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                                                                    Exhibit 10.7

                              EMPLOYMENT AGREEMENT


      This AGREEMENT (the "Agreement") is made as of February 17, 1999 (the
"Effective Date"), by and between Northway Financial, Inc., a New Hampshire
chartered corporation (the "Employer") and George L. Fredette (the "Executive").
In consideration of the mutual covenants contained in this Agreement, the
Employer and the Executive agree as follows:

      1. Employment. The Employer agrees to employ the Executive and the
Executive agrees to be employed by the Employer on the terms and conditions set
forth in this Agreement. For the purposes of complying with and administering
its compensation obligations under this Agreement, the Employer may, at its
option, engage its subsidiary, The Berlin City Bank (the "Bank"), to serve, for
such period as the Employer determines to be necessary, as a joint employer of
the Executive under this Agreement and the Executive accepts any such employment
by the Bank.

      2. Capacity. The Executive shall serve the Employer as Senior Vice
President/Chief Financial Officer, subject to election by the Board of Directors
of the Employer (the "Board of Directors"). The Executive shall also serve the
Employer in such other or additional offices as the Executive may be requested
to serve by the Chief Executive Officer (the "CEO") or the Board of Directors.
In such capacity or capacities, the Executive shall perform such services and
duties in connection with the business, affairs and operations of the Employer
as may be assigned or delegated to the Executive from time to time by or under
the authority of the CEO or the Board of Directors.

      3. Term. Subject to the provisions of Section 6, the term of employment
pursuant to this Agreement (the "Term") shall be for two (2) years from the
Effective Date and shall be renewed automatically for periods of one (1) year
commencing at the first anniversary of the Effective Date and on each subsequent
anniversary thereafter, unless either the Executive or the Employer gives
written notice to the other not less than sixty (60) days prior to the date of
any such anniversary of such party's election not to extend the Term.

      4. Compensation and Benefits. The regular compensation and benefits
payable to the Executive under this Agreement shall be as follows:

              (a) Salary. For all services rendered by the Executive under this
        Agreement, the Employer shall pay the Executive a salary (the "Salary")
        at an annual rate of $115,000, subject to increase from time to time in
        the discretion of the Board of Directors. The Salary shall be payable in
        periodic installments in accordance with the Employer's usual practice
        for its senior executives.

              (b) Bonus or Similar Incentive Programs. The Executive shall be
        entitled to participate in any incentive or bonus program established by
        the Board of Directors to include the Executive's position, with such
        terms as may be established in the sole discretion of the Board of
        Directors.

              (c) Regular Benefits. The Executive shall also be entitled to
        participate in any employee benefit plans, medical insurance plans, life
        insurance plans, disability income plans, retirement plans, vacation
        plans, expense reimbursement plans and other benefit plans which the
        Employer may from time to time have in effect for all or most of its
        senior executives; provided that until a package of benefit plans is
        established by the Employer, the Executive shall be entitled to
        participate in benefit plans in effect for all or most of the senior
        executives of the Bank. Such participation shall be subject to the terms
        of the applicable plan documents, generally applicable policies of the
        Employer, applicable law and the discretion of the Board of Directors or
        any administrative or other committee provided for in or contemplated by
        any such plan. Nothing contained in this Agreement shall be construed to
        create any obligation on the part of the Employer to establish any such
        plan or to maintain the effectiveness of any such plan which may be in
        effect from time to time.

              (d) Relocation Costs. To reduce the Executive's expense associated
        with relocation, the Employer shall provide the following to the
        Executive:

                    (i) Duplicate Residence Allowance. The Employer shall pay to
              the Executive a Duplicate Residence Allowance effective for the
              lesser of (A) such period as the Executive maintains residences in
              both Queensbury, NY and northern New Hampshire; or (B) six (6)
              months. The Duplicate Residence Allowance for any month shall
              equal the lesser of (Y) Eight Hundred Dollars ($800); or (Z) the
              Executive's monthly rental or mortgage payment plus the cost of
              electricity for a northern New Hampshire residence for such month.

                    (ii) Relocation Allowance. In lieu of any relocation cost
              reimbursement other than the Duplicate Residence Allowance, the
              Employer shall pay to the Executive (A) Ten Thousand Dollars
              ($10,000) promptly after the execution of this Agreement; and (B)
              Ten Thousand Dollars ($10,000) upon the Executive's relocation to
              a permanent residence in northern New Hampshire.

              (e) Taxation of Payments and Benefits. The Employer shall
        undertake to make deductions, withholdings and tax reports with respect
        to payments and benefits under this Agreement to the extent that it
        reasonably and in good faith believes that it is required to make such
        deductions, withholdings and tax reports. Payments under this Agreement
        shall be in amounts net of any such deductions or withholdings. Nothing
        in this Agreement shall be construed to require the Employer to make any
        payments to compensate the Executive for any adverse tax effect
        associated with any payments or benefits or for any deduction or
        withholding from any payment or benefit.

              (f) Exclusivity of Salary and Benefits. Unless approved by the
        Board of Directors, the Executive shall not be entitled to any payments
        or benefits other than those provided under this Agreement.

      5. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of the
CEO or the Board of Directors, devote the Executive's best efforts and business
judgment, skill and knowledge to the advancement of the Employer's interests and
to the discharge of the Executive's duties and responsibilities under this
Agreement. The Executive shall not engage in any other business activity, except
as may be approved by the CEO or the Board of Directors; provided that nothing
in this Agreement shall be construed as preventing the Executive from:

              (a) investing the Executive's assets in any company or other
      entity in a manner not prohibited by Section 7(d) and in such form or
      manner as shall not require any material activities on the Executive's
      part in connection with the operations or affairs of the companies or
      other entities in which such investments are made; or

              (b) engaging in religious, charitable or other community or
      non-profit activities that do not impair the Executive's ability to
      fulfill the Executive's duties and responsibilities under this Agreement.

      6. Termination and Termination Benefits. Notwithstanding the provisions of
Section 3, the Executive's employment under this Agreement shall terminate under
the following circumstances set forth in this Section 6.

              (a) Termination by the Employer for Cause. The Executive's
      employment under this Agreement may be terminated for cause without
      further liability on the part of the Employer effective immediately upon a
      majority vote of the Board of Directors and written notice to the
      Executive. Only the following shall constitute "cause" for such
      termination:

                    (i) dishonest statements or acts of the Executive with
              respect to the business of the Employer or any affiliate of the
              Employer;

                    (ii) the commission by or indictment of the Executive for
              (A) a felony or (B) any misdemeanor involving moral turpitude,
              deceit, dishonesty or fraud ("indictment," for these purposes,
              meaning an indictment, probable cause hearing or any other
              procedure pursuant to which an initial determination of probable
              or reasonable cause with respect to such offense is made);

                    (iii) material failure to perform to the reasonable
              satisfaction of the Board of Directors a substantial portion of
              the Executive's duties and responsibilities assigned or delegated
              under this Agreement, which failure continues, in the reasonable
              judgment of the Board of Directors, for sixty (60) days after
              written notice given to the Executive by the Board of Directors;

                    (iv) gross negligence, willful misconduct or insubordination
              of the Executive with respect to the Employer or any affiliate of
              the Employer; or

                    (v) material breach by the Executive of any of the
              Executive's obligations under this Agreement.

              (b) Termination by the Executive. The Executive's employment under
      this Agreement may be terminated by the Executive by written notice to the
      Board of Directors or the CEO at least thirty (30) days prior to such
      termination.

              (c) Termination by the Employer Without Cause. Subject to the
      payment of Termination Benefits pursuant to Section 6(d), the Executive's
      employment under this Agreement may be terminated by the Employer without
      cause upon written notice to the Executive by a majority vote of the Board
      of Directors.

              (d) Certain Termination Benefits. Unless otherwise specifically
      provided in this Agreement or otherwise required by law, all compensation
      and benefits payable to the Executive under this Agreement shall terminate
      on the date of termination of the Executive's employment under this
      Agreement. Notwithstanding the foregoing, in the event of termination of
      the Executive's employment with the Employer pursuant to Section 6(c)
      above, the Employer shall provide to the Executive the following
      termination benefits ("Termination Benefits"):

                    (i) continuation of the Executive's Salary at the rate then
              in effect pursuant to Section 4(a); and

                    (ii) continuation of group health plan benefits to the
              extent authorized by and consistent with 29 U.S.C. ss. 1161 et
              seq. (commonly known as "COBRA"), with the cost of the regular
              premium for such benefits shared in the same relative proportion
              by the Employer and the Executive as in effect on the date of
              termination.


      The Termination Benefits set forth in (i) and (ii) above shall continue
      effective until the expiration of the Term; provided that in the event
      that the Executive commences any employment or self-employment during the
      period during which the Executive is entitled to receive Termination
      Benefits (the "Termination Benefits Period"), the remaining amount of
      Salary due pursuant to Section 6(d)(i) for the period from the
      commencement of such employment or self-employment to the end of the
      Termination Benefits Period shall be reduced by one-half of the salary or
      other cash compensation the Executive receives from such employment or
      self-employment attributable to services performed during the Termination
      Benefits Period and, if the Executive receives benefits from such
      employment or self-employment comparable to those benefits provided by the
      Employer, the payments provided under Section 6(d)(ii) shall cease
      effective as of the date of commencement of such employment or
      self-employment. The Employer's liability for Salary continuation pursuant
      to Section 6(d)(i) shall be reduced by the amount of any severance pay due
      or otherwise paid to the Executive pursuant to any severance pay plan or
      stay bonus plan of the Employer. Notwithstanding the foregoing, nothing in
      this Section 6(d) shall be construed to affect the Executive's right to
      receive COBRA continuation entirely at the Executive's own cost to the
      extent that the Executive may continue to be entitled to COBRA
      continuation after the Executive's right to cost sharing under Section
      6(d)(ii) ceases. The Executive shall be obligated to give prompt notice of
      the date of commencement of any employment or self-employment during the
      Termination Benefits Period and shall respond promptly to any reasonable
      inquiries concerning any employment or self-employment in which the
      Executive engages during the Termination Benefits Period.

              (e) Disability. If the Executive shall be disabled so as to be
      unable to perform the essential functions of the Executive's then existing
      position or positions under this Agreement with or without reasonable
      accommodation, the Board of Directors by a majority vote may remove the
      Executive from any responsibilities and/or reassign the Executive to
      another position with the Employer for the remainder of the Term or during
      the period of such disability. Notwithstanding any such removal or
      reassignment, the Executive shall continue to receive the Executive's full
      Salary (less any disability pay or sick pay benefits to which the
      Executive may be entitled under the Employer's policies) and benefits
      under Section 4 of this Agreement (except to the extent that the Executive
      may be ineligible for one or more such benefits under applicable plan
      terms) for a period of time equal to the lesser of (i) one (1) year; or
      (ii) the remainder of the Term. If any question shall arise as to whether
      during any period the Executive is disabled so as to be unable to perform
      the essential functions of the Executive's then existing position or
      positions with or without reasonable accommodation, the Executive may, and
      at the request of the Employer shall, submit to the Employer a
      certification in reasonable detail by a physician selected by the Employer
      to whom the Executive or the Executive's guardian has no reasonable
      objection as to whether the Executive is so disabled or how long such
      disability is expected to continue, and such certification shall for the
      purposes of this Agreement be conclusive of the issue. The Executive shall
      cooperate with any reasonable request of the physician in connection with
      such certification. If such question shall arise and the Executive shall
      fail to submit such certification, the Employer's determination of such
      issue shall be binding on the Executive. Nothing in this Section 6(e)
      shall be construed to waive the Executive's rights, if any, under existing
      law including, without limitation, the Family and Medical Leave Act of
      1993, 29 U.S.C. ss.2601 et seq. and the Americans with Disabilities Act,
      42 U.S.C. ss.12101 et seq.

              (f) Termination Following a Change of Control. If there is a
      Change of Control, as defined in Section 6(f)(i) below, during the Term,
      the provisions of this Section 6(f) shall apply and shall continue to
      apply throughout the remainder of the Term. If (1) the Executive's
      employment is terminated by the Employer or the Executive following the
      occurrence of any of the events listed in Section 6(f)(ii) below or the
      Executive's employment is terminated without cause (in accordance with
      Section 6(c) above); and (2) such termination occurs both within twelve
      (12) months following a Change of Control and during the Term, then the
      Employer shall provide the Executive (or the Executive's estate, if
      applicable) with Termination Benefits for two (2) years from the date of
      termination of the Executive's employment. To the extent that Termination
      Benefits would otherwise be due to the Executive, this Section 6(f) shall
      not be construed to require the provision of any additional pay or
      benefits to the Executive.

                    (i) Change of Control shall mean the occurrence of one or
              more of the following events:

                          (A) any "person" (as such term is used in Sections
                    13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
                    as amended (the "Exchange Act")) becomes a "beneficial
                    owner" (as such term is defined in Rule 13d-3 promulgated
                    under the Exchange Act) (other than the Employer, any
                    trustee or other fiduciary holding securities under an
                    employee benefit plan of the Employer, or any corporation
                    owned, directly or indirectly, by the stockholders of the
                    Employer, in substantially the same proportions as their
                    ownership of stock of the Employer), directly or indirectly,
                    of securities of the Employer, representing fifty percent
                    (50%) or more of the combined voting power of the Employer's
                    then outstanding securities; or

                          (B) persons who, as of the Effective Date, constituted
                    the Employer's Board of Directors (the "Incumbent Board")
                    cease for any reason including, without limitation, as a
                    result of a tender offer, proxy contest, merger or similar
                    transaction, to constitute at least a majority of the
                    Employer's Board of Directors, provided that any person
                    becoming a director of the Employer subsequent to the
                    Effective Date whose election was approved by at least a
                    majority of the directors then comprising the Incumbent
                    Board shall, for purposes of this Section 6(f), be
                    considered a member of the Incumbent Board; or

                          (C) the stockholders of the Employer approve a merger
                    or consolidation of the Employer with any other corporation
                    or other entity, other than (1) a merger or consolidation
                    which would result in the voting securities of the Employer
                    outstanding immediately prior thereto continuing to
                    represent (either by remaining outstanding or by being
                    converted into voting securities of the surviving entity)
                    more than fifty percent (50%) of the combined voting power
                    of the voting securities of the Employer or such surviving
                    entity outstanding immediately after such merger or
                    consolidation or (2) a merger or consolidation effected to
                    implement a recapitalization of the Employer (or similar
                    transaction) in which no "person" (as hereinabove defined)
                    acquires more than fifty percent (50%) of the combined
                    voting power of the Employer's then outstanding securities;
                    or

                          (D) the stockholders of the Employer approve a plan of
                    complete liquidation of the Employer or an agreement for the
                    sale or disposition by of all or substantially all of the
                    Employer's assets.

                    (ii) The events referred to in Section 6(f) above shall be
              as follows:

                          (A) a reduction of the Executive's salary other than a
                    reduction that (1) is based on the Employer's financial
                    performance or (2) is similar to the reduction made to the
                    salaries provided to all or most other senior executives of
                    the Employer; or

                          (B) a significant change in the Executive's
                    responsibilities and/or duties which constitutes, when
                    compared to the Executive's responsibilities and/or duties
                    before the Change of Control, a demotion.

                    (iii) The Executive shall provide the Employer with
              reasonable notice and an opportunity to cure any of the events
              listed in Section 6(f)(ii) and shall not be entitled to
              compensation pursuant to this Section 6(f) unless the Employer
              fails to cure within a reasonable period; and

                    (iv) It is the intention of the Executive and of the
              Employer that no payments by the Employer to or for the benefit of
              the Executive under this Agreement or any other agreement or plan,
              if any, pursuant to which the Executive is entitled to receive
              payments or benefits shall be nondeductible to the Employer by
              reason of the operation of Section 280G of the Code relating to
              parachute payments or any like statutory or regulatory provision.
              Accordingly, and notwithstanding any other provision of this
              Agreement or any such agreement or plan, if by reason of the
              operation of said Section 280G or any like statutory or regulatory
              provision, any such payments exceed the amount which can be
              deducted by the Employer, such payments shall be reduced to the
              maximum amount which can be deducted by the Employer. To the
              extent that payments exceeding such maximum deductible amount have
              been made to or for the benefit of the Executive, such excess
              payments shall be refunded to the Employer with interest thereon
              at the applicable Federal rate determined under Section 1274(d) of
              the Code, compounded annually, or at such other rate as may be
              required in order that no such payments shall be nondeductible to
              the Employer by reason of the operation of said Section 280G or
              any like statutory or regulatory provision. To the extent that
              there is more than one method of reducing the payments to bring
              them within the limitations of said Section 280G or any like
              statutory or regulatory provision, the Executive shall determine
              which method shall be followed, provided that if the Executive
              fails to make such determination within forty-five (45) days after
              the Employer has given notice of the need for such reduction, the
              Employer may determine the method of such reduction in its sole
              discretion.

      7. Confidential Information, Noncompetition and Cooperation.

              (a) Confidential Information. As used in this Agreement,
      "Confidential Information" means information belonging to the Employer
      which is of value to the Employer in the course of conducting its business
      and the disclosure of which could result in a competitive or other
      disadvantage to the Employer. Confidential Information includes, without
      limitation, financial information, reports, and forecasts; inventions,
      improvements and other intellectual property; trade secrets; know-how;
      designs, processes or formulae; software; market or sales information or
      plans; customer lists; and business plans, prospects and opportunities
      (such as possible acquisitions or dispositions of businesses or
      facilities) which have been discussed or considered by the management of
      the Employer. Confidential Information includes information developed by
      the Executive in the course of the Executive's employment by the Employer,
      as well as other information to which the Executive may have access in
      connection with the Executive's employment. Confidential Information also
      includes the confidential information of others with which the Employer
      has a business relationship. Notwithstanding the foregoing, Confidential
      Information does not include information in the public domain, unless due
      to breach of the Executive's duties under Section 7(b).

              (b) Confidentiality. The Executive understands and agrees that the
      Executive's employment creates a relationship of confidence and trust
      between the Executive and the Employer with respect to all Confidential
      Information. At all times, both during the Executive's employment with the
      Employer and after its termination, the Executive will keep in confidence
      and trust all such Confidential Information, and will not use or disclose
      any such Confidential Information without the written consent of the
      Employer, except as may be necessary in the ordinary course of performing
      the Executive's duties to the Employer.

              (c) Documents, Records, etc. All documents, records, data,
      apparatus, equipment and other physical property, whether or not
      pertaining to Confidential Information, which are furnished to the
      Executive by the Employer or are produced by the Executive in connection
      with the Executive's employment will be and remain the sole property of
      the Employer. The Executive will return to the Employer all such materials
      and property as and when requested by the Employer. In any event, the
      Executive will return all such materials and property immediately upon
      termination of the Executive's employment for any reason. The Executive
      will not retain with the Executive any such material or property or any
      copies thereof after such termination.

              (d) Noncompetition and Nonsolicitation. During the Term, and for
      one (1) year thereafter (or during the Termination Benefits Period, if
      longer), the Executive (i) will not, directly or indirectly, whether as
      owner, partner, shareholder, consultant, agent, employee, co-venturer or
      otherwise, engage, participate, assist or invest in any Competing Business
      (as hereinafter defined); (ii) will refrain from directly or indirectly
      employing, attempting to employ, recruiting or otherwise soliciting,
      inducing or influencing any person to leave employment with the Employer
      (other than terminations of employment of subordinate employees undertaken
      in the course of the Executive's employment with the Employer); and (iii)
      will refrain from soliciting or encouraging any customer or supplier to
      terminate or otherwise modify adversely its business relationship with the
      Employer; provided, however, that the foregoing restriction shall not
      apply in the event the Executive's employment under this Agreement is
      terminated pursuant to Section 6(c) hereof. The Executive understands that
      the restrictions set forth in this Section 7(d) are intended to protect
      the Employer's interest in its Confidential Information and established
      employee, customer and supplier relationships and goodwill, and agrees
      that such restrictions are reasonable and appropriate for this purpose.
      For purposes of this Agreement, the term "Competing Business" shall mean a
      business conducted anywhere in the State of New Hampshire which is
      competitive with any business which the Employer or any of its affiliates
      conducts or proposes to conduct at any time during the employment of the
      Executive. Notwithstanding the foregoing, the Executive may own up to one
      percent (1%) of the outstanding stock of a publicly held corporation which
      constitutes or is affiliated with a Competing Business. Notwithstanding
      the foregoing, in the event that the Executive becomes entitled to
      Termination Benefits pursuant to Section 6(f) ("Termination Following a
      Change of Control"), this Section 7(d) shall not apply to the Executive
      with respect to the Executive's activities during any period following the
      termination of the Executive's employment.

              (e) Third-Party Agreements and Rights. The Executive hereby
      confirms that the Executive is not bound by the terms of any agreement
      with any previous employer or other party which restricts in any way the
      Executive's use or disclosure of information or the Executive's engagement
      in any business. The Executive represents to the Employer that the
      Executive's execution of this Agreement, the Executive's employment with
      the Employer and the performance of the Executive's proposed duties for
      the Employer will not violate any obligations the Executive may have to
      any such previous employer or other party. In the Executive's work for the
      Employer, the Executive will not disclose or make use of any information
      in violation of any agreements with or rights of any such previous
      employer or other party, and the Executive will not bring to the premises
      of the Employer any copies or other tangible embodiments of non-public
      information belonging to or obtained from any such previous employment or
      other party.

              (f) Litigation and Regulatory Cooperation. During and after the
      Executive's employment, the Executive shall cooperate fully with the
      Employer in the defense or prosecution of any claims or actions now in
      existence or which may be brought in the future against or on behalf of
      the Employer which relate to events or occurrences that transpired while
      the Executive was employed by the Employer. The Executive's full
      cooperation in connection with such claims or actions shall include, but
      not be limited to, being available to meet with counsel to prepare for
      discovery or trial and to act as a witness on behalf of the Employer at
      mutually convenient times. During and after the Executive's employment,
      the Executive also shall cooperate fully with the Employer in connection
      with any investigation or review of any federal, state or local regulatory
      authority as any such investigation or review relates to events or
      occurrences that transpired while the Executive was employed by the
      Employer. The Employer shall reimburse the Executive for any reasonable
      out-of-pocket expenses incurred in connection with the Executive's
      performance of obligations pursuant to this Section 7(f).

              (g) Injunction. The Executive agrees that it would be difficult to
      measure any damages caused to the Employer which might result from any
      breach by the Executive of the promises set forth in this Section 7, and
      that in any event money damages would be an inadequate remedy for any such
      breach. Accordingly, subject to Section 8 of this Agreement, the Executive
      agrees that if the Executive breaches, or proposes to breach, any portion
      of this Agreement, the Employer shall be entitled, in addition to all
      other remedies that it may have, to an injunction or other appropriate
      equitable relief to restrain any such breach without showing or proving
      any actual damage to the Employer.

      8. Arbitration of Disputes. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration in any forum and form agreed upon by the parties or, in the absence
of such an agreement, under the auspices of the American Arbitration Association
("AAA") in Boston, Massachusetts in accordance with the Employment Dispute
Resolution Rules of the AAA, including, but not limited to, the rules and
procedures applicable to the selection of arbitrators. In the event that any
person or entity other than the Executive or the Employer may be a party with
regard to any such controversy or claim, such controversy or claim shall be
submitted to arbitration subject to such other person or entity's agreement.
Judgment upon the award rendered by the arbitrator may be entered in any court
having jurisdiction thereof. This Section 8 shall be specifically enforceable.
Notwithstanding the foregoing, this Section 8 shall not preclude either party
from pursuing a court action for the sole purpose of obtaining a temporary
restraining order or a preliminary injunction in circumstances in which such
relief is appropriate; provided that any other relief shall be pursued through
an arbitration proceeding pursuant to this Section 8.

      9. Consent to Jurisdiction. To the extent that any court action is
permitted consistent with or to enforce Section 8 of this Agreement, the parties
hereby consent to the jurisdiction of the Superior Court of the State of New
Hampshire and the United States District Court for the District of New
Hampshire. Accordingly, with respect to any such court action, the Executive (a)
submits to the personal jurisdiction of such courts; (b) consents to service of
process; and (c) waives any other requirement (whether imposed by statute, rule
of court, or otherwise) with respect to personal jurisdiction or service of
process.

      10. Integration. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof and supersedes all prior
agreements between the parties with respect to any related subject matter.

      11. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided that the Employer may assign its rights under this Agreement
without the consent of the Executive in the event that the Employer shall effect
a reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity. This Agreement shall inure to the benefit of and be binding
upon the Employer and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.

      12. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

      13. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

      14. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of the
Board of Directors or the CEO, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.

      15. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.

      16. Governing Law. This is a New Hampshire contract and shall be construed
under and be governed in all respects by the laws of the State of New Hampshire,
without giving effect to the conflict of laws principles of such State.

      17. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
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      IN WITNESS WHEREOF, this Agreement has been executed as a sealed
instrument by the Employer, by its duly authorized officer, and by the
Executive, as of the Effective Date.

                                        NORTHWAY FINANCIAL, INC.
Attest:
                                        By: /S/ William J. Woodward
                                            -------------------------
By: /S/JN Rozek                         Name: William J. Woodward
    ----------------
Name: J. N. Rozek                       Title: Chairman, President & CEO

Title: Asst. to the Chairman

                                        EMPLOYEE

                                        /S/ George L. Fredette
                                        -------------------------
                                        George L. Fredette