Document:

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                                                                  EXHIBIT 10.17

                   SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT

         This Agreement, made and entered into as of the 1st day of January,
2000 by and among FIRST ESSEX BANK, FSB, a federal savings bank, with its main
office in Lawrence, Massachusetts (the "BANK"), FIRST ESSEX BANCORP, INC., a
Delaware corporation (the "HOLDING COMPANY") and the parent company of the Bank
(the Bank and the Holding Company shall be hereinafter collectively referred to
as the "EMPLOYERS"), and Brian W. Thompson of Amherst, Massachusetts (the
"EXECUTIVE").

                                   WITNESSETH.

         WHEREAS, the Executive is a valuable, key employee of each of the
Employers, serving each of them as their President and Chief Operating Officer;
and

         WHEREAS, because of the Executive's experience, knowledge of the
affairs of the Employers, and reputation and contacts in the banking industry,
the Holding Company deems the Executive's continued employment with the
Employers important for its future growth; and

         WHEREAS, it is the desire of the Holding Company and in its best
interest that the Executive's services with the Employers be retained; and

         WHEREAS, in order to induce the Executive to continue in the employ of
the Employers, the Holding Company has entered into this Agreement to provide
him with certain benefits in accordance with the terms and conditions
hereinafter set forth; and

         WHEREAS, the Holding Company desires to establish a trust (as defined
in Section 1.22, the "TRUST") and to contribute to the Trust certain assets that
shall be held therein, subject to the terms of the Trust, until such time as
benefits have been paid to the Executive and his beneficiaries as specified
herein;

         NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future as well as of the mutual promises and covenants
herein contained, it is agreed as follows:

PART 1. DEFINITIONS.

             1.1. ACCRUAL-BASED BENEFIT shall mean an amount equal to the
aggregate of all amounts accrued by the Bank or the Holding Company (gross of
any corporate deductions) between the date of this Agreement and the end of the
fiscal year in which the Executive's employment terminates for the cost of the
benefits payable under this Agreement.

             1.2. ACCRUED BENEFIT shall mean the Executive's Normal Retirement
Benefit calculated on the basis of the Final Average Compensation as of the date
on which the Executive's employment with the Employers terminates, multiplied by
the Accrued Percentage.

             1.3. ACCRUED PERCENTAGE. The Accrued Percentage shall not exceed
100% and shall be determined as follows:

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                    (a) The Accrued Percentage shall be 100% if:

                            (1) The Executive terminates his employment with the
                  Employers for Good Reason (as such term is defined in Section
                  1.14); or

                            (2) The Employers terminate the Executive's
                  employment with the Employers for any reason whatsoever other
                  than for "Cause" (as such term is defined in, and in
                  accordance with the procedures set forth in, Section 2.5); or

                            (3) The Executive terminates his employment with
                  Employers at or after the Normal Retirement Date (as such term
                  is defined in Section 1.17); or

                            (4) A Terminating Event (as such term is defined in
                  Section 1.21) occurs within three years of a Change in Control
                  (as such term is defined in Section 1.9).

                    (b) Upon termination for "Cause" the Accrued Percentage
shall be zero;

                    (c) If the Executive resigns from his position as an officer
or employee of the Holding Company without Good Reason prior to the date which
is the second anniversary of the date of this Agreement, the Accrued Percentage
shall be zero; and

                    (d) In all other cases, the Accrued Percentage shall be
determined by deducting from 100% a percentage determined by multiplying (x)
1/13 times (y) the number of whole and partial years between the date on which
the Executive's employment with the Employers or their successor in interest
terminated and the Normal Retirement Date.

             1.4. ACTUARIAL EQUIVALENT shall mean a benefit of equivalent
current value to the benefit which could otherwise have been provided to the
Executive, computed on the basis of the discount rates, mortality tables and
other assumptions then being used by SBERA in determining the actuarial
equivalent of payments being made by SBERA to its Retirement Plan beneficiaries.

             1.5. ACTUARIALLY EQUIVALENT FORM OF PAYMENT. In lieu of the form of
payment otherwise provided in this Agreement, upon request the Executive (or, if
applicable, his Beneficiary) may obtain an Actuarially Equivalent form of
payment; provided that such form is a permitted form of benefit under the SBERA
Pension Plan. Acceptable forms of payment presently include:

                  o        Lump Sum (but only with the permission of the Board)

                  o        Life Annuity

                  o        Joint and 50% Survivor Annuity or Joint and 100%
                           Survivor Annuity

The Executive shall have the right upon becoming a party to this Agreement to
elect the form of payment in which his Supplemental Benefit is to be paid. In
any Calendar Year prior to the year in which amounts become payable hereunder,
and at least six months prior to the Executive's termination of employment, the
Executive may change the form of payment he has elected.

             1.6. ANNUAL ANNUITY EQUIVALENT for a 401(k) plan shall be equal to
the annual benefit payable from a single life annuity on the Executive's life
from a company holding at least an AA rating from Moody's, Standard & Poor's or
an equivalent rating service. For purposes of this

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section, the amount available to invest in said annuity shall be assumed to be
the total of the employer's matching contributions to the 401(k) on the
Executive's behalf, calculated as all amounts actually contributed by the
employer as matching contributions to the 401(k) plus earnings.

             1.7. BENEFICIARY shall mean the person or persons designated by the
Executive in accordance with Section 2.6(b) hereof to receive benefits under
this Agreement after the death of the Executive.

             1.8. CALENDAR YEAR. Any reference to "CALENDAR YEAR" shall mean a
calendar year from January 1 to December 31.

             1.9. CHANGE IN CONTROL shall have the meaning set forth in the
Special Termination Agreement as such Agreement is in effect on the date hereof.

             1.10. COMPENSATION shall mean all compensation reported on the
Executive's Form W-2 (Wages, tips, other compensation box) for a Calendar Year,
including, but not limited to, any bonuses actually paid by the Employers to the
Executive during the Calendar Year, but adding thereto any amount which is
contributed by the Employers on the Executive's behalf pursuant to a salary
reduction agreement and which is not includable in the Executive's gross income
under section 125, 402(e)(3), 402(h), or 403(b) of the Internal Revenue Code of
1986, as amended ("CODE"), and excluding therefrom any taxable employee benefits
of any kind (e.g., reimbursements of moving and relocation expenses, insurance
premiums, automobile, health, medical, and dental expenses, the cost of
group-term life insurance, compensation arising from the exercise of a
nonqualified stock option or from a stock grant, and any fringe benefit which is
not excluded from gross income under Section 132 of the Code).

             1.11. EFFECTIVE DATE. The Effective Date of this Agreement shall be
January 1, 2000.

             1.12. EMPLOYMENT AGREEMENT shall mean that certain Employment
Agreement dated as of December 16, 1999 by and between the Executive and the
Holding Company, as in effect on the date hereof.

             1.13. FINAL AVERAGE COMPENSATION shall mean the average of the
Compensation of the Executive for the two Calendar Years during his final ten
Calendar Years of employment with the Holding Company or any predecessor entity
during which his Compensation was the highest.

             1.14. GOOD REASON. Good Reason shall mean any of the following:

                    (a) the failure of the Board of Directors of either of the
Employers to continue the Executive as President and Chief Operating Officer of
the Employers;

                    (b) any failure by the Employers to timely pay the amounts
or provide the benefits described in the Employment Agreement or this Agreement,
other than an isolated failure not occurring in bad faith and which is remedied
promptly after receipt of written notice thereof given by Executive;

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                    (c) any reduction in the Executive's base salary or any
material reduction in other benefits in effect for the Executive on the date
hereof;

                    (d) a material breach by the Employers of any of the
provisions of the Employment Agreement or this Agreement which failure or breach
shall have continued for thirty (30) days after written notice from the
Executive to the Employers specifying the nature of such failure or breach; and

                    (e) the failure of either Employer to obtain satisfactory
agreement from any successor to assume and agree to perform this Agreement.

In addition, "GOOD REASON" shall include the following events but only if they
shall occur within three years following a "CHANGE IN CONTROL":

                    (f) there occurs any material change to the Executive's
function, duties, or responsibilities in effect on the date hereof or as set
forth in this Agreement, which change would cause the Executive's position to
become one of lesser responsibility, importance, or scope from the position and
attributes thereof in effect on the date hereof or as set forth in the
Employment Agreement;

                    (g) the failure by the Employers to continue to provide the
Executive with benefits substantially similar to those available to the
Executive under any of the life insurance, medical, health and accident, or
disability plans or any other material benefit plans in which the Executive was
participating at the time of the Change in Control, or the taking of any action
by the Employers which would directly or indirectly materially reduce any of
such benefits, or the failure by the Employers to provide the Executive with the
number of paid vacation days to which the Executive is entitled on the basis of
years of service with the Employers in accordance with the Employers' normal
vacation policy in effect at the time of the Change in Control;

                    (h) the relocation of the Employers' offices at which the
Executive is principally employed immediately prior to the date of the Change in
Control to a location more than 25 miles from Andover, Massachusetts, or either
Employers' requiring the Executive to be based anywhere other than the
Employers' offices at such location;

                    (i) a reasonable determination by the Executive that, as a
result of a Change in Control, he is unable to exercise the responsibilities,
authorities, powers, functions or duties exercised by the Executive immediately
prior to such Change in Control; or

                    (j) A reasonable determination by the Executive that, as a
result of a Change in Control, his working conditions have significantly
worsened.

             1.15. NORMAL RETIREMENT AGE. Normal Retirement Age shall mean the
date on which the Executive attains age sixty-two (62).

             1.16. NORMAL RETIREMENT BENEFIT shall mean a single life annuity
payable (as provided hereinafter in this Section 1.16) as an annual supplemental
retirement benefit ("SUPPLEMENTAL BENEFIT"). The amount of such Supplemental
Benefit shall be calculated by (x) multiplying (i) 65% times (ii) the
Executive's Final Average Compensation and by (y) subtracting from such result
the following: (i) one half of the annual amount payable (before earnings

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reductions) to the Executive as a primary social security retirement benefit at
age 62, (ii) the annual pension payable to the Executive (excluding any pension
payable to the Executive that is attributable to the Executive's own
contributions) from defined benefit pension plans of the Employers or any
Previous Employer (as defined in Section 1.18) at his Normal Retirement Date, as
if such pension were paid as a single-life annuity, and (iii) the Annual Annuity
Equivalent (computed as of the Normal Retirement Date) for any defined
contribution plans (including 401(k) plans) maintained by either Employer or any
Previous Employer during the Executive's employment. The Normal Retirement
Benefit shall be an annual benefit in an amount equal to the Supplemental
Benefit payable in equal monthly installments commencing on the Normal
Retirement Date and continuing for the Executive's life.

             1.17. NORMAL RETIREMENT DATE shall mean the later to occur of (a)
the date upon which the Executive attains the Normal Retirement Age and (b) the
date on which the Executive ceases to be actively employed as an executive
officer by the Holding Company.

             1.18. PREVIOUS EMPLOYER shall mean Shawmut Bank and its
predecessors in interest, as well as any entities acquired thereby.

             1.19. SBERA means the Savings Banks Employees Retirement
Association.

             1.20. SPECIAL TERMINATION AGREEMENT shall mean that certain Special
Termination Agreement by and between the Executive and the Holding Company dated
as of December 30, 1996, as amended December 16, 1999.

             1.21. TERMINATING EVENT. A "TERMINATING EVENT" shall mean any of
the following:

                    (a) Termination by either of the Employers of the employment
of the Executive with either or both of the Employers for any reason other than
(i) death or (ii) for Cause (as such term is defined in Section 2.5), or

                    (b) Resignation of the Executive, with Good Reason, from the
employ of either of the Employers, while the Executive is not receiving payments
or benefits from either of the Employers by reason of the Executive's
disability.

             1.22. TRUST AND TRUSTEE. Trustee shall mean the trustee to be
appointed under that certain Trust Agreement ("TRUST") under the First Essex
Bancorp Supplemental Executive Retirement Plan to be entered into by the Holding
Company.

PART 2. BENEFITS.

             2.1. TERMINATION OF SERVICE AT NORMAL RETIREMENT DATE. If the
Executive terminates service as an employee of the Employers (other than for
"CAUSE") on or after the Normal Retirement Date, he shall receive a Normal
Retirement Benefit. He shall commence to receive such Normal Retirement Benefit
at the later to occur of (x) his Normal Retirement Age and (y) the date on which
his employment terminates.

             2.2. TERMINATION OF SERVICE BEFORE NORMAL RETIREMENT AGE. If the
Executive's service as an employee of the Employers terminates (other than by
reason of death or for "Cause",

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as such term is defined in Section 2.5) before his Normal Retirement Date, he
shall be entitled to receive his Accrued Benefit (it being understood that his
Accrued Benefit will be zero under certain circumstances if the Executive
resigns before the date which is the second anniversary of the Effective Date of
this Agreement). He shall commence to receive such Accrued Benefit at his Normal
Retirement Age or, if he so elects and the Board consents, he may commence to
receive the Actuarial Equivalent of such Accrued Benefit at an earlier date. In
the event that the Executive requests permission to commence receiving the
Actuarial Equivalent of his Accrued Benefit before his Normal Retirement Age and
the Board refuses to grant permission for such early commencement of payments,
the Executive may request the Board to reconsider its decision. If the Board has
not agreed to permit such early payment by a date which is thirty days after the
request for reconsideration was made, the Executive shall have the right to
receive upon written application to the Holding Company the Actuarial Equivalent
of such Accrued Benefit, less a penalty of 7%. If the Executive begins to
receive his Accrued Benefit prior to attaining his Normal Retirement Age, the
benefit shall be the Actuarial Equivalent of the benefit that would have been
payable if the benefit had been paid at the Executive's Normal Retirement Age.

             2.3. DISABILITY.

                    (a) In the event that the Executive shall become "disabled"
(as defined below) while in the employ of the Holding Company and prior to his
Normal Retirement Date, he shall become vested in his Accrued Benefit, computed
at the time of the Executive's disability with an Accrued Percentage of 100%. He
shall commence to receive such Accrued Benefit at his Normal Retirement Age or,
if he so elects and the Board consents, he may commence to receive the Actuarial
Equivalent of such Accrued Benefit at an earlier date. In the event that the
Executive requests permission to commence receiving the Actuarial Equivalent of
the Accrued Benefit before his Normal Retirement Age and the Board refuses to
grant permission for such early commencement of payments, the Executive may
request the Board to reconsider its decision. If the Board has not agreed to
permit such early payment by a date which is 15 days after the request for
reconsideration was made, the Executive shall have the right to receive upon
written application to the Holding Company the Actuarial Equivalent of the
Accrued Benefit, less a penalty of 7%. Payments under this Section 2.3 shall be
in addition to any payments otherwise payable to the Executive as a result of
disability under any other plans or agreements in effect from time to time.

                    (b) The Executive shall be considered to be "DISABLED" when
he is no longer capable of performing the material aspects of his employment
duties for the Holding Company as a result of physical and/or mental impairment.
The Executive shall be considered to be no longer "disabled" at such time as he
returns to work in a position with responsibilities comparable to those inherent
in the position in which he was employed on the date he became "disabled."

                    (c) If the Executive recovers from his disability and
returns to the employ of the Holding Company, his disability benefit shall
terminate and upon his subsequent termination of service as an employee of the
Bank or Holding Company he shall be entitled to such retirement or termination
benefits as he would otherwise have been entitled to if he had been employed by
the Bank or Holding Company throughout his period of disability, as
appropriately adjusted to reflect any benefits previously paid under this
Section 2.3. For purposes of the accrual of benefits under this Agreement, time
spent on disability shall be deemed to be time spent as an employee of the Bank
or Holding Company.

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                    (d) In the event there is disagreement as to whether the
provisions of this Section 2.3 are applicable, the Holding Company and the
Executive (or his personal representative) each shall select a physician. If the
physicians are in disagreement, they shall select a third physician. A majority
opinion of the three physicians as to disability shall be binding on all the
parties hereto. The parties agree that the Holding Company will, regardless of
the outcome of this procedure, reimburse the Executive (or his surviving spouse
or Beneficiary, as the case may be) for the reasonable and necessary fees and
costs directly attributable to such procedure.

             2.4. NO BENEFITS UPON DISCHARGE FOR CAUSE. Should the Executive be
discharged for Cause in accordance with the procedures set forth in Section 2.5
at any time (before or after his Normal Retirement Age), all Benefits under Part
2 of this Agreement shall be forfeited. If a dispute arises as to discharge for
"Cause", such dispute shall be resolved by arbitration as set forth in Section
3.10 of this Agreement.

             2.5. DISCHARGE FOR CAUSE.

                    (a) CAUSE. Termination for "Cause" shall mean

                           (1) committing fraud, misappropriation or
                  embezzlement in the performance of duties as an employee of
                  the Bank or the Holding Company;

                           (2) conviction of a felony involving a crime of moral
                  turpitude; or

                           (3) willfully engaging in violations of material
                  banking regulations.

For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or omitted to be
done, by the Executive in bad faith or without reasonable belief that the
Executive's action or omission was in the best interests of the Holding Company.
Any act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or upon the instructions of the Chief Executive
Officer (if Executive is not the Chief Executive Officer) or a senior officer of
the Holding Company or based upon the advice of counsel for the Holding Company
shall be conclusively presumed to be done, or omitted to be done, by the
Executive in good faith and in the best interests of the Holding Company.
Notwithstanding the foregoing, the Executive shall not be deemed to have been
discharged for "Cause" unless and until there shall have been delivered to him a
copy of a certification by the Clerk of the Holding Company that two-thirds of
the entire Board of Directors of the Holding Company found in good faith that
the Executive was guilty of conduct which is deemed to be Cause as defined in
this Section 2.5 and specifying the particulars thereof, after reasonable notice
to the Executive setting forth in reasonable detail the nature of such Cause and
an opportunity for him together with his counsel, to be heard before the Board
in accordance with the provisions of Section 2.5(b).

                    (b) BOARD TERMINATION PROCEDURE. In each case, in
determining Cause the alleged acts or omissions of the Executive shall be
measured against standards prevailing in the Holding Company industry generally
and the ultimate existence of Cause must be confirmed by not less than
two-thirds of the Board as a meeting prior to any termination therefor;
provided, however, that it shall be the Holding Company's burden to prove the
alleged facts and omissions and the prevailing nature of the standards the
Holding Company shall have alleged are violated by

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such acts and/or omissions of the Executive. In the event of such a confirmation
by two-thirds or more of the Board, the Holding Company shall notify the
Executive that the Holding Company intends to terminate the Executive's
employment for Cause under this Section 2.5 (the "CONFIRMATION NOTICE"). The
Confirmation Notice shall specify the acts or omissions upon the basis of which
the Board has confirmed the existence of Cause and must be delivered to the
Executive within ninety (90) days after a majority of the Board (excluding, if
applicable, the Executive) has actual knowledge of the events giving rise to
such purported termination. If the Executive notifies the Holding Company in
writing (the "OPPORTUNITY NOTICE") within thirty (30) days after the Executive
has received the Confirmation Notice, the Executive (together with counsel)
shall be provided one opportunity to meet with the Board (or a sufficient quorum
thereof) to discuss such acts or omissions. Such meeting shall take place at the
principal offices of the Holding Company or such other location as agreed to by
the Executive and the Holding Company. During the period commencing on the date
the Holding Company receives the Opportunity Notice and ending on the date next
succeeding the date on which such meeting between the Board (or a sufficient
quorum thereof) and the Executive is scheduled to occur and not withstanding
anything to the contrary in this Agreement, the Executive shall be suspended
from employment with the Holding Company (with pay to the extent not prohibited
by applicable law) and the Board may, during such suspension period, reasonably
limit the Executive's access to the principal offices of the Holding Company or
any of its assets. If the Board properly sets the date of such meeting and if
the Board (or a sufficient quorum thereof) attends such meeting and in good
faith does not rescind its confirmation of Cause at such meeting or if the
Executive fails to attend such meeting for any reason, the Executive's
employment by the Holding Company shall, immediately upon the closing of such
meeting and the delivery to the Executive of the Notice of Termination, be
terminated for Cause. If the Executive does not respond in writing to the
Confirmation Notice in the manner and within the time period specified in this
Section 2.5(b), the Executive's employment with the Holding Company shall, on
the thirty-first day after the receipt by the Executive of the Confirmation
Notice, be terminated for Cause under this Section 2.5.

             2.6. DEATH.

                    (a) DEATH BENEFIT. If (i) the Executive dies prior to the
termination of his employment with the Employers or (ii) the Executive's
employment with the Employers has been terminated by reason of his having become
disabled and he subsequently dies prior to reaching the age of 65 without having
received any Benefits under Part 2 of this Agreement, then a death benefit shall
be payable to the Executive's Beneficiary commencing not later than sixty days
following the death of the Executive. The death benefit shall be a lump sum
equal to the Accrual-Based Benefit, or the Actuarial Equivalent thereof as
provided in Section 1.5). No Death Benefit will be payable to the Executive's
Beneficiary upon the death of the Executive after commencement of benefits
hereunder, unless an optional form of payment providing for such payment is in
effect under Section 1.5. Benefits paid under this Section 3.1 shall be in lieu
of any other benefit otherwise payable under this Agreement.

                    (b) BENEFICIARY DESIGNATION PROCEDURE. The Executive may
designate one or more Beneficiaries to receive specified percentages of any
death benefit payments to be paid hereunder. The Executive shall designate any
such Beneficiaries in writing and shall submit such writing to the Treasurer of
the Holding Company. Only designated Beneficiaries alive at the Executive's
death shall be entitled to share in the benefit payments. Absent a contrary
specification by the Executive in writing submitted to the Treasurer of the
Holding Company,

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each Beneficiary alive at the Executive's death (or, in the case of the
Beneficiary's death after the Executive's death, the Beneficiary's estate) shall
share equally in death benefit payments. If no designated Beneficiary is alive
at the Executive's death, his surviving spouse shall be entitled to all death
benefit payments. If the Executive dies leaving neither a designated Beneficiary
nor a surviving spouse, his estate shall be entitled to any death benefit
payments except to the extent specifically provided in this Section 2.6.

PART 3. ADDITIONAL PROVISIONS.

             3.1. RABBI TRUST. Upon a Change in Control, the Holding Company
shall, as soon as possible, but in no event later than 30 days following the
Change in Control, make an irrevocable contribution to the Trust in an amount
that is sufficient, as determined by an actuary appointed by the Trustee, to pay
the Executive or his Beneficiary the full benefits to which he or she would be
entitled pursuant to the terms of this Agreement as of the date on which the
Change in Control occurred assuming that (x) the Accrued Percentage was 100%,
(y) a Terminating Event had occurred with respect to the Executive as of the
date of the Change in Control, and (z) the Board had agreed to pay such benefits
to the Executive or his Beneficiary, on an Actuarial Equivalent basis, as of the
date of the Change in Control. Within the same time period following a Change in
Control, the Holding Company shall make a further irrevocable contribution to
the Trust in an amount sufficient to pay for the Trustee's fees and for
actuarial, accounting, legal and other professional or administrative services
necessary to implement the terms of this Agreement following a Change in
Control. Such amount shall be determined by the Trustee's estimate of its fees
(as provided in the Trust Agreement) and by estimates obtained by the Trustee
from the independent actuaries, accountants, lawyers and other appropriate
professional and administrative personnel who provided such services to the
Trust or the Holding Company immediately before the Change in Control.

             3.2. ALIENABILITY AND ASSIGNMENT PROHIBITION. Neither the
Executive, his surviving spouse nor any other Beneficiary under this Agreement
shall have any power or right to transfer, assign, anticipate, hypothecate,
mortgage, commute, modify or otherwise encumber in advance any of the benefits
payable hereunder nor shall any of said benefits be subject to seizure for the
payment of any debts, judgments, alimony or separate maintenance owed by the
Executive or his Beneficiary, nor be transferable by operation of law in the
event of bankruptcy, insolvency or otherwise. In the event the Executive or any
Beneficiary attempts assignment, commutation, hypothecation, transfer or
disposal of the benefits hereunder, the Holding Company's liabilities shall
forthwith cease and terminate.

             3.3. BINDING OBLIGATION OF HOLDING COMPANY AND ANY SUCCESSOR IN
INTEREST. This Agreement shall bind the Executive and the Holding Company, their
heirs, successors, personal representatives and assigns. The Holding Company
expressly agrees that it shall not merge or consolidate into or with another
entity or sell substantially all of its assets to another bank, firm or person
until such entity, firm or person expressly agrees, in writing, to assume and
discharge the duties and obligations of the Holding Company under this
Agreement.

             3.4. AMENDMENT. During the lifetime of the Executive, this
Agreement may be amended only with the mutual written assent of the Executive
and the Holding Company.

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             3.5. GENERAL. The benefits provided by the Holding Company to the
Executive pursuant to this Agreement are in the nature of a fringe benefit and
shall in no event be construed to affect or limit the Executive's current or
prospective salary increases, cash bonuses or profit-sharing distributions or
credits or his right to participate in or be covered by any qualified or
non-qualified pension, profit-sharing, group, bonus or other supplemental
compensation or fringe benefit plan.

             3.6. HEADINGS. Headings and subheadings in this Agreement are
inserted for reference and convenience only and shall not be deemed a part of
this Agreement.

             3.7. APPLICABLE LAW. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of The
Commonwealth of Massachusetts without regard to its principles of conflicts of
laws.

             3.8. NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The "NAMED FIDUCIARY
AND PLAN ADMINISTRATOR" of this plan shall be First Essex Bancorp until its
removal by the Board. As Named Fiduciary and Plan Administrator, the Holding
Company shall be responsible for the management, control and administration of
the benefits to be provided under this Agreement. The Named Fiduciary may
delegate to others certain aspects of the management and operation
responsibilities of the plan including the employment of advisors and the
delegation of ministerial duties to qualified individuals.

             3.9. CLAIMS PROCEDURE.

                    (a) In the event a dispute arises over benefits under this
Agreement and benefits are not paid to the Executive (or to his Beneficiary in
the case of the Executive's death) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the Plan
Administrator named above within sixty (60) days from the date payments are
refused. The Plan Administrator shall review the written claim and if the claim
is denied, in whole or in part, they shall provide in writing within sixty (60)
days of receipt of such claim their specific reasons for such denial, reference
to the provisions of this Agreement upon which the denial is based and any
additional material or information necessary to perfect the claim. Such written
notice shall further indicate the additional steps to be taken by claimants if a
further review of the claim denial is desired. A claim shall be deemed to have
been denied if the Plan Administrator fails to take any action within the
aforesaid ninety-day period.

                    (b) If claimants desire a second review they shall notify
the Plan Administrator in writing within ninety (90) days of the first claim
denial. Claimants may review this Agreement or any documents relating thereto
and submit any written issues and comments they may feel appropriate. In its
sole discretion, the Plan Administrator shall then review the second claim and
provide a written decision within sixty (60) days of receipt of such claim. This
decision shall likewise state the specific reasons for the decision and shall
include reference to specific provisions of this Agreement upon which the
decision is based.

             3.10. ARBITRATION. Any controversy or claim arising out of or
relating to the Agreement, or the breach thereof, or any failure to agree where
agreement of the parties is necessary pursuant hereto, including the
determination of the scope of this agreement to arbitrate, shall be resolved by
the following procedures:

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                    (a) The parties agree to submit any dispute to final and
binding arbitration administered by the American Arbitration Association (the
"AAA"), pursuant to the Commercial Arbitration Rules of the AAA as in effect at
the time of submission. The arbitration shall be held in Boston, Massachusetts
before a single neutral, independent, and impartial arbitrator (the
"ARBITRATOR").

                    (b) Unless the parties have agreed upon the selection of the
Arbitrator before then, the AAA shall appoint the Arbitrator within thirty (30)
days after the submission to AAA for binding arbitration. The arbitration
hearings shall commence within fifteen (15) days after the selection of the
Arbitrator. Each party shall be limited to two pre-hearing depositions each
lasting no longer than two (2) hours. The parties shall exchange documents to be
used at the hearing no later than ten (10) days prior to the hearing date. Each
party shall have no longer than three (3) hours to present its position, and the
entire proceedings before the Arbitrator shall be on no more than two (2)
hearing days within a two week period. The award shall be made no more than ten
(10) days following the close of the proceeding. The Arbitrator's award shall
not include consequential, exemplary, or punitive damages. The Arbitrator's
award shall be a final and binding determination of the dispute and shall be
fully enforceable in any court of competent jurisdiction. Except in a proceeding
to enforce the results of the arbitration, neither party nor the Arbitrator may
disclose the existence, content, or results of any arbitration hereunder without
the prior written consent of both parties.

             3.11. ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties pertaining to its subject matter and supersedes
all prior and contemporaneous agreements, understandings, negotiations, prior
draft agreements, and discussions of the parties, whether oral or written.

             3.12. INTERPRETATION. Unless otherwise indicated or the context
otherwise requires, throughout this Agreement, references to Sections or
Exhibits refer to Sections of or Exhibits to this Agreement. References to
Sections include subsections, which are part of the related Section (e.g., a
section numbered "Section 5.5.1" would be part of "Section 5.5" and references
to "Section 5.5" would also refer to material contained in the subsection
described as "Section 5.5.1"). The recitals hereto constitute an integral part
of this Agreement. The headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". The phrases "the date of this Agreement", "the date hereof" and
terms of similar import, unless the context otherwise requires, shall be deemed
to refer to the date set forth in the Preamble to this Agreement.

             3.13. EMPLOYMENT. No provision of this Agreement shall be deemed to
restrict or limit any existing employment agreement by and between the Holding
Company and the Executive, nor shall any conditions herein create specific
employment rights to the Executive nor limit the right of the Holding Company to
discharge the Executive with or without Cause. In a similar fashion, no
provision shall limit the Executive's rights to voluntarily terminate his
employment at any time. The benefits provided by this Agreement are not part of
any salary reduction plan or any arrangement deferring a bonus or salary
increase. The Executive has no option to take any current payment or bonus in
lieu of these benefits.

                                       11

<PAGE>

             3.14. NON-COMPETE. In the event that the Executive's employment is
terminated for any reason prior to a Change in Control (as defined in the
Employment Agreement) and the Executive is entitled to receive benefits pursuant
to this Agreement, then during the period from the date of the termination of
the Executive's full-time employment with the Employers until all of the
benefits to which the Executive is entitled under the Agreement have been paid,
the Executive shall not directly or indirectly, whether as owner, partner,
shareholder, consultant, agent, employee, co-venturer, or otherwise, or through
any individual, corporation, association, partnership, estate, trust, or any
other entity or organization, compete in the Bank's market area (defined as all
cities and towns in which the Bank or an affiliate has an office or a branch on
the date of termination and all areas within a ten mile radius of each such
office and branch) with the banking or any other business conducted by the
Employers during the course of his employment, nor will he attempt to hire any
employee of the Employers, assist in such hiring by any other person or entity,
encourage any such employee to terminate his or her relationship with the
Employers, or solicit or encourage any customer of the Employers to terminate
his relationship with the Employers or to conduct with any other person or
entity any business or activity which such customer conducts or could conduct
with the Employers. For purposes of this Section 3.14, the Executive shall not
be deemed to be competing with the Employers if he is employed outside of the
Employers' market area for a bank or a corporation which has its headquarters
outside of the Employers' market area, even if such bank or corporation has a
branch or office in the Employers' market area.

             3.15. COMMUNICATIONS. All notices and other communications
hereunder shall be in writing and shall given by hand, sent by facsimile
transmission with confirmation of receipt requested, sent via a reputable
overnight courier service with confirmation of receipt requested, or mailed by
registered or certified mail (postage prepaid and return receipt requested) to
the parties at the their respective addresses set forth below (or at such other
address for a party as shall be specified by like notice), and shall be deemed
given on the date on which delivered by hand or otherwise on the date of receipt
as confirmed:

                                       12

<PAGE>

                            To the Employers:

                                   First Essex Bancorp, Inc.
                                   71 Main Street
                                   Post Office Box 2070
                                   Andover, Massachusetts 01810
                                   Attention: Chairman

                            To the Executive:

                                   Brian W. Thompson
                                   ___________________________
                                   ___________________________
                                   ___________________________

         IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal, as of the date first written above.

                                          FIRST ESSEX BANCORP, INC.

                                          By:
                                             ----------------------------------
                                               Title

                                          FIRST ESSEX BANK, FSB

                                          By:
                                             ----------------------------------
                                               Title

                                           ------------------------------------
                                            Brian W. Thompson

                                       13
<PAGE>

                          BENEFICIARY DESIGNATION FORM

PRIMARY DESIGNATION:

Name                                        Relationship

_____________________________________       _________________________
_____________________________________       _________________________
_____________________________________       _________________________

CONTINGENT DESIGNATION:

_____________________________________       _________________________
_____________________________________       _________________________
_____________________________________       _________________________

FORM OF PAYMENT

                  ?        Lump Sum (but only with the permission of the Board)
                  ?        Life Annuity
                  ?        Joint and 50% Survivor Annuity
                  ?        Joint and 100% Survivor Annuity

_____________________________________       _________________________
Brian W. Thompson                           Date

                                       14<PAGE>

                                                                  EXHIBIT 10.18

                            BENEFIT ENHANCEMENT PLAN

         This Agreement, made and entered into as of the ____ day of
____________, 2000 by and between FIRST essex Bank, FSB, a federal saving bank,
with its main office in Lawrence, Massachusetts (the "BANK"), First essex
Bancorp, Inc. a Delaware corporation (the "HOLDING COMPANY") and the parent
company of the Bank, and [William F. Burke] [Wayne C. Golon] [John M.
DiGaetano], a key employee and executive of the Bank (the "EXECUTIVE").

                                   WITNESSETH.

         WHEREAS, the Executive is a valuable, key employee of the Bank; and

         WHEREAS, because of the Executive's experience, knowledge of the
affairs of the Bank, and reputation and contacts in the banking industry, the
Bank deems the Executive's continued employment with the Bank important for its
future growth; and

         WHEREAS, it is the desire of the Bank and in its best interest that the
Executive's services be retained; and

         WHEREAS, in order to induce the Executive to continue in the employ of
the Bank, the Bank has entered into this Agreement to provide him or his
beneficiaries with certain benefits in accordance with the terms and conditions
hereinafter set forth (the "Plan"); and

         WHEREAS, the Bank desires to establish a trust (as defined in Section
1.23, the "TRUST") and to contribute to the Trust certain assets that shall be
held therein, subject to the terms of the Trust, until such time as benefits
have been paid to the Executive and his beneficiaries as specified herein;

         NOW, THEREFORE, in consideration of services performed in the past and
to be performed in the future as well as of the mutual promises and covenants
herein contained, it is agreed as follows:

PART 1. DEFINITIONS

         1.1. ACCRUAL-BASED BENEFIT shall mean benefit of the type chosen by the
Executive pursuant to Section 3.1 which is the Actuarial Equivalent of the
aggregate of all amounts accrued by the Bank or the Holding Company between the
date of this Agreement and the date of determination for the cost of the
benefits payable under this Agreement.

         1.2. ACTUARIAL EQUIVALENT shall mean a benefit of equivalent current
value to the benefit which could otherwise have been provided to the Executive,
computed on the basis of the discount rates, mortality tables and other
assumptions then being used by SBERA in determining the actuarial equivalent of
payments being made by SBERA to its Pension Plan beneficiaries.

         1.3. ANNUAL ANNUITY EQUIVALENT (a) for the Pension Plan shall be equal
to the annual benefit payable under the Pension Plan if all Pension Plan
benefits were being paid as a single life annuity; and (b) for a defined
contribution plan shall be equal to the annual benefit payable from a single
life annuity on the Executive's life from a company holding at least an AA
rating from Moody's, Standard & Poor's or an equivalent rating service. For
purposes of this section, the

                                      -1-
<PAGE>

amount available to invest in said annuity shall be assumed to be the total of
the employer's matching contributions to the defined contribution plan on the
Executive's behalf, calculated as all amounts actually contributed by the
employer as matching contributions to the defined contribution plan plus
earnings.

         1.4. BENEFICIARY shall mean the person or persons designated by the
Executive in accordance with Section 3.2 hereof to receive benefits under this
Agreement after the death of the Executive.

         1.5. BENEFIT LIMITATION shall mean the limitation imposed on amounts
payable to certain participants by a retirement plan imposed by Section 415 of
the Code.

         1.6. BOARD OR BOARD OF DIRECTORS shall mean the Board of Directors of
the Bank, or, where the context requires, the Board of Directors of the Holding
Company.

         1.7. CALENDAR YEAR. Any reference to "Calendar Year" shall mean a
calendar year from January 1 to December 31.

         1.8. CHANGE IN CONTROL shall have the meaning defined in that certain
Special Termination Agreement by and among the Holding Company, the Bank, and
the Executive dated as of the 1st day of January, 1994, as amended as of the
16th day of December, 1999.

         1.9. CODE shall mean the Internal Revenue Code of 1986, as amended.

         1.10. COMPENSATION shall mean all compensation reported on the
Executive's Form W-2 (Wages, tips, other compensation box) for a Calendar Year,
plus amounts contributed by the Executive during said Calendar Year pursuant to
a salary reduction agreement which is not includable in the gross income of the
Executive under Sections 125, 402(e) (3) or 402(h) of the Code.

         1.11. COMPENSATION CAP shall mean the limit imposed by Section
401(a)(17) of the Code on the maximum amount of compensation that may be taken
into account by a retirement plan in determining retirement benefits. Such
Section 401(a)(17) varies in amount for different tax years.

         1.12. DISABILITY. The Executive shall be considered to have a
"disability" and be "disabled" when he is no longer capable of performing the
material aspects of his employment duties for the Bank as a result of physical
and/or mental impairment. The Executive shall be considered to no longer have a
"disability" at such time as he returns to work in a position with
responsibilities comparable to those inherent in the position in which he as
employed on the date he became "disabled."

         1.13. EFFECTIVE DATE. The Effective Date of this Agreement shall be
____________, 2000.

         1.14. FINAL AVERAGE COMPENSATION shall mean the average of the
Compensation of the Executive for the three Calendar Years (out of his final
five Calendar Years of employment with the Bank) during which his Compensation
was the highest.

                                      -2-
<PAGE>

         1.15. GOOD REASON shall mean any Terminating Event described in Section
1.21(b).

         1.16. NORMAL BEP BENEFIT. The Normal BEP Benefit shall be a single life
annuity (payable in equal monthly installments commencing on the Normal
Retirement Date and continuing for the Executive's life) providing an annual
benefit in an amount equal to the difference between the Annual Annuity
Equivalent of the benefits that would have been payable to the Executive under
the Retirement Plans calculated as if the Compensation Cap and the Benefit
Limitation had been ignored in calculating such benefits, and the actual Annual
Annuity Equivalent payable to the Executive under the Retirement Plans. In each
case benefits shall be calculated on the assumption that Retirement Plan
benefits were being paid as a single life annuity. As provided in Section 3.1,
the Executive may elect to receive the Actuarial Equivalent of such single life
annuity paid in a different form, and under certain circumstances provided in
this Agreement, the Executive may elect to accelerate the date of payment of the
benefit payable under this Agreement.

         1.17. NORMAL RETIREMENT AGE. Normal Retirement Age shall mean the date
on which the Executive attains age sixty-five (65).

         1.18. NORMAL RETIREMENT DATE shall mean the later to occur of (a) the
date upon which the Executive attains the Normal Retirement Age and (b) the date
on which the Executive ceases to be actively employed as an executive officer by
the Holding Company.

         1.19. PENSION PLAN shall mean the SBERA Pension Plan maintained by the
Bank for the benefit of employees of the Bank and any successor thereto.

         1.20. RETIREMENT PLANS shall mean the Pension Plan and any defined
contribution plans (including 401(k) plans) maintained by the Bank or the
Holding Company during the Executive's employment.

         1.21. SBERA shall mean the Savings Banks Employees Retirement
Association.

         1.22. TERMINATING EVENT shall mean any of the following if they occur
within two years after a Change in Control:

                  (a) TERMINATION BY BANK OR HOLDING COMPANY. Termination by the
Holding Company or the Bank of the Executive's employment for any reason
whatsoever other than (i) the Executive's death or (ii) for "Cause" (as such
term is defined in, and in accordance with the procedures set forth in, Section
2.6), or

                  (b) RESIGNATION BY EXECUTIVE. Resignation of the Executive
from the employ of the Bank and the Holding company, while the Executive is not
receiving payments or benefits from the Holding Company or the Bank by reason of
the Executive's disability, following the occurrence of any of the following
events

                           (1) a significant change in the nature or scope of
         the Executive's responsibilities, authorities, powers, functions or
         duties from the responsibilities, authorities, powers, functions or
         duties exercised by the Executive immediately prior to the Change in
         Control; or

                                      -3-
<PAGE>

                           (2) a determination by the Executive that, as a
         result of a Change in Control, he is unable to exercise the
         responsibilities, authorities, powers, functions or duties exercised by
         the Executive immediately prior to such Change in Control; or

                           (3) a reduction in the Executive's annual base salary
         as in effect on the date hereof or as the same may be increased from
         time to time; or

                           (4) the relocation of the Employers' offices at which
         the Executive is principally employed immediately prior to the date of
         the Change in Control to a location more than 25 miles from Andover,
         Massachusetts, or either Employer's requiring the Executive to be based
         anywhere other than the Employers' offices at such location; or

                           (5) the failure by either Employer to pay to the
         Executive any portion of his current compensation or to pay to the
         Executive any portion of an installment of deferred compensation under
         any deferred compensation under any deferred compensation program of
         either Employer within seven (7) days of the date such compensation is
         due; or

                           (6) the failure by either Employer to continue in
         effect any material compensation, incentive, bonus or benefit plan in
         which the Executive participates immediately prior to the Change in
         Control, unless an equitable arrangement (embodied in an ongoing
         substitute or alternative plan) has been made with respect to such
         plan, or the failure by either Employer to continue the Executive's
         participation therein (or in such substitute or alternative plan) on a
         basis not materially less favorable, both in terms of the amount of
         benefits provided and the level of the Executive's participation
         relative to other participants, as existed at the time of the Change in
         Control; or

                           (7) the failure by either Employer to continue to
         provide the Executive with benefits substantially similar to those
         available to the Executive under any of either Employer's life
         insurance, medical, health and accident, or disability plans or any
         other material benefit plans in which the Executive as participating at
         the time of the Change in Control, the taking of any action by either
         Employer which would directly or indirectly materially reduce any such
         benefits, or the failure by either Employer to provide the Executive
         with the number of paid vacation days to which the Executive is
         entitled on the basis of years of service with the Employers in
         accordance with the Employers' normal vacation policy in effect at the
         time of the Change in Control; or

                           (8) the failure of either Employer to obtain a
         satisfactory agreement from any successor to assume and agree to
         perform this Agreement.

         1.23. TRUST AND TRUSTEE. Trustee shall mean the trustee to be appointed
under that certain Trust Agreement to be established by the Bank in connection
with this Agreement.

PART 2. BENEFITS

         2.1. TERMINATION OF SERVICE AT NORMAL RETIREMENT DATE. If the Executive
terminates service as an employee with the Bank on or after the Normal
Retirement Date (other than for "Cause", as such term is defined in Section
2.6), he shall receive a Normal BEP Benefit.

                                      -4-
<PAGE>

         2.2. TERMINATION OF SERVICE BEFORE NORMAL RETIREMENT DATE. If the
Executive's service as an employee of the Bank terminates (other than by reason
of death (which is provided for in Section 2.4) and other than for "Cause" (as
such term is defined in Section 2.6) before his Normal Retirement Date, he shall
be entitled to receive his Accrual-Based Benefit not later than 60 days after
termination of employment.

         2.3. BENEFITS UPON CHANGE IN CONTROL.

                  (a) If within two years following a Change in Control of the
Bank a Terminating Event occurs with respect to the Executive, the Executive
will be entitled to receive his Normal BEP Benefit, calculated as if the
following had occurred: (a) the Executive continued his employment with the Bank
until the Normal Retirement Date, (b) the annual rate of his base compensation
with the Bank in effect at the time of the termination of employment was
increased, on a compound basis, by 4% on each January 1 occurring after the date
of termination of employment and prior to the Normal Retirement Date, (c) the
Executive's annual compensation was paid in twenty-six equal bi-weekly
installments, and (d) the foregoing assumed facts applied in determining the
benefits payable under the Pension Plan. The Normal BEP Benefit, as so
calculated, will generally be payable at the Normal Retirement Date, provided
that, with the consent of the Board of Directors, an Actuarial Equivalent of
such benefit may be paid (or commenced) to the Executive or former Executive at
an earlier date. In the event that the Executive requests permission to commence
receiving his Benefit before his Normal Retirement Date and the Board refuses to
grant permission for such early commencement of payments, the Executive may
request the Board to reconsider its decision. If the Board has not agreed to
permit such early payment by a date which is 15 days after the request for
reconsideration is made, the Executive shall have the right to receive upon
written application to the Bank the Actuarial Equivalent of such Normal BEP
Benefit, less a penalty of 7%.

                  (b) Upon a Change in Control, the Bank shall, as soon as
possible, but in no event later than 30 days following the Change in Control,
make an irrevocable contribution to the Trust in an amount that is sufficient,
as determined by an actuary appointed by the Trustee, to pay the Executive or
his Beneficiary the full benefits to which he or she would be entitled pursuant
to the terms of this Agreement as of the date on which the Change in Control
occurred assuming that (x) a Terminating Event had occurred with respect to the
Executive as of the date of the Change in Control, and (y) the Board had agreed
to pay such benefits to the Executive or his Beneficiary, on an Actuarial
Equivalent basis, as of the date of the Change in Control. Within the same time
period following a Change in Control, the Bank shall make a further irrevocable
contribution to the Trust in an amount sufficient to pay for the Trustee's fees
and for actuarial, accounting, legal and other professional or administrative
services necessary to implement the terms of this Agreement following a Change
in Control. Such amount shall be determined by the Trustee's estimate of its
fees (as provided in the Trust Agreement) and by estimates obtained by the
Trustee from the independent actuaries, accountants, lawyers and other
appropriate professional and administrative personnel who provided such services
to the Trust or the Bank immediately before the Change in Control.

                  (c) If the Executive would be entitled to receive payment of a
benefit under this Section 2.3 and under Section 2.2, the provisions of Section
2.2 shall not apply and this Section 2.3 shall be controlling.

                                      -5-
<PAGE>

         2.4. DEATH BENEFIT. If (i) the Executive dies prior to the termination
of his employment with the Holding Company and the Bank or (ii) the Executive's
employment with the Bank and the Holding Company has been terminated by reason
of his having become disabled and he subsequently dies prior to the commencement
of payment of any other benefits under this Agreement, then (in lieu of the
benefits otherwise payable under this Agreement) a death benefit shall be
payable to the Executive's Beneficiary not later than sixty days following the
death of the Executive. The death benefit shall be a single lump sum
distribution payable not later than 60 days after the date of his death and
shall be an amount equal to the Accrual-Based Benefit determined as of the date
of the Executive's death.

         2.5. NO BENEFITS UPON DISCHARGE FOR CAUSE. Should the Executive be
discharged for Cause in accordance with the procedures set forth in Section 2.6
at any time (before or after his Normal Retirement Date), all Benefits under
Part 2 of this Agreement shall be forfeited. If a dispute arises as to discharge
for "Cause", such dispute shall be resolved by arbitration as set forth in
Section 3.11 of this Agreement.

         2.6. DISCHARGE FOR CAUSE. The term "Cause" shall mean the Executive's
deliberate dishonesty with respect to the Holding Company or the Bank or any
subsidiary or affiliate thereof; conviction of a crime involving moral
turpitude; or gross and willful failure to perform (other than on account of a
medically determinable disability) a substantial portion of the Executive's
duties and responsibilities as an officer of the Holding Company or the Bank,
which failure continues for more than thirty days after written notice given to
the Executive pursuant to a two-thirds vote of all of the members of the Board
then in office, such vote to set forth in reasonable detail the nature of such
failure. Notwithstanding the foregoing, the Executive shall not be deemed to
have been discharged for "Cause" unless and until there shall have been
delivered to him a copy of a certification by the Clerk of the Holding Company
or the Bank that two-thirds of the entire Board of Directors of the Holding
Company or the Bank found in good faith that the Executive was guilty of conduct
which is deemed to be Cause as defined in this Section 2.6 and specifying the
particulars thereof, after reasonable notice to the Executive setting forth in
reasonable detail the nature of such Cause and an opportunity for him together
with his counsel, to be heard before the Board.

PART 3. ADDITIONAL PROVISIONS

         3.1. ALTERNATIVE FORMS OF BENEFIT PAYMENT. Upon becoming subject to the
Plan, the Executive shall elect the form of payment by which his benefit is to
be paid, PROVIDED that such form is a permitted form of benefit under the SBERA
Pension Plan. In any Calendar Year prior to the year in which amounts become
payable hereunder, and at least six months prior to the Executive's termination
of employment, the Executive may change the form of payment he has elected.
Acceptable forms of payment presently include:

                  o     Lump Sum (but only with the permission of the Board)

                  o     Life Annuity

                  o     Joint and 50% Survivor Annuity or Joint and 100%
                        Survivor Annuity

         3.2. BENEFICIARY DESIGNATION PROCEDURE. The Executive may designate one
or more Beneficiaries to receive specified percentages of any death benefit
payments to be paid hereunder.

                                      -6-
<PAGE>

The Executive shall designate any such Beneficiaries in writing and shall submit
such writing to the President of the Bank. Only designated Beneficiaries alive
at the Executive's death shall be entitled to share in the benefit payments.
Absent a contrary specification by the Executive in writing submitted to the
President of the Bank, each Beneficiary alive at the Executive's death (or, in
the case of the Beneficiary's death after the Executive's death, the
Beneficiary's estate) shall share equally in death benefit payments. If no
designated Beneficiary is alive at the Executive's death, his surviving spouse
shall be entitled to all death benefit payments. If the Executive dies leaving
neither a designated Beneficiary nor a surviving spouse, his estate shall be
entitled to any death benefit payments. Except to the extent specifically
provided in this Section 3.2, the Executive may not, without the written consent
of the Bank, assign to any individual, trust or other organization, any right
title or interest in the Insurance Policy nor any rights, options, privileges or
duties created under this Agreement.

         3.3. ALIENABILITY AND ASSIGNMENT PROHIBITION. Neither the Executive,
his surviving spouse nor any other Beneficiary under this Agreement shall have
any power or right to transfer, assign, anticipate, hypothecate, mortgage,
commute, modify or otherwise encumber in advance any of the benefits payable
hereunder nor shall any of said benefits be subject to seizure for the payment
of any debts, judgments, alimony or separate maintenance owed by the Executive
or his Beneficiary, nor be transferable by operation of law in the event of
bankruptcy, insolvency or otherwise. In the event the Executive or any
Beneficiary attempts assignment, commutation, hypothecation, transfer or
disposal of the benefits hereunder, the Bank's liabilities shall forthwith cease
and terminate.

         3.4. BINDING OBLIGATION OF BANK AND ANY SUCCESSOR IN INTEREST. This
Agreement shall bind the Executive and the Bank, their heirs, successors,
personal representatives and assigns. The Bank expressly agrees that it shall
not merge or consolidate into or with another bank or sell substantially all of
its assets to another bank, firm or person until such bank, firm or person
expressly agrees, in writing, to assume and discharge the duties and obligations
of the Bank under this Agreement.

         3.5. AMENDMENT. During the lifetime of the Executive, this Agreement
may be amended only with the mutual written assent of the Executive and the
Bank.

         3.6. GENERAL. The benefits provided by the Bank to the Executive
pursuant to this Agreement are in the nature of a fringe benefit and shall in no
event be construed to affect or limit the Executive's current or prospective
salary increases, cash bonuses or profit-sharing distributions or credits or his
right to participate in or be covered by any qualified or non-qualified pension,
profit-sharing, group, bonus or other supplemental compensation or fringe
benefit plan.

         3.7. HEADINGS. Headings and subheadings in this Agreement are inserted
for reference and convenience only and shall not be deemed a part of this
Agreement.

         3.8. APPLICABLE LAW. This Agreement shall be governed by, and construed
and enforced in accordance with, the substantive laws of The Commonwealth of
Massachusetts without regard to its principles of conflicts of laws.

         3.9. NAMED FIDUCIARY AND PLAN ADMINISTRATOR. The "Named Fiduciary and
Plan Administrator" of this plan shall be the Bank until another administrator
is chosen by the Board.

                                      -7-
<PAGE>

As Named Fiduciary and Plan Administrator, the Bank shall be responsible for the
management, control and administration of the benefits to be provided under this
Agreement. The Named Fiduciary may delegate to others certain aspects of the
management and operation responsibilities of the plan including the employment
of advisors and the delegation of ministerial duties to qualified individuals.

         3.10. CLAIMS PROCEDURE

                  (a) In the event a dispute arises over benefits under this
Agreement and benefits are not paid to the Executive (or to his Beneficiary in
the case of the Executive's death) and such claimants feel they are entitled to
receive such benefits, then a written claim must be made to the Plan
Administrator named above within sixty (60) days from the date payments are
refused. The Plan Administrator shall review the written claim and if the claim
is denied, in whole or in part, they shall provide in writing within sixty (60)
days of receipt of such claim their specific reasons for such denial, reference
to the provisions of this Agreement upon which the denial is based and any
additional material or information necessary to perfect the claim. Such written
notice shall further indicate the additional steps to be taken by claimants if a
further review of the claim denial is desired. A claim shall be deemed to have
been denied if the Plan Administrator falls to take any action within the
aforesaid ninety-day period.

                  (b) If claimants desire a second review they shall notify the
Plan Administrator in writing within ninety (90) days of the first claim denial.
Claimants may review this Agreement or any documents relating thereto and submit
any written issues and comments they may feel appropriate. In its sole
discretion, the Plan Administrator shall then review the second claim and
provide a written decision within sixty (60) days of receipt of such claim. This
decision shall likewise state the specific reasons for the decision and shall
include reference to specific provisions of this Agreement upon which the
decision is based.

         3.11. ARBITRATION. Any controversy or claim arising out of or relating
to the Agreement, or the breach thereof, or any failure to agree where agreement
of the parties is necessary pursuant hereto, including the determination of the
scope of this agreement to arbitrate, shall be resolved by the following
procedures:

                  (a) The parties agree to submit any dispute to final and
binding arbitration administered by the American Arbitration Association (the
"AAA"), pursuant to the Commercial Arbitration Rules of the AAA as in effect at
the time of submission. The arbitration shall be held in Boston, Massachusetts
before a single neutral, independent, and impartial arbitrator (the
"Arbitrator").

                  (b) Unless the parties have agreed upon the selection of the
Arbitrator before then, the AAA shall appoint the Arbitrator within thirty (30)
days after the submission to AAA for binding arbitration. The arbitration
hearings shall commence within fifteen (15) days after the selection of the
Arbitrator. Each party shall be limited to two pre-hearing depositions each
lasting no longer than two (2) hours. The parties shall exchange documents to be
used at the hearing no later than ten (10) days prior to the hearing date. Each
party shall have no longer than three (3) hours to present its position, and the
entire proceedings before the Arbitrator shall be on no more than two (2)
hearing days within a two week period. The award shall be made no more than ten
(10) days following the close of the proceeding. The Arbitrator's award shall
not include

                                      -8-

<PAGE>

consequential, exemplary, or punitive damages. The Arbitrator's award shall be a
final and binding determination of the dispute and shall be fully enforceable in
any court of competent jurisdiction. Except in a proceeding to enforce the
results of the arbitration, neither party nor the Arbitrator may disclose the
existence, content, or results of any arbitration hereunder without the prior
written consent of both parties.

         3.12. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties pertaining to its subject matter and supersedes all prior
and contemporaneous agreements, understandings, negotiations, prior draft
agreements, and discussions of the parties, whether oral or written.

         3.13. INTERPRETATION. When a reference is made in this Agreement to
Sections or Exhibits, such reference shall be to a Section of or Exhibit to this
Agreement unless otherwise indicated. Unless the context otherwise requires,
throughout this Agreement, references to Sections refer to Sections of this
Agreement. References to Sections include subsections, which are part of the
related Section (e.g., a section numbered "Section 5.5.1" would be part of
"Section 5.5" and references to "Section 5.5" would also refer to material
contained in the subsection described as "Section 5.5.1"). The recitals hereto
constitute an integral part of this Agreement. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The phrases "the date of this
Agreement", "the date hereof" and terms of similar import, unless the context
otherwise requires, shall be deemed to refer to the date set forth in the
Preamble to this Agreement.

         3.14. EMPLOYMENT. No provision of this Agreement shall be deemed to
restrict or limit any existing employment agreement by and between the Holding
Company or the Bank and the Executive, nor shall any conditions herein create
specific employment rights to the Executive nor limit the right of the Holding
Company or the Bank to discharge the Executive with or without Cause or to limit
the access of the Executive to the premises or assets of the Bank or the Holding
Company. In a similar fashion, no provision shall limit the Executive's rights
to voluntarily terminate his employment at any time.

         3.15. COMMUNICATIONS. All notices and other communications hereunder
shall be in writing and shall given by hand, sent by facsimile transmission with
confirmation of receipt requested, sent via a reputable overnight courier
service with confirmation of receipt requested, or mailed by registered or
certified mail (postage prepaid and return receipt requested) to the parties at
the their respective addresses set forth below (or at such other address for a
party as shall be specified by like notice), and shall be deemed given on the
date on which delivered by hand or otherwise on the date of receipt as
confirmed:

                         To the Holding Company:

                               First Essex Bancorp, Inc.
                               71 Main Street
                               Post Office Box 2070
                               Andover, Massachusetts 01810
                               Attention:

                                      -9-

<PAGE>

                         To the Executive:

                               William F. Burke

                               ___________________

                               ___________________

         IN WITNESS WHEREOF, the parties have executed this Agreement as an
instrument under seal, as of the date first written above.

                                   FIRST ESSEX BANK, FSB.

                                   By:      ______________________________

                                   Name:    ______________________________

                                   Title:   ______________________________

                                   _____________________________
                                   [Officer's name]

The undersigned hereby guarantees the
obligations of First Essex Bank
under the foregoing agreement

FIRST  ESSEX BANCORP, INC.

By:      ______________________________

Name:    ______________________________

Title:   ______________________________

                                      -10-

<PAGE>

                          BENEFICIARY DESIGNATION FORM

Primary Designation:

        Name                                      Relationship

____________________________________      _______________________

____________________________________      _______________________

____________________________________      _______________________

Contingent Designation:
____________________________________      _______________________

____________________________________      _______________________

____________________________________      _______________________

Form of Payment

                           Lump Sum (but only with the permission of the Board)

                           Life Annuity

                           Joint and 50% Survivor Annuity

                           Joint and 100% Survivor Annuity

____________________________________      _______________________
                                          Date

                                      -11-

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