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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.
<PAGE>

      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<PAGE>

                                                                    Exhibit 10.8

                             KEY EMPLOYEE AGREEMENT

      THIS AGREEMENT is made as of the 19th day of August, 1999 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.
<PAGE>

      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 BANK

________________________________                By:__________________________

                                                Title: ______________________
                                                             Clerk

[Seal]

ATTEST:                                           NORTHWAY FINANCIAL, INC.

________________________________                By:__________________________

                                                Title:_______________________
                                                             Clerk

[Seal]
<PAGE>

                                    EXHIBIT A

                  INVENTIONS AND DEVELOPMENTS MADE BY EXECUTIVE
                       PRIOR TO EMPLOYMENT BY THE COMPANY

Nil

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