EXHIBIT 10.6


                 GRANITE STATE BANKSHARES, INC. AND SUBSIDIARY







     EMPLOYMENT SEPARATION AGREEMENT AND RELEASE WITH CHRISTOPHER J. FLYNN



                  EMPLOYMENT SEPARATION AGREEMENT AND RELEASE



        THIS AGREEMENT AND RELEASE, is effective as of the 20th day of
November, 1998 by and between CHRISTOPHER J. FLYNN ("Executive") and GRANITE
BANK ("Granite") and GRANITE STATE BANKSHARES, INC. ("Granite State").

        WHEREAS, Executive has served Granite in the position of President since
October 31, 1997; and

        WHEREAS, the parties have mutually decided to discontinue Executive's
employment and directorships with Granite and Granite State (references to
Granite shall include Granite State unless otherwise indicated) on the following
terms and conditions, which contain the entire agreement of the parties relating
to the termination of Executive's employment, and any prior agreements,
including the Employment Agreement entered into by and between Executive and
Granite Bank as of October 31, 1997, ("Employment Agreement"), shall be
superceded by this Agreement and Release, unless otherwise provided herein.

        NOW, THEREFORE, in consideration of the promises and payments stated and
other good and valuable consideration, the receipt and adequacy of which is
acknowledged by each of the parties and who intend to be legally bound by this
Agreement and Release, the parties state and agree as follows:

        1.      Executive resigns from employment with Granite effective
December 31, 1998.  Executive resigns as a director of Granite effective
November 30, 1998.

        2.      Executive has no further obligation to perform services as an
employee of Granite.  Executive and Granite have entered into a Consulting
Agreement, effective January 1, 1999 ("Consulting Agreement"),  pursuant to
which Executive shall perform services as a consultant to Granite.

        3.      Executive shall continue to preserve the confidences and
proprietary information of Granite and its subsidiaries, parent corporations and
affiliates, including information that has been disclosed to Executive relating
to Granite's business activities, as set forth in Section 10 of the Employment
Agreement which Section is incorporated herein by reference.

        4.      (a)     Granite Bank shall pay Executive a cash severance
payment in the aggregate amount of $558,069, payable as follows: $258,069 on
December 22, 1998; $150,000 on January 15, 1999 and $150,000 on
February 15, 1999.  All payments shall be subject to requisite federal and state
tax withholding, including without limitation withholdings for Medicare, FICA,
and Federal Income Tax.  The first payment is being made to Executive on or
after the Waiting Period Expiration Date (as defined in paragraph 8 of this
Agreement and Release).

                (b)     Executive shall be entitled to receive bi-weekly salary
payments from Granite Bank, at the rate of salary payment in effect as of the
date of this Agreement and Release, through December 31, 1998, paid in
accordance with Granite's regular payroll practices, including tax withholdings.
Executive shall be considered employed by Granite Bank for purposes of the
Granite State Employee Stock Ownership Plan through December 31, 1998.

                (c)     Granite shall either: (i) continue to provide medical
and dental coverage to Executive substantially identical to the coverage
maintained by Granite prior to his termination of employment, except to the
extent such coverage may be changed in its application to all Granite
Executives; or (ii) if coverage under Granite's existing plans is unavailable,
Granite shall pay the cost of providing Executive substantially equivalent
coverage, except to the extent such coverage may be changed in its application
to all Granite Executives.  Such coverage shall cease upon the earlier of
December 31, 2001 or upon the date of Executive's employment with another
employer that provides substantially equivalent coverage.

                (d)     As of the date of this Agreement and Release, Executive
shall vest in 1,500 shares of restricted stock previously awarded to Executive
under the 1997 Long-term Incentive Stock  Benefit Plan (the "Stock Benefit
Plan").  The remaining 6,000 shares of restricted stock which have been
previously awarded to Executive shall be forfeited and returned to Granite.

                (e)     As of the date of this Agreement and Release, Executive
shall vest in all unvested options previously awarded to Executive under the
Stock Benefit Plan .  Such options shall be exercisable for so long as Executive
continues to perform services for Granite as a consultant, pursuant to the
Consulting Agreement, and within thirty days of the termination of the
Consulting Agreement, but in no event later than December 31, 2001.

                (f)     Executive shall retain the 1996 Ford Explorer that was
prior hereto owned by Granite and  used by Executive during the term of his
employment.  Title to this vehicle shall be transferred to Executive as of the
date of this Agreement and Release.

                (g)     The ownership of the following life insurance policies
owned by Granite shall be transferred to Executive as of the date of this
Agreement and Release: the Lincoln Benefit Life Company Flexible Premium Life
Insurance Policy, Policy Number U0207843; and the MassMutual Policy Number
7399899.  Granite shall have no further interest in, or obligation under, these
policies.

        5.      (a)     The foregoing shall satisfy all obligations of Granite
(including Granite Bank as the successor to Primary Bank) to Executive that now
exists or hereinbefore existed relating to the employment of Executive by
Granite (including Granite Bank as the successor to Primary Bank), and the
service by Executive as a director of Granite (including Granite Bank as the
successor to Primary Bank), and the termination of the employment by Granite of
Executive (and the termination of his service as a director of Granite), except
as may be set forth in the Consulting Agreement  and except that Executive's
rights under any tax-qualified plan maintained by Granite shall not be effected
hereby.

        (b) In consideration of the foregoing, Executive hereby irrevocably and
unconditionally, waives and releases Granite, its affiliates and subsidiaries,
officers, directors, and Executives, from any and all causes of action, debts
and claims, known and unknown, which Executive may now have or may have in the
future, concerning Executive's employment under the Employment Agreement, or
separation from service thereunder, including but not limited to any claims for
alleged breach of contract, wrongful discharge, or any rights or claims arising
out of title VII of the Civil Rights Act of 1964, as amended, the Age
Discrimination in Employment Act ("ADEA"), the Americans with Disabilities Act
("ADA"), or any other federal, state or municipal statute or ordinance relating
to discrimination in employment.  However, Executive may pursue claims or
institute legal action to enforce the provisions of this Agreement and Release,
and the Consulting Agreement.  Nothing herein contained shall be construed to
require Executive's release of any rights granted to him as a former employee,
officer or director of Granite under its Charter and Bylaws or under New
Hampshire law. Executive shall continue to be indemnified by Granite for any
actions taken as an employee, officer or director to the fullest extent
provided by Granite's Charter and Bylaws and New Hampshire law.

        6.      Executive further covenants that Executive will neither file nor
cause nor permit to be filed on Executive's behalf and, as the case may be
waives Executive's right to recover in his/her own right upon filing, any
lawsuits, claims, grievances, complaints, or charges with any Court, State,
federal or local agency, concerning or relating to any dispute arising out of
the employment relationship, alleged breaches of employment, covenants or
contracts, abusive or wrongful and constructive discharge, unlawful employment
discrimination, or otherwise relating to Executive's employment or resignation
from that employment with Granite.

        7.      Both parties agree that this is a separation of convenience, and
neither party will state or infer a contrary intention or understanding.
Neither the Chief Executive Officer nor the Chief Financial Officer of Granite
is aware, as of the date of this Agreement, of any basis for any claim by
Granite against Executive relating to Executive's service as an employee of
Granite.  The nature and terms of the parties Agreement and Release are
Confidential and may not be publicly disclosed with the exception of required
court documents prepared and filed in connection with legal actions initiated
to enforce the provisions of this Agreement and Release.

        8.      (a)     Executive further states that Executive has carefully
read the foregoing, has had sufficient opportunity to review and deliberate the
foregoing with or without counsel of Executive's own choosing, knows and
understands its contents, and signs the same as Executive's free and independent
act.  No inducements, representations, or agreements have been made or relied
upon to make this Agreement and Release except as stated in this Agreement and
Release.

                (b)     Executive has twenty-one (21) days from November 20,
1998 (the date of the initial receipt of these terms) within which to consider
accepting and being bound by the terms of this Agreement and Release.  Executive
understands and acknowledges that this release and waiver of claims is exchanged
for the payments described in Paragraph 4. Executive also understands that he
may revoke this waiver and release of claims under the ADEA for a period of
seven (7) days following the date the Executive signs this Agreement and Release
and that the Executive's waiver of the ADEA claims will not become effective
until the revocation period has expired.  Such date that is seven (7) days after
Executive signs this Agreement and Release is referred to as the "Waiting Period
Expiration Date."

        9.      Section 9 of the Employment Agreement shall remain in effect as
to Executive for the one year period from December 31, 1998.

        10.     This Agreement and Release may not be amended or modified except
in a writing signed by the party to be charged.  This Agreement and Release
constitutes the entire understanding of the parties, and all prior discussions
and agreements between the parties are merged herein.

        11.     Any term or provision of this Agreement and Release which is
held to be invalid or unenforceable shall be ineffective to the extent of such
invalidity or unenforceability without rendering invalid or unenforceable the
remaining terms and provisions of this Agreement and Release.

        12.     The terms and provisions of, and the obligations under, the
Employment Agreement shall be superceded by this Agreement and Release, and
shall be of no further force or effect, unless otherwise expressly stated
herein.

        IN WITNESS WHEREOF, the parties hereto have signed their Agreement and
Release.

DATE:  November 20, 1998

/s/ Christopher J. Flynn
------------------------
Christopher J. Flynn

GRANITE BANK
/s/ Charles W. Smith
--------------------
Charles W. Smith

GRANITE STATE BANKSHARES, INC.
/s/ Charles W. Smith
--------------------
Charles W. Smith

STATE OF NEW HAMPSHIRE                )
                                           : ss.
COUNTY OF CHESHIRE                    )



                On this 20th day of November, 1998, before me personally came
CHRISTOPHER J. FLYNN, to me known, and known to me to be the individual
described in the foregoing instrument, who, by his free act and deed, signed his
name to the foregoing instrument.


                                                /s/ Faith E. Wilder
                                                -------------------
                                                Notary Public




STATE OF NEW HAMPSHIRE                 )
                                           : ss.:
COUNTY OF CHESHIRE                     )



                On this 20th day of November, 1998, before me personally came
Charles W. Smith, to me known, who, being by me duly sworn, did depose and say
that he is an executive officer of GRANITE BANK, the bank described in and which
executed the foregoing instrument; that he knows the seal of said bank; that the
seal affixed to said instrument is such seal; that it was so affixed by
authority of the Board of Directors of said bank; and that he signed his or her
name thereto by like authority.



                                                /s/ Faith E. Wilder
                                                -------------------
                                                Notary Public


STATE OF NEW HAMPSHIRE                 )
                                           : ss.:
COUNTY OF CHESHIRE                     )



                On this 20TH day of November, 1998, before me personally came
Charles W. Smith, to me known, who, being by me duly sworn, did depose and say
that he is an executive officer of GRANITE STATE BANKSHARES, INC., the
corporation described in and which executed the foregoing instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.



                                                /s/ Faith E. Wilder
                                                -------------------
                                                Notary Public