<PAGE>
 
                                                                    EXHIBIT 10.7
 
                                WEST ESSEX BANK
                    THREE YEAR CHANGE IN CONTROL AGREEMENT


     This AGREEMENT is made effective as of February 2, 1999, by and between
West Essex Bank (the "Bank"), a federally chartered stock savings institution,
with its principal administrative office at 417 Bloomfield Avenue, Caldwell, New
Jersey, 07006, Dennis A. Petrello ("Executive"), and West Essex Bancorp, Inc.
(the "Holding Company"), a corporation organized under the laws of the United
States which is the holding company of the Bank.

     WHEREAS, the Bank recognizes the substantial contribution Executive has
made to the Bank and wishes to protect Executive's position therewith for the
period provided in this Agreement; and

     WHEREAS, Executive has agreed to serve in the employ of the Bank.

     NOW, THEREFORE, in consideration of the contribution and responsibilities
of Executive, and upon the other terms and conditions hereinafter provided, the
parties hereto agree as follows:

1.   TERM OF AGREEMENT.
     ----------------- 

     The term of the West Essex Bank Three Year Change in Control Agreement (the
"Agreement") shall be deemed to have commenced as of the date first above
written and shall continue for a period of thirty-six (36) full calendar months
thereafter.  Commencing on the first anniversary date of this Agreement and
continuing at each anniversary date thereafter, the Board of Directors of the
Bank ("Board") may extend the Agreement for an additional year.  The Board will
review the Agreement and Executive's performance annually for purposes of
determining whether to extend the Agreement, and the results thereof shall be
included in the minutes of the Board's meeting.

2.   CHANGE IN CONTROL.
     ----------------- 

     (a) If a Change in Control (as defined herein) has occurred or the Board
has determined that a Change in Control has occurred, Executive shall be
entitled to the benefits provided in Section 3 upon his subsequent termination
of employment at any time during the term of this Agreement due to (i)
Executive's dismissal, or (ii) Executive's voluntary resignation following any
demotion, loss of title, office or significant authority or responsibility,
reduction in the annual compensation or material reduction in benefits or
relocation of his principal place of employment by more than 50 miles from its
location immediately prior to the Change in Control, unless such termination is
because of his death or Termination for Cause.
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     (b) For purposes of this Plan, a "Change in Control" of the Bank or Holding
Company shall mean an event of a nature that: (i) would be required to be
reported in response to Item 1 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 Home Owners' Loan Act of
1933, as amended, the Federal Deposit Insurance Act, or the Rules and
Regulations promulgated by the Office of Thrift Supervision ("OTS") (or its
predecessor agency), as in effect on the date hereof (provided, that in applying
the definition of change in control as set forth under the Rules and Regulations
of the OTS, the Board shall substitute its judgment for that of the OTS); or
(iii) 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 25% or more of the Bank's or the
Holding Company's outstanding voting securities or right to acquire such
securities except for any voting securities of the Bank purchased by the Holding
Company in connection with the conversion of the Bank to the stock form and any
voting securities purchased by any employee benefit plan of the Bank or the
Holding Company, or (B) individuals who constitute the Board 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; provided, however, that
such an event listed above will be deemed to have occurred or to have been
effectuated upon the receipt of all required regulatory approvals not including
the lapse of any statutory periods.

     (c) Executive shall not have the right to receive termination benefits
pursuant to Section 3 hereof upon Termination for Cause.  The term "Termination
for Cause" shall mean termination because of Executive's personal dishonesty,
incompetence, willful misconduct, any breach of fiduciary duty involving
personal profit, intentional failure to perform stated duties, willful violation
of any law, rule, or regulation (other than traffic violations or similar
offenses) or final cease-and-desist order, or material breach of any provision
of this Agreement. Notwithstanding the foregoing, Executive shall not be deemed
to have been Terminated for Cause unless and until there shall have been
delivered to him a Notice of Termination which shall include a copy of a
resolution duly adopted by the affirmative vote of not less than a majority of
the Board of Directors of the Bank at a meeting of the Board called and held for
that purpose (after reasonable notice to Executive and an opportunity for him,
together with counsel, to be heard before the Board), finding that in the good
faith opinion of the Board, Executive's conduct justified a finding of
Termination for Cause and specifying the particulars thereof in detail.
Executive shall not have the right to receive compensation or other benefits for
any period after the Date of Termination for Cause.  During the period beginning
on the date of the 


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Notice of Termination for Cause pursuant to Section 4 hereof through the Date of
Termination for Cause, stock options and related limited rights granted to
Executive under any stock option plan shall not be exercisable nor shall any
unvested awards granted to Executive under any stock benefit plan of the Bank,
the Company or any subsidiary or affiliate thereof, vest. At the Date of
Termination for Cause, such stock options and related limited rights and any
such unvested awards shall become null and void and shall not be exercisable by
or delivered to Executive at any time subsequent to such Termination for Cause.

3.   TERMINATION BENEFITS.
     -------------------- 

     (a) Upon the occurrence of a Change in Control, followed at any time during
the term of this Agreement by termination of the Executive's employment due to:
(1) Executive's dismissal or (2) Executive's voluntary termination pursuant to
Section 2(a), unless such termination is due to Termination for Cause, the Bank
and the Holding Company shall pay Executive, or in the event of his subsequent
death, his beneficiary or beneficiaries, or his estate, as the case may be, a
sum equal to three (3) times Executive's average annual compensation for the
five most recent taxable years that Executive has been employed by the Bank or
such lesser number of years in the event that Executive shall have been employed
by the Bank for less than five years.  Such average annual compensation shall
include Base Salary, commissions, and bonuses, as well as contributions on
Executive's behalf to any pension and/or profit sharing plan, retirement
payments, directors or committee fees, fringe benefits paid or to be paid to the
Executive in any such year and payment of any expense items without
accountability or business purpose or that do not meet the Internal Revenue
Service requirements for deductibility by the Bank; provided however, that any
                                                    -------- -------          
payment under this provision and subsection 3(b) below shall not exceed three
(3) times the Executive's average annual compensation.  At the election of
Executive, which election is to be made prior to a Change in Control, such
payment shall be made in a lump sum.  In the event that no election is made,
payment to Executive will be made on a monthly basis in approximately equal
installments during the remaining term of this Agreement.

     (b) Upon the occurrence of a Change in Control of the Bank or the Holding
Company followed at any time during the term of this Agreement by Executive's
voluntary or involuntary termination of employment, other than for Termination
for Cause, the Bank shall cause to be continued life, medical and disability
coverage substantially identical to the coverage maintained by the Bank or
Holding Company for Executive prior to his severance, except to the extent such
coverage may be changed in its application to all Bank or Holding Company
employees on a nondiscriminatory basis.  Such coverage and payments shall cease
upon the expiration of thirty-six (36) full calendar months from the Date of
Termination.

     (c) Notwithstanding the preceding paragraphs of this Section 3, in no event
shall the aggregate payments or benefits to be made or afforded to Executive
under said paragraphs (the "Termination Benefits") constitute an "excess
parachute payment" under Section 280G of the Code or any successor thereto, and
in order to avoid such a result Termination Benefits will be reduced, if
necessary, to an amount (the "Non-Triggering Amount"), the value of which is one

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dollar ($1.00) less than an amount equal to three (3) times Executive's "base
amount," as determined in accordance with said Section 280G.  The allocation of
the reduction required hereby among the Termination Benefits provided by the
preceding paragraphs of this Section 3 shall be determined by Executive.

4.   NOTICE OF TERMINATION.
     --------------------- 

     (a) Any purported termination by the Bank or by Executive in connection
with a Change in Control shall be communicated by Notice of Termination to the
other party hereto. For purposes of this Agreement, a "Notice of Termination"
shall mean a written notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in reasonable detail
the facts and circumstances claimed to provide a basis for termination of
Executive's employment under the provision so indicated.

     (b) "Date of Termination" shall mean the date specified in the Notice of
Termination (which, in the instance of Termination for Cause, shall not be less
than thirty (30) days from the date such Notice of Termination is given).

     (c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (the time for
appeal therefrom having expired and no appeal having been perfected) and
provided further that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
Notwithstanding the pendency of any such dispute in connection with a Change in
Control, in the event the Executive is terminated for reasons other than
Termination for Cause, the Bank will continue to pay Executive his full
compensation in effect when the notice giving rise to the dispute was given
(including, but not limited to his annual salary) and continue him as a
participant in all compensation, benefit and insurance plans in which he was
participating when the notice of dispute was given, until the earlier of:  (1)
the resolution of the dispute in accordance with this Agreement or (2) the
expiration of the remaining term of this Agreement as determined as of the Date
of Termination.

5.   SOURCE OF PAYMENTS.
     ------------------ 

     It is intended by the parties hereto that all payments provided in this
Agreement shall be paid in cash or check from the general funds of the Bank.
Further, the Holding Company guarantees such payment and provision of all
amounts and benefits due hereunder to Executive and, if such amounts and
benefits due from the Bank are not timely paid or provided by the Bank, such
amounts and benefits shall be paid or provided by the Holding Company.


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6.   EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFIT PLANS.
     ----------------------------------------------------- 

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior agreement between the Bank and Executive, except that
this Agreement shall not affect or operate to reduce any benefit or compensation
inuring to Executive of a kind elsewhere provided.  No provision of this
Agreement shall be interpreted to mean that Executive is subject to receiving
fewer benefits than those available to him without reference to this Agreement.

     Nothing in this Agreement shall confer upon Executive the right to continue
in the employ of Bank or shall impose on the Bank any obligation to employ or
retain Executive in its employ for any period.

7.   NO ATTACHMENT.
     ------------- 

     (a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

     (b) This Agreement shall be binding upon, and inure to the benefit of,
Executive, the Bank and their respective successors, heirs and assigns.


8.   MODIFICATION AND WAIVER.
     ----------------------- 

     (a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

     (b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there be any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future or as to any act other than that
specifically waived.

9.   REQUIRED REGULATORY PROVISIONS.
     ------------------------------ 

     (a) The board of directors may terminate Executive's employment at any
time, but any termination by the board of directors, other than Termination for
Cause, shall not prejudice Executive's right to compensation or other benefits
under this Agreement.  Executive shall not have the right to receive
compensation or other benefits for any period after Termination for Cause as
defined in Section 2(c) hereinabove.


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     (b) If Executive is suspended from office and/or temporarily prohibited
from participating in the conduct of the association's affairs by a notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act (12
U.S.C. (S)1818(e)(3) or (g)(1)), the association's obligations under this
contract shall be suspended as of the date of service, unless stayed by
appropriate proceedings.  If the charges in the notice are dismissed, the Bank
may in its discretion (i) pay Executive all or part of the compensation withheld
while their contract obligations were suspended and (ii) reinstate (in whole or
in part) any of the obligations which were suspended.

     (c) If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank's affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act (12 U.S.C.
(S)1818(c)(4) or (g)(1)), all obligations of the Bank under this contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

     (d) If the Bank is in default as defined in Section 3(x)(1) of the Federal
Deposit Insurance Act, all obligations of the Bank under this contract shall
terminate as of the date of default, but this paragraph shall not affect any
vested rights of the contracting parties.

     (e) All obligations under this contract shall be terminated, except to the
extent determined that continuation of the contract is necessary for the
continued operation of the institution:  (i) by the Director of the Office of
Thrift Supervision (or his or her designee) at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the Bank under the authority contained in Section 13(c) of the Federal
Deposit Insurance Act; or (ii) by the Director of the Office of Thrift
Supervision (or his or her designee) at the time the Director (or his or her
designee) approves a supervisory merger to resolve problems related to operation
of the Bank or when the Bank is determined by the Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

     (f) Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and 12 C.F.R. (S) 545.121 and any rules and regulations promulgated
thereunder.

10.  REINSTATEMENT OF BENEFITS UNDER SECTION 9(b).
     -------------------------------------------- 

     In the event Executive is suspended and/or temporarily prohibited from
participating in the conduct of the Bank's affairs by a notice described in
Section 9(b) hereof (the "Notice") during the term of this Agreement and a
Change in Control, as defined herein, occurs, the Bank will assume its
obligation to pay and Executive will be entitled to receive all of the
termination benefits provided for under Section 3 of this Agreement upon the
Bank's receipt of a dismissal of charges in the Notice.

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11.  SEVERABILITY.
     ------------ 

     If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

12.  HEADINGS FOR REFERENCE ONLY.
     --------------------------- 

     The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.  In addition, references to the
masculine shall apply equally to the feminine.

13.  GOVERNING LAW.
     ------------- 

     The validity, interpretation, performance, and enforcement of this
Agreement shall be governed by Federal law.

14.  ARBITRATION.
     ----------- 

     Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration, conducted before a panel
of three arbitrators sitting in a location selected by Executive within fifty
(50) miles from the location of the Bank's main office, in accordance with the
rules of the American Arbitration Association then in effect.  Judgment may be
entered on the arbitrator's award in any court having jurisdiction; provided,
however, that Executive shall be entitled to seek specific performance of his
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement, other
than in the case of a Termination for Cause.

15.  PAYMENT OF COSTS AND LEGAL FEES.
     ------------------------------- 

     All reasonable costs and legal fees paid or incurred by Executive pursuant
to any dispute or question of interpretation relating to this Agreement shall be
paid or reimbursed by the Bank (which payments are guaranteed by the Holding
Company pursuant to Section 5 hereof) if Executive is successful on the merits
pursuant to a legal judgment, arbitration or settlement.

16.  INDEMNIFICATION.
     --------------- 

          (a) The Bank shall provide Executive (including his heirs, executors
and administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, and shall indemnify Executive (and
his heirs, executors and administrators) to the fullest extent permitted under
Federal law against all expenses and liabilities reasonably incurred by him in
connection with or arising out of any action, suit or proceeding in which he may
be involved by reason of his having been a director or officer of the Bank
(whether or not he continues to be a director or officer at the time of
incurring such expenses or liabilities), such expenses and liabilities to
include, but not be limited to, judgments, court costs and attorneys' fees and
the cost of reasonable settlements.

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17.  SUCCESSOR TO THE BANK
     ---------------------

     The Bank shall require any successor or assignee, whether direct or
indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the Bank, expressly and
unconditionally to assume and agree to perform the Bank's obligations under this
Agreement, in the same manner and to the same extent that the Bank would be
required to perform if no such succession or assignment had taken place.

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                                   SIGNATURES

     IN WITNESS WHEREOF, West Essex Bank and West Essex Bancorp, Inc. have
caused this Agreement to be executed by their duly authorized officers, and
Executive has signed this Agreement, on the 2/nd/ day of February, 1999.


ATTEST:                             WEST ESSEX BANK



 /s/ Craig L. Montanaro             By: /s/ Leopold W. Montanaro
------------------------------         --------------------------------
Secretary                              Leopold W. Montanaro
                                       For the Entire Board of Directors
 
SEAL


ATTEST:                             WEST ESSEX BANCORP, INC.
                                       (Guarantor)



 /s/ Lisa Mulligan                  By: /s/ Leopold W. Montanaro
------------------------------         --------------------------------
                                       Leopold W. Montanaro
                                       For the Entire Board of Directors

SEAL


WITNESS:                            EXECUTIVE



 /s/ Lisa Mulligan                  By: /s/ Dennis A. Petrello 
------------------------------         -------------------------------
                                       Dennis A. Petrello 


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