EXHIBIT 10.6

                EMPLOYMENT AGREEMENT WITH CHRISTOPHER J. FLYNN



                                 GRANITE BANK

                             EMPLOYMENT AGREEMENT


      This Agreement is made effective as of the 31st day of October, 
1997 by and between Granite Bank, a New Hampshire bank (the "Bank"), 
with its principal administrative office at 122 West Street, Keene, New 
Hampshire 03431-0627, and Christopher J. Flynn (the "Executive").  Any 
reference to "Company" herein shall mean Granite State Bankshares, Inc., 
the stock holding company parent of the Bank or any successor thereto.

      WHEREAS, the Bank and Company entered into an Agreement and Plan 
of Reorganization (the "Merger Agreement") with Primary Bank on April 
29, 1997; and

      WHEREAS, Executive is willing to forego payment under the 
Employment Agreement currently in effect by and between Primary Bank and 
Executive as a result of the Merger Agreement; and

      WHEREAS, the Bank wishes to assure itself of the services of 
Executive for the period provided in this Agreement; and

      WHEREAS, Executive is willing to serve in the employ of the Bank 
on a full-time basis for said period.

      NOW, THEREFORE, in consideration of the mutual covenants herein 
contained, and upon the other terms and conditions hereinafter provided, 
the parties hereby agree as follows:

1.      POSITION AND RESPONSIBILITIES

      During the period of his employment hereunder, Executive agrees to 
serve as President of the Bank.  The Executive shall render 
administrative and management services to the Bank such as are 
customarily performed by persons in a similar executive capacity.  
During said period, Executive also agrees to serve, if elected, as an 
officer and director of any subsidiary or affiliate of the Bank. 
Pursuant to the Merger Agreement, and as of the date hereof, Executive 
shall be elected to the Board of Directors of the Bank and the Company.

2.      TERMS AND DUTIES

      (a)      The period of Executive's employment under this Agreement 
shall begin as of the date first above written and shall continue for a 
period of thirty-six (36) full calendar months thereafter.  During said 
term the Executive shall perform the normal and customary duties 
associated with the position of  President. The board of directors of 
the Bank ("Board") will review the Agreement and the Executive's 
performance annually for the purpose of determining whether to extend 
the Agreement and, unless the Board determines that there exists some 
basis not to extend this Agreement, this Agreement shall be extended for 
an additional year, so that the remaining term shall be thirty-six (36) 
months.  Nothing in this provision shall be interpreted as restricting 
the Bank's right to remove Executive for Cause in accordance with 
Section 7 of this Agreement, or to remove Executive for any reason and 
pay Executive the benefits set forth in Section 4 or 5, as applicable.

      (b)      During the period of his employment hereunder, except for 
periods of absence occasioned by illness,  reasonable vacation periods, 
and reasonable leaves of absence, Executive shall devote substantially 
all his business time, attention, skill, and efforts to the faithful 
performance of his duties hereunder including activities and services 
related to the organization, operation and management of the Bank; 
provided, however, that, with the approval of the Board, as evidenced by 
a resolution of such Board, from time to time, Executive may serve, or 
continue to serve, on the boards of directors of, and hold any other 
offices or positions in, business companies or business organizations, 
which, in such Board's judgment, will not present any conflict of 
interest with the Bank, or materially affect the performance of 
Executive's duties pursuant to this Agreement (it being understood that 
membership in social, religious, charitable, educational, or similar 
organizations does not require Board approval pursuant to this Section 
2(b)).

3.      COMPENSATION AND REIMBURSEMENT

      (a)      The compensation specified under this Agreement shall 
constitute the salary and benefits paid for the duties described in 
Section 2(b).  The Bank shall pay Executive as compensation a salary of 
not less than $205,000 per year ("Base Salary").  Such Base Salary shall 
be payable bimonthly.  During the period of this Agreement, Executive's 
Base Salary shall be reviewed at least annually.   Such review shall be 
conducted by a Committee designated by the Board, and the Board may 
increase, but not decrease, Executive's Base Salary (any increase in 
Base Salary shall become the "Base Salary" for purposes of this 
Agreement).  In addition to the Base Salary provided in this Section 
3(a), the Bank shall provide Executive with all such other benefits as 
are provided uniformly to full-time officers of the Bank.  Base salary 
shall include any amounts of compensation deferred by Executive under a 
qualified plan maintained by the Bank.

      (b)      Executive will be entitled to participate in or receive 
benefits under any employee benefit plans including but not limited to, 
retirement plans, supplemental retirement plans, pension plans, 
profit-sharing plans, health-and-accident plans, medical coverage or any 
other employee benefit plan or arrangement made available by the Bank in 
the future to its senior executives and key management employees, 
subject to and on a basis consistent with the terms, conditions and 
overall administration of such plans and arrangements.  Executive will 
be entitled to incentive compensation and bonuses as provided in any 
plan of the Bank in which Executive is eligible to participate.  Nothing 
paid to the  Executive under any such plan or arrangement will be deemed 
to be in lieu of other compensation to which the Executive is entitled 
under this Agreement.  The Bank shall provide Executive with an annual 
allowance toward any dues, initiation fees, and/or assessments required 
to maintain the Executive as a member of a country club in the Bank's 
market area, and shall provide him with the use of a Bank-owned, late 
model automobile (as to which the Bank pay, or reimburse Executive for, 
all maintenance costs related to usage for business purposes).

      (c)      In addition to the Base Salary provided for by this Section 
3(a), the Bank shall pay or reimburse Executive for all reasonable 
travel and other reasonable expenses incurred by Executive performing 
his obligations under this Agreement and may provide such additional 
compensation in such form and such amounts as the Board may from time to 
time determine in accordance with standards set by the Board of 
Directors.

4.      PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION

      The provisions of this Section shall in all respects be subject to 
the terms and conditions stated in Sections 9 and 10.

        (a)     The provisions of this Section shall apply upon the 
occurrence of an Event of Termination (as herein defined) during the 
Executive's term of employment under this Agreement.  As used in this 
Agreement, an "Event of Termination" shall mean and include any one or 
more of the following:

      (i) the termination by the Bank of Executive's full-time 
employment hereunder for any reason other than (A) Disability or 
Retirement, as defined in Section 6 hereof, or Death, (B) following a 
Change in Control, as defined in Section 5(a) hereof, or (C) Termination 
for Cause as defined in Section 7 hereof;  or

      (ii) Executive's resignation from the Bank's employ, upon any:

          (A)     failure to elect or reelect or to appoint or 
reappoint Executive as President during the term of this 
Agreement in accordance with Section 2(a) of this Agreement,

          (B)     without Executive's written consent, a material change 
in Executive's function, duties, or responsibilities, which 
change would cause Executive's position to become one of 
lesser responsibility, importance, or scope from the 
position and attributes thereof described in Section 1, 
hereof,

          (C)     a relocation of Executive's principal place of 
employment by more than 50 miles from its location at the 
effective date of this Agreement, or a material reduction in 
the benefits and perquisites to the Executive from those 
being provided as of the effective date of this Agreement,

          (D)    liquidation or dissolution of the Bank or Company 
other than liquidations or dissolutions that are caused by 
reorganizations that do not affect the status of Executive, 
or

          (E)     breach of this Agreement by the Bank. 

      Upon the occurrence of any event described in clauses (ii) (A), 
(B), (C), (D) or (E), of this Section 4(a), Executive shall have the 
right to elect to terminate his employment under this Agreement by 
resignation upon thirty (30) days prior written notice which must be 
given by Executive within a reasonable period of time not to exceed four 
calendar months after the initial event giving rise to said right to 
elect, which shall be deemed to constitute an "Event of Termination."  
Other than as set forth in the preceding sentence, the voluntary 
resignation of Executive from the Bank shall not constitute an Event of 
Termination.

      (b)      Upon the occurrence of an Event of Termination, on the Date 
of Termination, as defined in Section 8, the Bank shall pay Executive, 
or, in the event of his subsequent death, his beneficiary or 
beneficiaries, or his estate, as the case may be, as severance pay or 
liquidated damages, or both, a sum equal to the Base Salary due for the 
remaining term of the Agreement; provided however, that if the Bank is 
not in compliance with its minimum capital requirements or if such 
payments would cause the Bank's capital to be reduced below its minimum 
capital requirements, such payments shall be deferred until such time as 
the Bank is in capital compliance.  At the election of the Executive, 
which election is to be made on an annual basis during the month of 
January, and which election is irrevocable for the year in which made 
and upon the occurrence of an Event of Termination, any payments shall 
be made in a lump sum or paid monthly during the remaining term of this 
Agreement following the Executive's termination.  In the event that no 
election is made, payment to the Executive will be made on a monthly 
basis during the remaining term of this Agreement. 

      (c)      Upon the occurrence of an Event of Termination, the Bank, in 
its sole discretion, shall cause Executive  to be continued under the 
Bank's existing employee benefit plans, life, medical, dental and 
disability coverage substantially identical to the coverage maintained 
by the Bank for Executive prior to his termination, except to the extent 
such coverage may be changed in its application to all Bank employees, 
or if coverage under the Bank's existing plans is unavailable, the Bank 
shall pay the cost of providing Executive with substantially equivalent 
covererage. Such coverage shall cease upon the expiration of the 
remaining term of this Agreement, or upon the date that Executive 
obtains employment.

      (d)      Upon the occurrence of an Event of Termination, the 
Executive will be entitled to receive benefits due him and accrued 
pursuant to any retirement, incentive, profit sharing, bonus, 
performance, disability or other employee benefit plan maintained by the 
Bank.

      (e)      If it is determined that the Bank has breached the terms of 
this Agreement, the only remedy to which Executive is entitled is to 
receive the payments and benefits as set forth in this Section 4.

      (f)      Apart from the right granted to Executive to voluntary 
resign as set forth in (a) above, Executive shall have the right upon 
thirty (30) days written notice to the Bank to terminate the Agreement 
("Voluntary Termination").  Such Voluntary Termination shall not be 
deemed to constitute an Event of Termination as defined above; however, 
Executive shall be entitled to receive a lump sum payment from the Bank, 
upon the effective date of the Voluntary Termination, in an amount equal 
to Base Salary.
 
5.      CHANGE IN CONTROL

      (a)      No benefit shall be payable under this Section 5 unless 
there shall have been a Change in Control of the Bank or Company, as set 
forth below.  For purposes of this Agreement, a "Change in Control" of 
the Bank or Company shall mean an event of a nature that: (i) would be 
required to be reported in response to Item 1(a) 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 Company within 
the meaning of the Change in Bank Control Act and the Rules and 
Regulations promulgated by the Federal Deposit Insurance Corporation 
("FDIC"), 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 FDIC, the Board shall substitute its judgment for 
that of the FDIC); 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 
Company representing 20% or more of the Bank's or the Company's 
outstanding securities except for any securities of the Bank purchased 
by the Bank's employee stock ownership plan and trust; 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, however, that this sub-section (b) shall not apply if the 
Incumbent Board is replaced by the appointment by a Federal banking 
agency of a conservator or receiver for the Bank and, provided further 
that any person becoming a director subsequent to the date hereof whose 
election was approved by a vote of at least two-thirds of the directors 
comprising the Incumbent Board or whose nomination for election by the 
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 Company in which the 
Bank or the Company is not the resulting entity.

      (b)      If any of the events described in Section 5(a) hereof 
constituting a Change in Control have occurred, Executive shall be 
entitled to the benefits provided in paragraphs (c), (d) and (e) of this 
Section 5 upon his subsequent termination of employment at any time 
during the term of this Agreement (regardless of whether such 
termination results from his dismissal, his voluntary resignation, or 
his resignation at any time during the term of this Agreement following 
any demotion, loss of title, office or significant authority or 
responsibility, reduction in the annual compensation or 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, Disability, Retirement or 
termination for Cause.

      (c)      In addition, upon the occurrence of a Change in Control 
followed by the Executive's termination of employment, the Bank shall 
pay Executive, or in the event of his subsequent death, his beneficiary 
or beneficiaries, or his estate, as the case may be, as severance pay or 
liquidated damages, or both, a sum equal to the greater of the payments 
due for the remaining term of the Agreement or three (3) times Base 
Salary.  At the election of the Executive, which election is to be made 
on an annual basis during the month of January, and which election is 
irrevocable for the year in which made and upon the occurrence of a 
Change in Control, such payment may be made in a lump sum or on a pro 
rata basis.  In the event that no election is made, payment to the 
Executive will be made on a monthly basis during the remaining term of 
the Agreement.    

      (d)      Upon the occurrence of a Change in Control followed by the 
Executive's termination of employment, the Bank, in its sole discretion, 
shall either (i) contribute the same amount as the Bank contributed 
prior to such termination of employment towards the purchase for 
Executive of, or (ii) cause to be continued for Executive under the 
Bank's existing employee benefit plans, life, medical, dental and 
disability insurance coverage substantially identical to the coverage 
maintained by the Bank for Executive prior to his termination, except to 
the extent that such coverage is changed in its application to all 
employees (provided nothing herein shall be deemed to require the Bank 
to contribute more towards such coverage than it contributed prior to 
such termination of employment).  Such coverage and payments shall cease 
upon the expiration of thirty-six (36) months.

      (e)      Notwithstanding the preceding paragraphs of this Section 5, 
if payments under this Agreement, together with any other payments 
received or to be received by the Executive in connection with a Change 
in Control would be deemed to include an "excess parachute payment" 
pursuant to Section 280G of the Code, then benefits under this Agreement 
shall be reduced (to not less than zero) to the extent necessary to 
avoid the payment of an excess parachute payment by the Bank.  The 
Executive shall determine the allocation of such reduction among 
payments to the Executive.  The Bank shall be entitled to rely on 
calculations provided by its independent auditors as to whether payments 
to Executive would constitute excess parachute payments, and as to the 
amount that payments are to be reduced to avoid any excess parachute 
payment, which shall be binding on Executive.
            
6.      TERMINATION UPON RETIREMENT, DISABILITY OR DEATH

      Termination by the Bank of the Executive based on "Retirement" 
shall mean termination in accordance with the Bank's retirement policy 
or in accordance with any retirement arrangement established with 
Executive's consent with respect to him.  Upon termination of Executive 
upon Retirement, Executive shall be entitled to all benefits under any 
retirement plan of the Bank and other plans to which Executive is a 
party.

      Termination by the Bank of Executive's employment based on 
"Disability" shall mean termination because of any physical or mental 
impairment which qualifies Executive for disability benefits under the 
applicable long-term disability plan maintained by the Bank, or if no 
such plan applies, which would qualify Executive for disability benefits 
under the federal social security system.  In the event Executive is 
unable to perform his duties under this Agreement on a full-time basis 
for a period of six (6) consecutive months by reason of Disability, the 
Bank may terminate this Agreement, provided that the Bank shall be 
obligated to pay the Executive, as disability pay, a bi-monthly payment 
equal to sixty percent (60%) of Base Salary on the effective date of 
such termination.  These disability payments shall commence on the 
effective date of Executive's termination and will end on the earlier of 
(i) the date Executive returns to the full-time employment of the Bank 
in the same capacity as he was employed prior to his termination for 
Disability; (ii) Executive's full-time employment by another employer; 
(iii) Executive attaining the age of 65; (iv)  the date on which 
payments commence to the Executive under any long-term disability plan 
maintained by the Bank; or (v) Executive's death.  Provided, further, 
that any amounts actually paid to Executive pursuant to any disability 
insurance or other such similar program which the Bank has provided or 
may provide on behalf of its employees or pursuant to any worker's 
compensation or social security disability program shall reduce the 
disability benefits to be paid to the Executive pursuant to this 
paragraph. 

      Notwithstanding any other provision, this Agreement shall 
terminate, and the Bank shall have no further obligation hereunder, upon 
the death of the Executive.

7.       TERMINATION FOR CAUSE

      The term "Termination for Cause" shall mean termination because of 
the Executive's personal dishonesty with respect to the Bank, gross 
negligence, willful misconduct, any breach of fiduciary duty involving 
personal profit, intentional failure to perform stated duties, 
intentional and willful violation of any law, governmental rule or 
regulation (other than traffic violations and regulations that do not 
adversely affect the Bank, the Company, or their employees, or similar 
offenses) or final cease-and-desist order, or material breach of any 
provision of this Agreement.  In determining gross negligence, the acts 
or omissions shall be measured against standards generally prevailing in 
the savings institutions industry.  For purposes of this paragraph, no 
act or failure to act on the part of Executive shall be considered 
"willful" unless done, or omitted to be done, by the Executive not in 
good faith and without reasonable belief that the Executive's action or 
omission was in the best interest of the Bank.  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 copy of 
a resolution duly adopted by the affirmative vote of not less than a 
majority of the members of the Board at a meeting of the Board called 
and held for that purpose (after reasonable notice, in writing, 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 was guilty of conduct justifying Termination for Cause and 
specifying the particulars thereof in detail.  Notwithstanding the 
foregoing, any such good faith determination by the Board as to 
Termination for Cause shall not be determinative as to the existence of 
Cause in any judicial proceeding. The Executive shall not have the right 
to receive compensation or other benefits for any period after 
Termination for Cause.  Any stock options granted to Executive under any 
stock option plan of the Bank, the Company or any subsidiary or 
affiliate thereof shall be null and void effective upon Executive's 
receipt of Notice of Termination for Cause pursuant to Section 8 hereof, 
unless and until the matter is successfully resolved in the Executive's 
favor, and such stock options shall become entirely null and void 
effective upon a determination in arbitration that termination was for 
cause.

8.      NOTICE

      (a)      Any purported termination by the Bank or by Executive 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 (A) if Executive's 
employment is terminated for Disability, thirty (30) days after a Notice 
of Termination is given (provided that he shall not have returned to the 
performance of his duties on a full-time basis during such thirty (30) 
day period), and (B) if his employment is terminated for any other 
reason, the date  specified in the Notice of Termination (which, in the 
case of a 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 
for Cause is given, the Executive notifies the Bank that a dispute 
exists concerning the termination, the parties shall promptly proceed to 
arbitration and the Date of Termination shall be the date on which the 
dispute is finally determined, either by mutual written agreement of the 
parties or by a binding arbitration award, 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.  The 
Bank shall continue to make the payments and provide the benefits 
specified under this Agreement until the dispute is settled by 
arbitration.  In the event that it is determined by arbitration that 
"Cause" for termination did exist, Executive shall not be entitled to 
any further compensation or benefits from the Bank under the Agreement, 
and if it is determined in arbitration that his dispute of termination 
for Cause was not taken in good faith, he shall return all cash payments 
made to him during the pendency of dispute, without interest thereon.  
Notwithstanding the foregoing, no stock options held by Executive shall 
be exercised during the pendency of the dispute, and the period for 
exercising any such stock options shall be extended through the 
resolution of the dispute by arbitration. If it is ultimately determined 
in arbitration that "Cause" for terminating Executive's employment did 
not exist, the Executive shall be entitled to receive from the Bank the 
remaining payments and benefits due under this Agreement determined as 
of the date of Executive's receipt of Notice of Termination, with full 
offset for payments and benefits received pending the resolution of the 
dispute by arbitration.

9.      POST-TERMINATION OBLIGATIONS

      (a)      All payments and benefits to Executive under this Agreement 
shall be subject to Executive's compliance with paragraph (b) of this 
Section 9 and Section 10 during the term of this Agreement and during 
any period during which payments are being made or benefits provided, to 
Executive under this Agreement.

      (b)      Executive shall, upon reasonable notice, furnish such 
information and assistance to the Bank as may reasonably be required by 
the Bank in connection with any litigation in which it or any of its 
subsidiaries or affiliates is, or may become, a party.

10.      NON-COMPETITION

      (a)      Upon any termination of Executive's employment hereunder as 
a result of which the Bank is paying Executive benefits under Section 4, 
Executive agrees not to compete with the Bank and/or the Company for a 
period of one (1) year following such termination in any city, town or 
county in which the Bank and/or the Company has an office or has filed 
an application for regulatory  approval to establish an office, 
determined as of the effective date of such termination, except as 
agreed to pursuant to a resolution duly adopted by the Board.  Executive 
agrees that during such period and within said cities, towns and 
counties, Executive shall not work for or advise, consult or otherwise 
serve with, directly or indirectly, any entity whose business materially 
competes with the depository, lending or other business activities of 
the Bank and/or the Company.  The parties hereto, recognizing that 
irreparable injury will result to the Bank and/or the Company, its 
business and property in the event of Executive's breach of this Section 
10(a) agree that in the event of any such breach by Executive, the Bank 
and/or the Company may be entitled, in addition to any other remedies 
and damages available, to an injunction to restrain the violation hereof 
by Executive, Executive's partners, agents, servants, employers, 
employees and all persons acting for or with Executive.  Executive 
represents and admits that Executive's experience and capabilities are 
such that Executive can obtain employment in a business engaged in other 
lines and/or of a different nature than the Bank and/or the Company, and 
that the enforcement of a remedy by way of injunction will not prevent 
Executive from earning a livelihood.  Nothing herein will be construed 
as prohibiting the Bank and/or the Company from pursuing any other 
remedies available to the Bank and/or the Company for such breach or 
threatened breach, including the recovery of damages from Executive.

      (b)      Executive recognizes and acknowledges that the knowledge of 
the business activities and plans for business activities of the Bank 
and affiliates thereof, as it may exist from time to time, is a 
valuable, special and unique asset of the business of the Bank.  
Executive will not, during or after the term of his employment, disclose 
any knowledge of the past, present, planned or considered business 
activities of the Bank or affiliates thereof to any person, firm, 
corporation, or other entity  for any reason or purpose whatsoever.  
Notwithstanding the foregoing, Executive may disclose any knowledge of 
banking, financial and/or economic principles, concepts or ideas which 
are not solely and exclusively derived from the business plans and 
activities of the Bank, and Executive may disclose any information 
regarding the Bank or the Company which is otherwise publicly available.  
In the event of a breach or threatened breach by Executive of this 
Section 10, the Bank will be entitled to an injunction restraining 
Executive from disclosing, in whole or in part, the knowledge of the 
past, present, planned or considered business activities of the Bank or 
affiliates thereof, or from rendering any services to any person, firm, 
corporation, other entity to whom such knowledge, in whole or in part, 
has been disclosed or is threatened to be disclosed.  Nothing herein 
will be construed as prohibiting the Bank from pursuing any other 
remedies available to the Bank for such breach or threatened breach, 
including the recovery of damages from Executive.

11.      SOURCE OF PAYMENTS

      All payments provided in this Agreement shall be timely paid in 
cash or check from the general funds of the Bank.  No special or 
separate fund of the Bank shall be established and no other segregation 
of assets of the Bank shall be made to assure payment.  The Company 
guarantees 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 Company out of its general 
funds. No special or separate fund of the Company shall be established 
and no other segregation of assets of the Company shall be made to 
assure payment.

12.      EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS

      This Agreement contains the entire understanding between the 
parties hereto and supersedes any prior employment agreement between the 
Bank or any predecessor of the Bank and Executive, including the 
Employment Agreement dated November 24, 1993 between Executive and 
Peterborough Savings Bank (the "PSB Employment Agreement").  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.  Executive agrees that no Event of 
Termination nor a Change in Control occurred under the PSB Employment 
Agreement and that no payments or benefits are due him under the PSB 
Employment Agreement as a result of the Merger Agreement and the 
transactions contemplated thereby.

13.      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 and the Bank and their respective successors, 
assigns and heirs.


14.      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 as to any act other than that 
specifically waived.


15.      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.  In 
the event of any conflict or discrepancies between any provision of the 
Agreement and existing federal or state laws and/or regulations, such 
laws and regulations shall prevail, and the Agreement shall be construed 
to be consistent therewith. 

16.      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.

17.      GOVERNING LAW

      This Agreement shall be governed by the laws of the State of New 
Hampshire but only to the extent not superseded by federal law.

18.      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 
the Bank within fifty (50) miles from the location of the Bank, after 
due consultation with Executive, 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.

19.      PAYMENT OF LEGAL FEES

      All reasonable 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, provided that the dispute or 
interpretation has been resolved in the Executive's favor.

20.      INDEMNIFICATION

      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 New Hampshire 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 (such settlements must be approved by 
the Board of Directors of the Bank).  If such action, suit or proceeding 
is brought against Executive in his capacity as an officer or director 
of the Bank, however, such indemnification shall not apply to any 
action, suit or proceeding relating to this Agreement and shall not 
extend to matters as to which Executive is finally adjudged to be liable 
for willful misconduct in the performance of his duties.  

21.      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 or the Company, 
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.




SIGNATURES

      IN WITNESS WHEREOF, the Bank has caused this Agreement to be 
executed by their duly authorized officers, and Executive has signed 
this Agreement, on the day and date first above written.

ATTEST:                               GRANITE BANK

/s/ Charles B. Paquette               By: /s/ Charles W. Smith
_______________________               _________________________________
Secretary                             Charles W. Smith, Chief Executive 
                                      Officer


ATTEST:                               GRANITE STATE BANKSHARES, INC.

/s/ Charles B. Paquette               By: /s/ Charles W. Smith
_______________________               _________________________________
Secretary                             Charles W. Smith, Chief Executive 
                                      Officer


                               
WITNESS:                              EXECUTIVE:

/s/ William G. Pike                   /s/ Christopher J. Flynn
_______________________               _________________________________