SEVERANCE AGREEMENT

This  Agreement  is  entered  into  by  and  between  Keirsten   Scanlon,   Vice
President/Retail  Banking of Ipswich Savings Bank (the  "Executive") and Ipswich
Savings  Bank (the  "Bank") and shall be effective as of the 18th day of August,
1999 (the "Effective Date").

WHEREAS,  the  Board  of  Directors  of the  Bank  desires  to  assure  that the
Executive,  in the Executive's capacity as an officer of the Bank, will consider
the  prospect of a "Change in Control" (as defined in Section 1(a) below) of the
Bank or of Ipswich Bancshares, Inc. (the "Company"), the holding company for the
Bank, in an objective manner; and

WHEREAS,  the Executive  desires to commit herself to serve the Bank to the best
of her ability;

NOW,  THEREFORE,  in  consideration  of the foregoing and the  agreements of the
parties herein contained, the parties hereto agree as follows:

I. Consequences of Termination of the Executive's Employment Following Change in
Control.  If there is a "Change in Control" (as defined in subsection (a) below)
during the  "Term" (as  defined  in  Section 3 below),  the  provisions  of this
Section shall apply and shall continue to apply  throughout the remainder of the
Term.  If,  within one year  following  a "Change  in  Control"  (as  defined in
subsection (a) below), the Executive's employment is terminated by the Executive
following a  reduction  of the  Executive's  annual  compensation  (other than a
reduction which is based on the Bank's  financial  performance and is similar to
the  reduction  made to the  compensation  provided to each other officer of the
Bank), the Executive (or the Executive's  estate,  if applicable)  shall receive
such  compensation  as is provided to the Executive  pursuant to subsection  (c)
below.  Similarly,  if the Executive's  employment is terminated without "cause"
(as defined in  subsection  (b) below) by the Bank  within one year  following a
"Change in Control" (as defined in subsection (a) below),  the Executive (or the
Executive's  estate,  if  applicable)  shall  receive  such  compensation  as is
provided to the Executive pursuant to subsection (c) below.

(a) For the  purposes  of this  Section  "Change  in  Control"  shall  mean  the
occurrence of any one or more of the following  events:  (i) after the Effective
Date,  any  "person"  (as such term is used in  Sections  13(d) and 14(d) of the
Securities  Exchange Act of 1934), other than the Company or the Bank, becomes a
"beneficial  owner" (as such term is defined in Rule 13d-3 as promulgated  under
the  Securities  Exchange  Act of 1934)  directly or  indirectly  of  securities
representing  25% or more of the total  number of votes that may be cast for the
election of  Directors of the Company or the Bank and two thirds of the Board of
Directors  of the Company or the Bank (the  "Board")  has not  consented to such
event prior to its  occurrence  or within sixty (60) days  thereafter,  provided
that if the  consent  occurs  after the  event,  it shall  only be valid for the
purposes  of  this  paragraph  (i) if a  majority  of the  consenting  Board  of
theCompany  or the Bank is comprised of Directors of the Company or the Bank who
were Directors of the Company or the Bank immediately prior to the event;

(ii) within two years after a merger,  consolidation or sale of assets involving
the  Company  or the  Bank,  or a  contested  election  of a  Company  or a Bank
Director,  or any  combination  of  the  foregoing,  the  individuals  who  were
Directors of the Company or the Bank  immediately  prior  thereto shall cease to
constitute a majority of the Board; or
<PAGE>
(iii)  within  two years  after a tender  offer or  exchange  offer  for  voting
securities  of the  Company  or the  Bank  (other  than  by  the  Company),  the
individuals  who were  Directors  of the Company or the Bank  immediately  prior
thereto shall cease to constitute a majority of the Board.

(b) For purposes of this Section 1, "cause" shall mean activities which have had
an adverse  effect on the financial  strength or stability of the Company or the
Bank; neglect of duties for which employed (other than on account of a medically
determinable disability which renders the Executive incapable of performing such
services); committing fraud, misappropriation or embezzlement in the performance
of duties as an  employee  of the  Company or the Bank;  conviction  of a felony
involving a crime of moral turpitude; or willfully engaging in conduct injurious
to the Company or the Bank.

(c) If the Executive becomes entitled to receive  compensation  pursuant to this
Section,  she shall  receive a lump-sum  payment from the Bank within 30 days of
the  termination of her employment in the amount of one (1) year's salary of the
Executive  (at the then  applicable  annual base  salary rate of the  Executive,
exclusive of bonuses).

I. Employment  Status.  This Agreement is not an agreement for the employment of
the  Executive  and shall  confer no  rights on the  Executive  except as herein
expressly provided.

I. Term and One-Year  Extension.  The term of this  Agreement  shall be one year
commencing  with  the  Effective  Date  hereof  (the  "Term").  The Term of this
Agreement will, however, be automatically extended for additional periods of one
year  commencing  on the first  anniversary  of the  Effective  Date and on each
subsequent  anniversary  thereafter,  unless either party  notifies the other in
writing  at least  three  months  prior to the date of such  anniversary  of the
Effective Date that the Agreement is not to be extended.

I. Exclusivity Covenant; Non-Competition.

(a) Except with the prior written  consent of the Board,  the Executive will not
while in the  employ of the Bank,  undertake  or engage in any other  employment
occupation or business enterprise. Further, the Executive agrees not to acquire,
assume or participate  in, directly or indirectly,  any position,  investment or
interest,  in the areas where the Bank  maintains  banking  offices,  adverse or
antagonistic to the Bank, its business or prospects,  financial or otherwise, or
take  any  action  towards  any of the  foregoing,  except  for  any  investment
representing   less  than  one  percent  (1%)  of  the  voting   shares  of  any
publicly-held corporation.

(b) During the Executive's  employment by the Bank hereunder and during a period
of one year following the date of  termination  of her employment  with the Bank
for any reason, the Executive will not, directly or indirectly whether as owner,
partner, shareholder,  consultant, agent, employee, co-venturer or otherwise, or
through  any Person (as  defined  below),  compete  in the  Bank's  market  area
(defined as Essex County,  Massachusetts) with the banking or any other business
conducted  by the Bank or any  Subsidiary  during the  period of her  employment
hereunder, nor will she attempt to hire any employee of the Bank, assist in such
hiring by any other Person,  encourage any such employee to terminate his or her
relationship  with the Bank or encourage  any customer to conduct with any other
Person any business or activity  which such  customer  conducts or could conduct
with the Bank.
<PAGE>
         For purposes of this subsection,  (i) the Executive shall not be deemed
to be competing  with the Bank if she is employed  outside of the Bank's  market
area for a bank or corporation which has its headquarters  outside of the Bank's
market  area,  even if such  bank or  corporation  has a branch or office in the
Bank's  market  area and (ii) the term  "Person"  shall  mean an  individual,  a
corporation,  an association,  a partnership,  an estate,  a trust and any other
entity or organization.

I.  Assignment.  This  Agreement and the rights and  obligations  of the parties
hereto  shall bind and inure to the  benefit of each of the  parties  hereto and
shall also bind and inure to the benefit of any  successor or  successors of the
Bank by  reorganization,  merger or  consolidation  and any  assignee  of all or
substantially  all of its business and  properties,  but,  except as to any such
successor or assignee of the Company or the Bank, neither this Agreement nor any
rights or  benefits  hereunder  may be assigned by the Company or the Bank or by
the Executive.

I. Withholding.  All payments made by the Bank under this Agreement shall be net
of any tax or other amounts required to be withheld by the Bank under applicable
Federal and state law.

I.  Governing  Law. This  Agreement  shall be construed in accordance  with, and
governed  for all purposes by, the laws of The  Commonwealth  of  Massachusetts,
without regard to its principles of conflicts of laws.

I.  Interpretation.  In case any one or more of the provisions contained in this
Agreement shall, for any reason, be held to be invalid, illegal or unenforceable
in any respect, such invalidity, illegality or unenforceability shall not affect
any other provisions of this Agreement, but this Agreement shall be construed as
if such invalid,  illegal or  unenforceable  provision had never been  contained
herein.

I.  Enforcement.  Any legal expenses  incurred by the Executive in enforcing her
rights  hereunder  (regardless  of whether the provisions of this Agreement have
terminated) shall be paid by the Bank, provided that both the Executive prevails
on the  merits of her  claim or  claims  and the  Bank's  rights of appeal  with
respect to such claim or claims have been exhausted or have  otherwise  expired.
The Bank  shall  pay  such  legal  expenses  (or  reimburse  the  Executive,  if
appropriate)  within  thirty  (30) days after the later of the date on which the
conditions  specified inthe previous sentence are fulfilled or the date on which
the Executive submits evidence of such legal expenses to the Board.

I.  Amendment and Waiver.  This  Agreement may not be amended,  supplemented  or
waived except by a writing  signed by the party against which such  amendment or
waiver is to be enforced.  The waiver by any party of a breach of any  provision
of this  Agreement  shall not  operate to, or be  construed  as a waiver of, any
other  breach  of that  provision  nor as a  waiver  of any  breach  of  another
provision.
<PAGE>
I. Binding Effect. Subject to the provisions of Section 5 hereof, this Agreement
shall be binding on the successors and assigns of the parties hereto.

I. Notices. Any notices, requests, demands and other communications provided for
by the  Agreement  shall be  sufficient if in writing and delivered in person or
sent by  registered  or  certified  mail,  postage  prepaid,  in the case of the
Executive,  at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank,  at its main  office,  attention  of the  President
(with a copy to Carol Hempfling Pratt, Foley, Hoag & Eliot, llp, One Post Office
Square, Boston, Massachusetts 02109).

I.  Counterparts.  This Agreement may be executed in any number of counterparts,
each of which is an original  but which shall  together  constitute  one and the
same instrument.

IN WITNESS WHEREOF,  the Company,  the Bank and the Executive have executed this
Agreement under seal as of the date first set forth above.

IPSWICH SAVINGS BANK EXECUTIVE

By:      /s/ David L. Grey                     /s/ Keirsten Scanlon
         -----------------                     --------------------
         David L. Grey, President              Keirsten Scanlon

The undersigned hereby guarantees the
obligations of Ipswich Savings Bank under
the foregoing agreement.

IPSWICH BANCSHARES, INC.


By:      /s/ David L. Grey
         -----------------
         David L. Grey, President