Exhibit
      10.7


FORM
      OF
      KEY EMPLOYEE AGREEMENT





THIS
      AGREEMENT is made as of the  day of  ,  by
      and
      among The Berlin City Bank, a New Hampshire bank with its main office in Berlin,
      New Hampshire (the "Subsidiary"), Northway Financial, Inc. a New Hampshire
      corporation ("Northway") (Northway and the Subsidiary shall be hereinafter
      collectively referred to as the "Company"), and _______., a resident of _______
      _____________ (the "Executive").





WHEREAS
      in order to allow the Executive to consider the prospect of a Change in Control
      (as defined in Section 1) in an objective manner and in consideration of the
      services to be rendered by the Executive to the Company and other good and
      valuable consideration, the receipt and sufficiency of which is hereby
      acknowledged by the Company, the Company is willing to provide, subject to
      the
      terms of this Agreement, certain severance benefits to protect the Executive
      from the consequences of a Terminating Event (as defined in Section 1) occurring
      subsequent to a Change in Control; and





WHEREAS,
      in consideration of the continued employment of the Executive by the Company,
      the entering into by Northway of that certain stock option agreement between
      Northway and the Executive of even date herewith providing for participation
      by
      the Executive in Northway's 1999 Stock Option and Grant Plan, the severance
      benefits provided subject to the terms herein and other good and valuable
      consideration, the receipt and sufficiency of which is hereby acknowledged
      by
      the Executive, the Executive agrees to be bound by certain restrictions
      contained herein regarding competition, Confidential Information (as defined
      in
      Section 1) and proprietary rights.





1. Certain
      Definitions. For the purposes of this Agreement, the following terms
      shall have the following respective meanings:




(a)
              "Change
                  in Control" shall be deemed to have occurred in any one of the
                  following
                  events:





(i)
            if
                there has occurred a change in control of either Northway or the
                Subsidiary which Northway would be required to report in response
                to Item
                1 (or, in the case of the Subsidiary, Item 2) of Form 8-K promulgated
                under the Securities Exchange Act of 1934, as amended (the "1934
                Act"),
                or, if such regulation is no longer in effect, any regulations promulgated
                by the Securities and Exchange Commission, pursuant to the 1934 Act,
                which
                are intended to serve similar
                purposes;





(ii)
            when
                any "person" (as such term is used in Sections 13(d) and 14(d)(2)
                of the
                1934 Act) becomes a "beneficial owner" (as such term is defined in
                Rule
                13d-3 promulgated under the 1934 Act), directly or indirectly, of
                securities of Northway or the Subsidiary representing 25% or more
                of the
                total number of votes that may be cast for the election of directors
                of
                Northway or the Subsidiary, as the case may be;




(iii)
            during
                any period of two consecutive years (not including any period prior
                to the
                execution of this Agreement), individuals who are Continuing Directors
                (as
                hereinafter defined) cease for any reason to constitute at least
                a
                majority of the Board of Directors of Northway or the Subsidiary.
                For this
                purpose, a "Continuing Director" shall mean (a) an individual who
                was a
                director of Northway or the Subsidiary at the beginning of such period
                or
                (b) any new director (other than a director designated by a person
                who has
                entered into an agreement with Northway or the Subsidiary to effect
                a
                transaction described in clause (ii), (iv) or (v) of this Section
                1(a))
                whose election by the Board or nomination for election by Northway's
                or
                the Subsidiary's stockholders was approved by a vote of at least
                two-thirds (2/3) of the directors of Northway or the Subsidiary,
                as
                appropriate, then still in office who either were directors at the
                beginning of such period or whose election or nomination for election
                was
                previously so approved;





(iv)
            the
                stockholders of Northway approve a merger or consolidation of Northway
                or
                the Subsidiary with any other corporation or bank, other than (a)
                a merger
                or consolidation which would result in the voting securities of Northway
                outstanding immediately prior thereto continuing to represent (either
                by
                remaining outstanding or by being converted into voting securities
                of the
                surviving entity) more than 80% of the combined voting power of the
                voting
                securities of Northway or such surviving entity outstanding immediately
                after such merger or consolidation or (b) a merger or consolidation
                effected to implement a recapitalization of Northway (or similar
                transaction) in which no "person" (as defined above) acquires more
                than
                30% of the combined voting power of Northway's then outstanding
                securities; or





(v)
            the
                stockholders of Northway or the Subsidiary approve a plan of complete
                liquidation of Northway or the Subsidiary or an agreement for the
                sale or
                disposition by Northway or the Subsidiary of all or substantially
                all of
                Northway's or the Subsidiary's
                assets;





(b)
            "Company-Related
                Inventions and Developments" means all Inventions and Developments
                which
                either (i) relate at the time of conception or development to the
                actual
                or demonstrably anticipated business or research and development
                activities of the Company; (ii) result from or relate to any work
                performed for the Company, whether or not during normal business
                hours;
                (iii) are developed on Company work time; or (iv) are developed through
                the use of Confidential Information, or the Company's equipment,
                software,
                or other facilities or resources;





(c)
            "Confidential
                Information" means information belonging to the Company, whether
                reduced
                to writing (or in a form from which such information can be obtained,
                translated, or derived into reasonably usable form), or maintained
                in the
                mind or memory of the Executive, which derives independent economic
                value
                from not being readily known to or ascertainable by proper means
                by others
                who can obtain economic value from the disclosure or use of such
                information, including without limitation, financial information,
                reports,
                and forecasts; inventions, improvements and other intellectual property;
                trade secrets; know-how; designs, processes or formulae; software
                or
                related code; 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 Company. Confidential Information
                includes information developed by the Executive in the course of
                his
                employment by the Company, as well as other information to which
                the
                Executive may have access in connection with his employment. Confidential
                Information also includes the confidential information of others
                with
                which the Executive has a business relationship. Notwithstanding
                the
                foregoing, Confidential Information does not include information
                in the
                public domain, unless due to breach of the duties of the Executive
                under
                Section 5 below;





(d)
            "Customer"
                means any person or entity who (i) is receiving Services, directly
                or
                indirectly, from the Company on the date of termination of employment
                of
                the Executive with the Company, (ii) received Services, directly
                or
                indirectly, from the Company or the Executive at any time during
                the two
                year period immediately preceding the date of termination of employment
                of
                the Executive with the Company, (iii) was solicited, directly or
                indirectly, in whole or in part, by the Executive on behalf of the
                Company
                to provide Services within two years preceding the termination of
                employment of the Executive with the Company, or (iv) anyone solicited,
                directly or indirectly, in whole or in part, on behalf of the Company
                to
                provide Services within two years preceding the termination of employment
                of the Executive with the
                Company;





(e)
            "Inventions
                and Developments" means any and all inventions, developments, creative
                works and useful ideas of any description whatsoever, whether or
                not
                patentable, including without limitation, discoveries and improvements
                which consist of or relate to any form of Confidential
                Information;





(f)
            "Restricted
                Term" means the aggregate period equal to the period during which
                the
                Executive is employed by the Company, plus a period of 1.5 years
                immediately following the termination of employment of the Executive
                with
                the Company;





(g)
            "Services"
                means banking and bank-related services, and such other services
                that are
                similar to and competitive with services the Company may provide
                or
                develop plans to provide during the employment of the
                Executive;





(h)
            "Terminating
                Event" shall mean:





(i)
            termination
                by either of Northway or the Subsidiary of the employment of the
                Executive
                with either of Northway or the Subsidiary for any reason other than
                (A)
                death, (B) deliberate dishonesty of the Executive with respect to
                Northway
                or the Subsidiary or any subsidiary or affiliate of either, or (C)
                conviction of the Executive of a crime involving moral turpitude,
                or





(ii)
            resignation
                of the Executive from the employ of both of Northway and the Subsidiary,
                while the Executive is not receiving payments or benefits from either
                of
                Northway or the Subsidiary by reason of the Executive's disability,
                subsequent to the occurrence of any of the following
                events:





(A)
            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





(B)
            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





(C)
            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 except for
                across-the-board salary reductions similarly affecting all management
                personnel of the Company and all management personnel of any person
                in
                control of the Company; or





(D)
            the
                failure by the Company 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 program of
                the
                Company within seven (7) days of the date such compensation is due;
                or





(E)
            the
                failure by the Company 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 the Company
                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





(F)
            the
                failure by the Company 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
                Company which would directly or indirectly materially reduce any
                of such
                benefits, or the failure by the Company 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 Company in accordance with the
                Company's normal vacation policy in effect at the time of the Change
                in
                Control; or





(G)
            the
                failure of the Company to obtain a satisfactory agreement from any
                successor(s) to assume and agree to perform this
                Agreement.





2. Severance
      Payments. In the event a Terminating Event occurs within one (1) year after
      a
      Change in Control, the Company shall pay to the Executive, in periodic
      installments in accordance with the Company's usual practice for its senior
      executives, for a period of 1.5 years from the date of such Terminating Event,
      a
      annualized amount equal to the annual compensation paid by the Company to the
      Executive which was includible in the gross income of the Executive for the
      calendar year ending before the date on which the Change in Control occurs;
      provided, that if the Executive is in breach of his obligations under Section
      7,
      the Company may withhold amounts otherwise due to the Executive under this
      Section 2 until the Executive has cured such breach or is otherwise in
      compliance with Section 7.





3. Limitation
      on Benefits.





(a) It
      is the
      intention of the Executive and the Company that no payments by the Company
      to or
      for the benefit of the Executive under this Agreement or any other agreement
      or
      plan pursuant to which he is entitled to receive payments or benefits shall
      be
      non-deductible to the Company by reason of the operation of Section 280G of
      the
      Internal Revenue Code of 1986 , as amended (the "Code") relating to parachute
      payments. 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, any such payments exceed the amount which can be deducted by the Company,
      such payments shall be reduced to the maximum amount which can be deducted
      by
      the Company. 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 Company 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 than no such
      payments shall be non-deductible to the Company by reason of the operation
      of
      said Section 280G. To the extent that there is more than one method of reducing
      the payments to bring them within the limitations of said Section 280G, the
      Executive shall determine which method shall be followed, provided that if
      the
      Executive fails to make such determination within 45 days after the Company
      has
      sent him written notice of the need for such reduction, the Company may
      determine the method of such reduction in its sole discretion.





(b) If
      any
      dispute between the Company and the Executive as to any of the amounts to be
      determined under this Section 3, or the method of calculating such amounts,
      cannot be resolved by the Company and the Executive, either the Company or
      the
      Executive after giving three days written notice to the other, may refer the
      dispute to a partner in the Boston office of a firm of independent certified
      public accountants selected jointly by the Company and the Executive. The
      determination of such partner as to the amount to be determined under Section
      3(a) and the method of calculating such amounts shall be final and binding
      on
      both the Company and the Executive. The Company shall bear the costs of any
      such
      determination.





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





(a)
            investing
                his assets in any company or other entity in a manner not prohibited
                by
                Section 7 below and in such form or manner as shall not require any
                material activities on his 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 ability of the Executive to fulfill his duties
                and
                responsibilities under this
                Agreement.





5. Confidentiality.
      The Executive acknowledges and agrees that his employment creates a relationship
      of confidence and trust with the Company with respect to all Confidential
      Information. At all times, both during the Executive's employment with the
      Company and after the termination of such employment, the Executive shall keep
      in confidence and trust all such Confidential Information, and shall not use
      or
      disclose any such Confidential Information without the written consent of the
      Company, except as may be necessary in the ordinary course of performing his
      duties to the Company. In furtherance of the foregoing:





(a) Documents,
      Records, etc. All documents, records, data, apparatus, equipment and physical
      property, whether or not pertaining to Confidential Information or
      Company-Related Inventions and Developments, which are furnished to the
      Executive by the Company or are produced by the Executive in connection with
      his
      employment shall be and remain the sole property of the Company. The Executive
      shall return to the Company all such materials and property, including any
      material or medium from which any Confidential Information may be ascertained
      or
      derived, as and when requested by the Company. In any event, the Executive
      shall
      return all such materials and property immediately upon termination of his
      employment for any reason. The Executive shall not retain any such material
      or
      property or any copies, compilations, or analyses thereof after such
      termination.





(b) Assignment
      of
      Inventions and Developments. The Executive agrees that all Company-Related
      Inventions and Developments which he conceives or develops, in whole or in
      part,
      either alone or jointly with others, during the term of his employment with
      the
      Company shall be the sole property of the Company. The Company shall be the
      sole
      owner of all patents, copyrights and other proprietary rights in and with
      respect to such Company-Related Inventions and Developments. To the fullest
      extent permitted by law, such Company-Related Inventions and Developments shall
      be deemed works made for hire. The Executive hereby transfers and assigns to
      the
      Company any proprietary rights which he may have or acquire in any such
      Company-Related Inventions and Developments, and the Executive hereby waives
      any
      other special rights which he may have or accrue therein. The Executive agrees
      to execute any documents and take any actions that may be required to effect
      and
      confirm such transfer, assignment and waiver. The provisions of this Section
      5(b) shall apply to all Company-Related Inventions and Developments which are
      conceived or developed by the Executive during the term of his employment with
      the Company, whether or not further development or reduction to practice may
      take place after termination of such employment, for which purpose it shall
      be
      presumed that any Company-Related Inventions and Developments conceived by
      the
      Executive which are reduced to practice within one year after termination of
      the
      employment of the Executive were conceived during the term of the Executive's
      employment with the Company unless the Executive is able to establish a later
      conception date by clear and convincing evidence. THE EXECUTIVE HEREBY
      REPRESENTS AND WARRANTS TO THE COMPANY THAT ALL INVENTIONS AND DEVELOPMENTS
      MADE
      BY THE EXECUTIVE PRIOR TO HIS EMPLOYMENT BY THE COMPANY ARE DISCLOSED IN EXHIBIT
      A ATTACHED TO THIS AGREEMENT. The Executive agrees promptly to disclose to
      the
      Company, or to persons designated by the Company, all Company-Related Inventions
      and Developments which are or may be subject to the provisions of this Section
      5(b). The Executive further agrees to assist the Company, at the Company's
      request from time to time and at its expense, to obtain and enforce patents,
      copyrights or other proprietary rights with respect to Company-Related
      Inventions and Developments in any and all countries and the Executive agrees
      that he shall execute all documents reasonably necessary or appropriate for
      this
      purpose. This obligation of the Executive shall survive the termination of
      employment of the Executive, provided that the Company shall compensate the
      Executive at a reasonable rate after such termination for time actually spent
      by
      the Executive at the Company's request on such assistance. In the event that
      the
      Company is unable for any reason to secure the Executive's signature to any
      document reasonably necessary or appropriate for any of the foregoing purposes
      (including renewals, extensions, continuations, divisions or continuations
      in
      part), the Executive hereby irrevocably designates and appoints the Company
      and
      its duly authorized officers and agents as the Executive's agents and
      attorneys-in-fact to act for the Executive and on behalf of the Executive,
      but
      only for the purpose of executing and filing any such document and doing all
      other lawfully permitted acts to accomplish the foregoing purposes, with the
      same legal force and effect as if it had been executed or done by the
      Executive.





6. Nonsolicitation
      of Customers. During the Restricted Term, regardless of the reason for
      termination of the employment of the Executive, the Executive shall not,
      directly or indirectly, in any capacity:





(a)
            solicit
                the business or patronage of any Customer for any other person or
                entity
                engaged in or for the purpose of providing
                Services;





(b)
            divert,
                entice, or otherwise take away from the Company the business or patronage
                of any Customer, or attempt to do
                so;





(c)
            solicit
                or induce any Customer to terminate or reduce its relationship with
                the
                Company;





(d)
            provide
                or assist with the provision of Services to a Customer (except in
                his
                capacity as an employee of the Company);
                or





(e)
            refer
                a Customer to another provider of
                Services.





7. Unfair
      Competition. During the Restricted Term, regardless of the reason for
      termination of employment of the Executive, the Executive shall not, directly
      or
      indirectly, in any capacity, whether as owner, partner, director, shareholder,
      consultant, agent, employee, co-venturer or otherwise, engage, participate,
      assist or invest in any business activity anywhere in the State of New
      Hampshire, or any county in another state that is contiguous to a county where
      Northway or any of its subsidiaries or affiliates has an office, where the
      Company directly or indirectly provides or uses Services or the Company is
      preparing to provide Services, if such business activity involves the
      development, production, sale, provision or marketing of Services or products
      or
      services like or similar to, or otherwise competitive with the Services. The
      foregoing shall not prevent the Executive from owning up to one percent of
      the
      outstanding securities of a publicly-held corporation which competes with the
      Company, or from being employed by or affiliated or associated with any person
      or entity after termination of the employment of the executive with the Company
      so long as the Executive does not have any direct or indirect involvement on
      behalf of any such person or entity with respect to developing, producing,
      selling, providing or marketing Services. Notwithstanding any provision of
      this
      Agreement to the contrary, in the event a Terminating Event occurs following
      a
      Change in Control, the Executive shall not be subject to the restrictions
      outlined above in this Section 7 for a period in excess of six (6) months from
      the date of such Terminating Event.





8. Nonsolicitation
      of Employees. During the Restricted Term, regardless of the reason for
      termination of the employment of the Executive, the Executive shall not directly
      or indirectly, in any capacity:





(a)
            hire
                or employ, directly or indirectly, through any enterprise with which
                the
                Executive is associated, any current employee or agent of the Company
                or
                any individual who had been employed by or served as an agent to
                the
                Company within one year preceding the date of termination of employment
                of
                the Executive; or





(b)
            recruit,
                solicit or induce (or in any way assist another person or enterprise
                in
                recruiting, soliciting or inducing) any employee or an agent of the
                Company to terminate his or her employment or other relationship
                with the
                Company.





9. Acknowledgments.
      The Executive acknowledges and agrees that the restrictions set forth in
      Sections 5, 6, 7 and 8 are intended to protect the Company's interest in its
      Confidential Information and its commercial relationships and goodwill (with
      its
      customers, prospective customers, vendors, consultants and employees), or
      developed while the Executive was employed by the Company, and are reasonable
      and appropriate for these purposes.





10. Disclosure
      of Agreement. The Executive agrees that he shall disclose the existence and
      terms of this Agreement to any prospective company, partner, co-venturer,
      investor or lender prior to entering into an employment, partnership or other
      business relationship with such person or entity.





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





12. Litigation
      and Regulatory Cooperation. During and after the employment of the Executive
      by
      the Company, the Executive shall cooperate fully with the Company 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 Company which relate to events or
      occurrences that transpired while the Executive was employed by the Company.
      The
      full cooperation of the Executive in connection with such claims or actions
      shall include, but shall 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
      Company at mutually convenient times. During and after the employment of the
      Executive by the Company, the Executive shall cooperate fully with the Company
      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 Company.
      The
      Company shall reimburse the Executive for any reasonable out-of-pocket expenses
      incurred in connection with the performance by the Executive of obligations
      pursuant to this Section 12.





13. Injunction.
      The Executive acknowledges and agrees that it would be difficult to measure
      any
      damages caused to the Company which might result from any breach by the
      Executive of the promises set forth in this Agreement, and that in any event
      money damages would be an inadequate remedy for any such breach. Accordingly,
      the Executive agrees that if the Executive breaches, or threatens to breach,
      any
      portion of this Agreement, the Company shall be entitled, in addition to, and
      not in substitution for, all other remedies that it may have, at law or in
      equity, to an injunction or other appropriate equitable relief to restrain
      any
      such breach without showing or proving any actual damage to the
      Company.





14. Severability.
      The parties hereto agree that if any provisions of this Agreement shall be
      adjudicated to be invalid or unenforceable, such provision shall be deleted
      from
      the Agreement, but such deletion is to apply only with respect to the operation
      of such provision in the particular jurisdiction in which such adjudication
      is
      made, and the validity or enforceability of any other provision hereof shall
      not
      be affected thereby. The parties hereto further agree that to the extent any
      provision hereof is deemed unenforceable by virtue of its scope in terms of
      area
      or length of time or for any other reason, but may be made enforceable by
      limitations thereon, such provision shall be enforceable to the fullest extent
      permissible under the laws and public policies applied in the jurisdiction
      in
      which enforcement is sought.





15. Entire
      Agreement. This Agreement contains the entire and only agreement between the
      parties hereto respecting the subject matter hereof and supersedes all prior
      agreements and understandings between the parties as to the subject matter
      hereof.





16. Survival
      of Obligations; Extension. The Executive acknowledges and agrees that his
      obligations under this Agreement shall survive the termination of his employment
      with the Company regardless of the manner of or reasons for such termination,
      and regardless of whether such termination constitutes a breach of this
      Agreement or of any other agreement the Executive may have with the
      Company.





17. Assignment.
      The Executive shall not make any assignment of this Agreement or any interest
      herein, by operation of law or otherwise, without the prior written consent
      of
      Northway, and without such consent any attempted transfer shall be null and
      void
      and of no effect. The Company shall not make any assignment of this Agreement
      or
      any interest herein, by operation of law or otherwise, without the prior written
      consent of the Executive, and without such consent any attempted transfer shall
      be null and void and of no effect; provided, that the Company may assign all
      or
      any portion of its rights under this Agreement: (a) to any of its affiliates,
      (b) by operation of law to any corporation or other entity with or into which
      the Company may be merged or consolidated, or (c) to any corporation or other
      entity to which the Company transfers all or substantially all of its assets;
      provided such corporation or other entity assumes this Agreement and all
      obligations and undertakings of the Company hereunder.





18. Binding
      Effect. This Agreement shall inure to the benefit of, and be binding upon,
      and
      enforceable against Northway, the Subsidiary and the Executive , their
      respective successors, executors, administrators, heirs and permitted assigns.
      In the event of the Executive's death prior to the completion by the Company
      of
      all payments due to him under this Agreement, the Company shall continue such
      payments to the Executive's beneficiary designated in writing to the Company
      prior to his death (or to his estate, if he fails to make such
      designation).





19. Amendment.
      This Agreement may not be amended except in a writing signed by all parties
      hereto.





20. No
      Contract of Employment. Nothing in this Agreement shall be construed as a
      contract of employment between the Executive and the Company or as a commitment
      on the part of the Company to retain the Executive in any capacity for any
      period of time.





21. Notices.
      Any notices, requests, demands and other communications provided for by this
      Agreement will be sufficient if in writing and delivered in person or sent
      by
      registered or certified mail, postage prepaid, to the Executive at the address
      set out below the signature of the Executive below and, in the case of any
      notice to the Company, at the main office of Northway, to the attention of
      its
      President and Chief Executive Officer.





22. Governing
      Law. The validity, construction, and enforceability of this Agreement shall
      be
      governed by and construed in all respects in accordance with the laws of the
      State of New Hampshire without giving effect to the conflict of laws provisions
      thereof. This Agreement is executed under seal.





23. Term.
      This Agreement shall take effect as of the date hereof and shall terminate
      upon
      expiry of the Restricted Term.





24. Withholding.
      All payments made by the Company under this Agreement shall be net of any tax
      or
      other amounts required to be withheld by the Company under applicable
      law.





25. Arbitration
      of Disputes. Any controversy or claim arising out of or relating to this
      Agreement or the breach thereof shall be settled by arbitration in accordance
      with the laws of the State of New Hampshire by three arbitrators, one of whom
      shall be appointed by the Company, one by the Executive and the third by the
      first two arbitrators. If the first two arbitrators cannot agree on the
      appointment of a third arbitrator, then the third arbitrator shall be appointed
      by the American Arbitration Association in the City of Concord. Such arbitration
      shall be conducted in the City of Concord in accordance with the rules of the
      American Arbitration Association, except with respect to the selection of
      arbitrators which shall be as provided in this Section 25. Judgment upon the
      award rendered by the arbitrators may be entered in any court having
      jurisdiction thereof. In the event that it shall be necessary or desirable
      for
      the Executive to retain legal counsel and/or incur other costs and expenses
      in
      connection with the enforcement of any or all of the Executive's rights under
      this Agreement, the Company shall pay (or the Executive shall be entitled to
      recover from the Company, as the case may be) the Executive's reasonable
      attorneys' fees and other reasonable costs and expenses in connection with
      the
      enforcement of said rights (including the enforcement of any arbitration award
      in court) regardless of the final outcome, unless and to the extent the
      arbitrators shall determine that under the circumstances of recovery by the
      Executive of all or a part of any such fees and costs and expenses would be
      unjust. This provision shall not apply to Section 3(b), except in the event
      that
      the Company and the Executive cannot agree on the selection of the accounting
      partner described in said Section 3(b).





26. Allocation
      of Obligations. Northway and the Subsidiary shall allocate among themselves
      which party shall be responsible for paying the severance payments and other
      benefits directed by this Agreement. The payment by either party of such
      severance payments and other benefits shall satisfy the obligations of the
      non-paying party under this Agreement. Both Northway and the Subsidiary shall
      be
      jointly liable in the event of a failure by both parties to pay such severance
      payments and other benefits.





27. 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.





28. Election
      of Remedies. An election by the Executive to resign after a Change in Control
      under the provisions of this Agreement shall not constitute a breach by the
      Executive of any employment agreement between the Company and the Executive
      and
      shall not be deemed a voluntary termination of employment by the Executive
      for
      the purpose of interpreting the provisions of any of the Company's benefit
      plans, programs or policies. Nothing in this Agreement shall be construed to
      limit the rights of the Executive under any employment agreement he may then
      have with the Company; provided, however, that if there is a Terminating Event
      under Section 1 hereof, the Executive may elect either to receive the severance
      payment provided under Section 2 or such termination benefits as he may under
      any such employment agreement, but may not elect to receive both.





29. Amendment.
      This Agreement may be amended or modified only by a written instrument signed
      by
      the Executive and by duly authorized representatives of each of Northway and
      the
      Subsidiary.




IN
      WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
      by Northway, by its duly authorized officer, by the Subsidiary, by its
      duly
      authorized officer, and by the Executive, as of the date first above written.





WITNESS:ATTEST:
            
            
            THE
                BERLIN CITY BANKBy:Title:Clerk