject to exemption pursuant to Section 4975(d)(3)
of the Code and Section 408 of ERISA.

     6.8  Except as otherwise provided in this Agreement, the Shares are not
subject to any restriction on transfer under applicable Federal securities law
and may be freely traded over-the-counter.

     6.9  The Bank shall apply for  a determination letter from the Internal
Revenue Service that the Plan and the Trust, taken together, qualify as an
employee stock ownership plan for purposes of Section 4975(e)(7) of the Code and
the rules and regulations thereunder.

     6.10 The Bank or its affiliates shall make contributions to the ESOP
sufficient to enable the Trustee to make payments on the Loan as required in
accordance with its terms.

SECTION SEVEN.  CONDITIONS PRECEDENT.

     The obligation of the Lender to make the Loan shall be subject to
satisfaction of the following conditions precedent:

     7.1  The Lender shall have received executed originals of this Agreement
and the Note duly signed and properly completed.

     7.2  The Lender shall have received either (i) the certificate evidencing
all the Pledged Shares together with duly executed blank stock power therefore
or (ii) if such Pledged Shares are not yet available, a duly executed agreement
to pledge such stock in the form attached hereto as Exhibit B (in which event
such certificate and stock power will be delivered within 6 days of the date of
the Lender makes the Loan).

     7.3  The Lender shall have received copies (executed or certified, as may
be appropriate) of all legal documents or proceedings taken in connection with
the execution and delivery of this Agreement and the Note.

SECTION EIGHT.  COVENANTS.
 
     Borrower covenants and agrees that so long as any amount remains unpaid on
the Note or the Commitment is outstanding, except to the extent compliance in
any case or cases is waived in writing by the Lender:

     8.1  Compliance.  The Borrower will comply with all requirements of the
          ----------                                                        
Code, ERISA and any other law, rule or regulation applicable to it as such laws,
rules or regulations affect the ESOP or the Trust.

                                       6
<PAGE>
 
     8.2  Reports.
          ------- 

          (a)  The Borrower will maintain a system of accounting for  the ESOP
     and the Trust in accordance with sound accounting practice and will, from
     time to time, furnish to the Lender and its duly authorized
     representatives, such information and data with respect to the financial
     condition of the ESOP and the Trust as the Lender may reasonably request.

          (b)  Without any request the Borrower will furnish to the Lender
     promptly after knowledge thereof shall have come to the attention of the
     Borrower, written notice of the occurrence of any Default hereunder or of
     any threatened or pending litigation or governmental proceeding against the
     Plan or the Trust.

 

SECTION NINE.  DEFAULT AND REMEDIES.

     9.1  Default.  Any one or more of the following events shall constitute a
          --------                                                            
Default hereunder:

          (a) As of the date when due, the Borrower fails to make payment of
     principal and/or interest with respect to the Note or any other amounts
     payable under this Agreement within five (5) business days of the date when
     due;

          (b) As of the date proven false, the Borrower makes any
     representation, warranty or statement herein or in connection with the
     making of the Loan which proves to be incorrect in any material respect;

          (c) As of the date the Borrower fails to perform or observe any term,
     covenant or agreement (other than those referred to in subparts (a) and
     (b), inclusive, of this Section 9.1) contained in this Agreement and such
     failure continues unremedied for a period of 30 days after notice to the
     Borrower by the Lender or any other holder of the Note;

          (d) As of the date of termination of the ESOP if such termination is
     prior to the expiration of the term of this Agreement.

     9.2  Limitations on Use of Trust Assets.  When any Default described in
          -----------------------------------                               
subsections (a) to (c), of Section 9.1 has occurred and is continuing, the
Lender or the holder of the Note shall have no rights to assets of the Trust
other than (i) contributions (other than contributions of employer securities)
that are made by the Lender to enable the Borrower to meet its obligations
pursuant to the Loan, cash dividends received by the Borrower on the Pledged
Shares and earnings attributable to the investment of such contributions and
dividends and (ii) the Pledged Shares; provided further, however, that the value
of Trust assets transferred to the Lender as a result of a Default shall not
exceed the amount of the repayment then in default, and, provided further, that
so long as the Lender is a "party in interest" within the meaning of ERISA
Section 3(14) or a "disqualified person" within 

                                       7
<PAGE>
 
the meaning of Section 4975(e)(2) of the Code, a transfer of Trust assets upon
Default shall be made only if, and to the extent of, the Borrower's failure to
meet the loan's payment schedule.

     9.3  Rights Upon Default.  When any Default has occurred and is continuing
          --------------------                                                 
the Lender may, in addition to such other rights or remedies as it may have,
then or at any time or times thereafter exercise with respect to the Collateral
any and all of the rights, options and remedies of a secured party under the
Uniform Commercial Code of New Jersey (the "UCC") including without limitation
the sale of all or any part of the Collateral at any brokers' board or any
public or private sale, provided, however that the Lender shall only be able to
exercise such rights and remedies to the extent of all interest and principal
payments which are due and payable as of the date of the Default and provided
further that prior to such exercise the Lender shall release from the Collateral
so much thereof as it would have been required to release under Section 3.4
hereof if the period from the previous December 31 to the date of such release
constituted a Plan Year and no Default had occurred. The net proceeds of any
such sale, after deducting all costs and expenses incurred in the collection,
protection, sale and delivery of the Collateral (which expenses Borrower
promises to pay) shall be applied first to the payment of any costs and expenses
incurred by the Lender in selling or otherwise disposing of the Collateral,
second, to the payment of the principal of and the interest on the Note, and,
third, ratably as among any other items of the indebtedness hereby secured. Any
surplus remaining after the full payment and satisfaction of the foregoing shall
be returned to the Borrower or to whomsoever a court of competent jurisdiction
shall determine to be entitled thereto. Any requirement of said UCC as to
reasonable notice shall be met by the Lender personally delivering or mailing
notice (by certified mail - return receipt requested) to the Borrower at its
address as provided in Section 10.6 hereof at least ten (10) days prior to the
event giving rise to the requirement of such notice. In connection with any
offer, solicitation or sale of the Collateral, the Lender may restrict bidders
and otherwise proceed in whatever manner it reasonably believes appropriate in
order to comply or assure compliance with applicable legal requirements
pertaining to the offer and sale of securities of the same type as the
Collateral.

     9.4  ERISA Restrictions.  The number of Pledged Shares as to which the
          -------------------                                              
Lender may exercise the rights set forth in this Section 9 may not exceed that
number of shares (then remaining subject to pledge hereunder) which is then
equal in current value to the amount in default under the Note. The remedies set
forth in this Section 9 may only be exercised to the extent consistent with the
restrictions on remedies set forth in Section 408(b)(3) of ERISA and the
regulations thereunder and Section 4975(d)(3) of the Code and the regulations
thereunder.

SECTION TEN.  MISCELLANEOUS.

     10.1 Holidays.  If any principal of the Note shall fall due on Saturday,
          --------                                                           
Sunday or on another day which is a legal holiday for savings institutions in
the State of New Jersey interest at the rate the Note bears for the period prior
to maturity shall continue to accrue on such principal from the stated due date
thereof to and including the next succeeding Business Day on which the same is
payable.

                                       8
<PAGE>
 
     10.2  No Waiver, Cumulative Remedies.  No delay or failure on the part of
           ------------------------------                                     
the Lender or the part of the holder of the Note in the exercise of any power or
right shall preclude any other or further exercise thereof, or the exercise of
any other power or right, and the rights and remedies hereunder of the Lender
and of any holder of the Note are cumulative to, and not exclusive of, any
rights or remedies which any of them would otherwise have.

     10.3  Amendments, Etc.  No amendment, modification, termination or waiver 
           ----------------     
any provision of this Agreement or of the Note nor consent to any departure by
the Borrower therefrom, shall in any event be effective unless the same shall be
in writing and signed by the Lender, and then such consent, modification or
waiver shall be effective only in the specific instance and for the specific
purpose for which given. No notice to or demand on the Borrower in any case
shall entitle the Borrower to any other further notice or demand in similar or
other circumstances.

     10.4  Survival of Representations.  All representations and warranties
           ---------------------------                                     
made herein or in certificates given in connection with the Loan shall survive
the execution and delivery of this Agreement and of the Note, and shall continue
in full force and effect with respect to the date as of which they were made as
long as any credit is in use or available hereunder.

     10.5  Payments.  So long as the Lender is the holder of the Note, the
           --------                                                       
Borrower will promptly and punctually pay the principal of and interest on the
Note without presentment of the Note.

     10.6  Addresses for Notices.  All communications provided for herein shall
           ---------------------                                               
be in writing and shall be deemed to have been given or made when served
personally or when deposited in the United States mail addressed, if to the
Borrower at Marine Midland Bank, 140 Broadway, 11th Floor, New York, New York
10005, Attention: Richard A. Glover, Vice President with copy to Helm, Shapiro,
Anito & McCale, P.C., 20 Corporate Woods Boulevard, Albany, New York 12211,
Attention: Brian P. Goldstein, Esq.; if to the Lender at 417 Bloomfield Avenue,
Caldwell, New Jersey 07006-4980, Attention: Leopold Montanaro with copy to
Muldoon, Murphy & Faucette, 5101 Wisconsin Avenue, N.W., Washington, D.C. 20016,
Attention: Thomas P. Hutton; or at such other address as shall be designated by
any party hereto in a written notice to each other party pursuant to this
Section 10.6.

     10.7  Headings. Article and Section headings used in this Agreement are for
           --------   
convenience of reference only and are not a part of this Agreement for any other
purpose.

     10.8  Severability of Provisions.  Any provision of this Agreement which is
           --------------------------                                           
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such unenforceability without impairing the enforceability of
the remaining provisions hereof affecting the enforceability of such provision
in any other jurisdiction.

     10.9  Counterparts.  This Agreement may be executed in any number of
           ------------                                                  
counterparts, and by different parties hereto on separate counterparts, and all
such counterparts taken together shall be deemed to constitute one and the same
instrument.

                                       9
<PAGE>
 
     10.10  Binding Nature, Governing Law, Etc.  This Agreement shall be
            -----------------------------------                         
binding upon the Borrower and its successors and assigns and shall inure to the
benefit of the Lender and the benefit of its successors and assigns, including
any subsequent holder of the Note. To the extent not preempted by Federal law,
this Agreement and the rights and duties of the parties hereto shall be
construed and determined in accordance with the laws of the State of New Jersey
without regard to principles of conflicts of laws. This Agreement constitutes
the entire understanding of the parties with respect to the subject matter
hereof and any prior agreements, whether written or oral, with respect thereto
are superseded hereby.

     10.11  Concerning the Borrower.  The term "Borrower" as used herein
            -----------------------                                     
shall mean and include the undersigned as Trustee of the Trust and its
successors in trust not individually but solely as Trustee under that certain
West Essex Bank Employee Stock Ownership Trust effective September 10, 1998, by
and between the undersigned and West Essex Bank and this Agreement shall be
binding upon the undersigned and its successors and assigns and upon the trust
estate. The undersigned assumes no personal or individual liability or
responsibility for payment of the indebtedness evidenced by the Note or for
observance or performance of the covenants and agreements herein contained or
for the truthfulness of the representations and warranties herein contained, the
undersigned having executed this Agreement and the Note solely in its capacity
as Trustee as aforesaid to bind the undersigned, its successors in trust and the
trust estates.

     10.12  Limited Liability.  Anything contained herein or in the Note to
            -----------------                                              
the contrary notwithstanding, the sole and only recourse of the Lender and any
other holder of the Note for payment of the obligations hereunder and under the
Note, as against the Borrower for the payment of the obligations hereunder and
under the Note shall be to (i) the Collateral, (ii) contributions, other than
employer securities not constituting Collateral hereunder, made to the ESOP and
the Trust by sponsoring employers to enable the Borrower to meet its obligations
hereunder and under the Note, and (iii) earnings attributable to the Pledged
Shares and to the investment of such employer contributions, but only to the
extent of the failure of the Borrower to meet the payment schedule of the Loan
provided for herein. The Trust assets may be transferred to Lender upon the
occurrence of a Default only upon and to the extent of the failure of the Plan
to meet the payment schedule of the Loan. In no event may the value of the Trust
assets so transferred exceed the amount of the default.

     10.13  Lender's Duty of Care.  It is agreed and understood that the
            ---------------------                                       
Lender's duty with respect to the Collateral shall be solely to use reasonable
care in the custody and preservation of the Collateral in the Lender's
possession, which shall not include any steps necessary to preserve rights
against prior parties.

     All provisions in this Agreement shall be construed so as to maintain (i)
the ESOP as a qualified leveraged employee stock ownership plan under Sections
401(a) and 4975(e)(7) of the Code, (ii) the Trust as exempt from taxation under
Section 501(a) of the Code, and (iii) the Loan as an "exempt loan" under the
Exempt Loan Rules.

                                       10
<PAGE>
 
     Upon your acceptance hereof in the manner hereinafter set forth, this
Agreement shall constitute a contract between us for the uses and purposes
hereinabove set forth.

     Dated as of this 1st day of October, 1998


                         Marine Midland Bank, and its successors in trust, as
                         Trustee under that certain West Essex Bank Employee
                         Stock Ownership Plan Trust effective September 10, 1998
                         by and between the undersigned and West Essex Bank.



                         By /s/ Richard A. Glover
                            ------------------------------------
 


 

     Accepted and agreed to at Caldwell, New Jersey as of the date last above
written.


 

                         WEST ESSEX BANCORP, INC.

                         By /s/ Dennis A. Petrello
                            ------------------------------------                
 

                                       11
<PAGE>
 
                                   EXHIBIT A

                                PROMISSORY NOTE

Amount sufficient to satisfy the Loan Amount            October 1, 1998
Caldwell, New Jersey


     For VALUE RECEIVED, the undersigned, Marine Midland Bank, not individually
but solely as Trustee under that certain West Essex Bank Employee Stock
Ownership Plan Trust effective September 10, 1998 by and between the undersigned
("Borrower") and West Essex Bank promises to pay to the order of West Essex
Bancorp, Inc. (the "Lender") at its office at 417 Bloomfield Avenue, Caldwell,
New Jersey 07006-4980, the aggregate unpaid principal amount of all loan amounts
or advances under the loan made to the Borrower under Section 1.1 of the Loan
and Security Agreement hereinafter referred to in ten (10) consecutive annual
equal installments, consisting of both principal and interest, amortized over a
ten (10) year period in an amount sufficient to repay all borrowed amounts plus
interest, payable annually on the last business day of December, 1998, and
continuing on the last business day of each and every December thereafter,
except that the final installment of principal and interest not sooner paid
shall be due on December 31, 2007, the final maturity hereof.

     The Borrower promises to pay interest (computed on the basis of a year of
360 days) at said office on the balance of principal from time to time remaining
outstanding and unpaid hereon at the rate per annum equal at all times to the
Interest Rate as defined in Section 2.1 of the Loan and Security Agreement (as
defined below) on the last business day of each and every December, commencing
December 31, 1998, and in each year thereafter and on the final maturity date of
this Note. On demand, the Borrower promises to pay interest on any overdue
principal hereof (whether by lapse of time, acceleration, or otherwise) until
paid at the stated rate.

     This Note is issued under the terms and provisions of that certain West
Essex Bank Employee Stock Ownership Plan Trust Loan and Security Agreement
bearing even date herewith by and between the Borrower and the Lender (the "Loan
and Security Agreement") and this Note and the holder hereof are entitled to all
the benefits and security provided for, by or referred to in such Loan and
Security Agreement.

     This Note may be declared due prior to its express maturity and voluntary
prepayments may be made hereon, all in the events, on the terms and in the
manner as provided in such Loan and Security Agreement.

     Recourse for the payment of this Note has been limited by the provisions of
the Loan and Security Agreement and this Note is expressly made subject to such
provisions notwithstanding anything contained herein to the contrary. This Note
shall be governed by and construed in

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<PAGE>
 
accordance with the laws of New Jersey without regard to principles of conflicts
of laws. The Borrower hereby waives presentment for payment and demand.

     Upon the occurrence of a Default as such term is defined in the Loan and
Security Agreement at the option of the Lender, all amounts payable by the
Borrower to the Lender under the terms of this Note may immediately become due
and payable by the Borrower to the Lender pursuant to the provisions of Section
9.3 of the Loan and Security Agreement, and the Lender shall have all of the
rights, powers, and remedies available under the terms of this Note, any of the
other documents evidencing and securing this Loan and all applicable laws. The
Borrower and all endorsers, guarantors, and other parties who may now or in the
future be primarily or secondarily liable for the payment of the indebtedness
evidenced by this Note hereby severally waive presentment, protest and demand,
notice of protest, notice of demand and of dishonor and non-payment of this Note
and expressly agree that this Note and any payment hereunder may be extended
from time to time without in any way affecting the liability of the Borrower,
guarantors and endorsers.

                                    Marine Midland Bank, its successors in
                                    trust, as Trustee under that certain West
                                    Essex Bank Employee Stock Ownership Plan
                                    Trust effective September 10, 1998 by and
                                    between the undersigned and West Essex Bank

 
                                    By: /s/ Richard A. Glover
                                       ------------------------------------
                                       Richard A. Glover
 
 

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<PAGE>
 
                                   EXHIBIT B
                              SECURITY AGREEMENT
              INSTRUMENTS OR NEGOTIABLE DOCUMENTS TO BE DEPOSITED


    For new value contemporaneously given by West Essex Bancorp, Inc.,
("Lender") to the undersigned ("Borrower"), the receipt whereof is hereby
acknowledged and subject to the terms and provisions of the Loan and Security
Agreement described below, the Borrower does hereby grant a security interest to
said Lender in the instruments or negotiable documents hereafter described
("Collateral"), in all of which Collateral the Borrower warrants that the
Borrower has good, valid and effective rights to the ownership and possession
thereof and to the grant the security interest hereby made:

    All Shares of the common stock, par value $.01 per share, of West Essex
    Bancorp, Inc., a federally-chartered corporation, acquired with the
    proceeds of the Loan Amount.


    Borrower agrees to deliver said collateral to said Lender as soon as
    practicable after Borrower's receipt of one or more certificates therefore.

    Said security interest secures the payment of all indebtedness and
liabilities as undertaken in the Loan and Security Agreement to which this is a
part, now existing or hereafter arising, and the Lender has all the rights with
respect to said Collateral and said security interest as more fully set forth in
the form of secured note or notes executed and delivered by the undersigned to
said Lender prior hereto or contemporaneously herewith.

    This agreement, including matters of interpretation and construction, and
the rights of the Lender and the duties and obligations of the debt hereunder
are to be determined in accordance with the laws of the State of New Jersey,
particularly the Uniform Commercial Code, except where preempted by federal law.

Dated at the 1st day of October, 1998


                                Marine Midland Bank, and its successors in
                                trust, as Trustee under that certain West Essex
                                Bank Employee Stock Ownership Plan Trust
                                effective September 10, 1998 by and between the
                                undersigned and West Essex Bank.


                                By: /s/ Richard A. Glover
                                   --------------------------------------
                                   Richard A. Glover

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