Document:

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                                                                     Exhibit 4.6

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                          CENTRAL MAINE POWER COMPANY

                                      and

                             THE BANK OF NEW YORK,

                                                As Trustee

                     -------------------------------------

                          FIFTH SUPPLEMENTAL INDENTURE

                           Dated as of [            ]

                          Supplementing the Indenture

                           Dated as of August 1, 1989

                      ------------------------------------

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            THIS FIFTH SUPPLEMENTAL INDENTURE, dated as of [ ] is between
CENTRAL MAINE POWER COMPANY, a Maine corporation (hereinafter called the
"Issuer" or the "Company"), having its principal office at 83 Edison Drive,
Augusta, Maine 04336, and THE BANK OF NEW YORK, a New York banking corporation,
as Trustee (hereinafter called the "Trustee"), having its Corporate Trust Office
at 101 Barclay Street, Floor 21 West, New York, New York 10286; Att: Corporate
Trust Administration.

                             RECITALS OF THE ISSUER

            The Issuer and the Trustee have heretofore entered into an
Indenture, dated as of August 1, 1989, as supplemented by the First Supplemental
Indenture, dated as of August 7, 1989, the Second Supplemental Indenture, dated
as of January 10, 1992, the Third Supplemental Indenture, dated as of December
15, 1994 and the Fourth Supplemental Indenture dated as of February 26, 1998
(such Indenture, as heretofore supplemented and as supplemented by this
supplemental indenture being hereinafter referred to as the "Indenture"),
relating to the issuance at any time or from time to time of its Securities on
terms to be specified at the time of issuance. As of ________, $_________ in
aggregate principal amount of Medium-Term Notes, Series A have been issued under
the Indenture, of which $__________ in aggregate principal amount is
outstanding, $_____________ in aggregate principal amount of Medium-Term Notes,
Series B have been issued under the Indenture of which $_____________ in
aggregate principal amount is outstanding, $_____________ in aggregate principal
amount of Medium-Term Notes, Series C have been issued under the Indenture of
which $_____________ in aggregate principal amount is outstanding and $________
in aggregate principal amount of Medium Term Notes, Series D have been issued
under the Indenture, of which $___________ in aggregate principal amount is
outstanding. Terms used and not otherwise defined herein shall (unless the
context otherwise clearly requires) have the respective meanings given to them
in the Indenture.

            The Indenture provides in Article Three thereof that, prior to the
issuance of Securities of any series, the form of such Securities and the terms
applicable to such series shall be established in, or pursuant to, the authority
granted in a resolution of the Board of Directors (delivered to the Trustee in
the form of a Board Resolution) or established in one or more indentures
supplemental thereto. The Issuer desires by this supplemental indenture to
establish the form of the Securities of a series, to be titled "Medium-Term
Notes, Series E" of the Issuer, and to establish the terms applicable to such
series, pursuant to Sections 3.1 and 10.1(e) of the Indenture. The Issuer has
duly authorized the execution and delivery of this supplemental indenture.

            Article Ten of the Indenture provides that the Issuer, when
authorized by a resolution of its Board of Directors, and the Trustee may from
time to time and at any time enter into an indenture or indentures supplemental
thereto for certain purposes enumerated in Section 10.1 thereof, including the
establishment of the form or terms of

<PAGE>

any Securities as permitted by Section 3.1 thereof.

            The execution and delivery of this supplemental indenture by the
parties hereto are in all respects authorized by the provisions of the
Indenture.

            All things necessary have been done to make this supplemental
indenture a valid agreement of the Issuer, in accordance with its terms.

            NOW, THEREFORE, THIS FIFTH SUPPLEMENTAL INDENTURE

WITNESSETH:

            For and in consideration of the premises, it is mutually covenanted
and agreed, as follows:

                                  ARTICLE ONE

                  ESTABLISHMENT OF MEDIUM-TERM NOTES, SERIES E

            Section 1.01. The title of the series of the Securities established
by this supplemental indenture shall be "Medium-Term Notes, Series E" of the
Issuer (hereinafter called the "Series E Notes"). The Series E Notes shall be
substantially in the form set forth in Exhibit A hereto (which is hereby
incorporated herein and made a part hereof), subject to changes in the form
thereof made by the Issuer and acceptable to the Trustee.

            Section 1.02. The Series E Notes shall be limited to $500,000,000 in
aggregate principal amount at any time Outstanding, determined in accordance
with the definition of "Outstanding" in Section 1.1 (including the final
paragraph thereof) of the Indenture.

            Section 1.03. The Series E Notes may be issued in whole or in part
as one or more Global Securities and The Depository Trust Company, or a nominee
thereof, shall be the Depository for such Global Security or Global Securities,
except in each case as otherwise provided in an Issuer Order with respect to any
Series E Notes. The Depository for such Global Security or Global Securities
representing Series E Notes may surrender one or more Global Securities
representing Series E Notes in exchange in whole or in part for individual
Series E Notes on such terms as are acceptable to the Issuer and such Depository
and otherwise subject to the terms of Section 2.4 of the Indenture.

            Section 1.04. The Issuer hereby appoints, or confirms the
appointment of, The Bank of New York as the initial Trustee, Securities
Registrar and Paying Agent,

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subject to the provisions of the Indenture with respect to resignation, removal
and succession, and subject, further, to the right of the Issuer to appoint
additional agents (including Paying Agents). An Authenticating Agent may be
appointed for the Series E Notes under the circumstances set forth in, and
subject to the provisions of, the Indenture.

            Section 1.05. If the Trustee shall cease to be Securities Registrar
for the Series E Notes, the Issuer shall, upon the written request of the
Trustee, establish by an Officers' Certificate the applicable dates for the
purpose of clause (a) of Section 5.1 of the Indenture with respect to any Series
E Notes that do not bear interest.

            Section 1.06. The terms of the Series E Notes shall be as set forth
in Exhibit A hereto, and shall include the payment and other terms reflected on
the respective Series E Notes as actually executed, authenticated and delivered
under the Indenture. Without limiting the generality of the foregoing, specific
terms of particular Series E Notes (including any interest rate formulas not
specified in Exhibit A hereto, any redemption, sinking fund or other repayment
terms that differ from the provisions of Article Fourteen or Fifteen of the
Indenture and any terms for satisfaction and discharge of the Indenture that
differ from the provisions of Article Twelve of the Indenture) may be determined
in accordance with or pursuant to the Issuer Order with respect thereto, as
referred to in Section 3.3 of the Indenture.

                                  ARTICLE TWO

                                 MISCELLANEOUS

            Section 2.01. The recitals contained herein shall be taken as the
statements of the Issuer, and the Trustee assumes no responsibility for the
correctness of the same. The Trustee makes no representation as to the validity
of this supplemental indenture. The Indenture, as supplemented by this
supplemental indenture, is in all respects hereby adopted, ratified and
confirmed.

            Section 2.02.  This supplemental indenture may be
executed in any number of counterparts, and on separate counterparts, each of
which shall be an original; but such counterparts shall together constitute but
one and the same instrument.

            Section 2.03. If any provision of this supplemental indenture
limits, qualifies or conflicts with the duties imposed by any of Sections 310 to
317, inclusive, of the Trust Indenture Act of 1939, as amended by the Trust
Indenture Reform Act of 1990, through operation of Section 318(c), such imposed
duties shall control.

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            Section 2.04. The Article headings herein are for convenience only
and shall not affect the interpretation hereof.

                                      -5-
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            IN WITNESS WHEREOF, the parties hereto have caused this Fifth
Supplemental Indenture to be duly executed, and their respective corporate seals
to be hereunto affixed and attested (the date of this supplemental indenture
being the date of execution by the Trustee, as indicated in its Acknowledgment).

                                        CENTRAL MAINE POWER COMPANY

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                                         [Seal]

                                        Attest:

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                        THE BANK OF NEW YORK

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                                         [Seal]

                                        Attest:

                                        By
                                           -------------------------------------
                                           Name:
                                           Title:

                                      -6-
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STATE OF MAINE          )
                        )  ss.:
COUNTY OF KENNEBEC      )

            At Augusta, on this____ day of ________, 2000, before me, a
Notary Public in and for the County of Kennebec and State of Maine,
personally appeared _____________________ and __________________, the
__________________ and _________________, respectively, of Central Maine
Power Company, each to me personally known, who respectively executed, and
affixed and attested the corporate seal on, the foregoing instrument on
behalf of said corporation, and severally acknowledged the same to be their
free act and deed in their said capacities and the free act and deed of
Central Maine Power Company.

                                        NOTARIAL SEAL

                                        ----------------------------------------
                                        Notary Public

My Commission Expires:

STATE OF NEW YORK       )
                        )  ss.:
NEW YORK COUNTY         )

            At The City of New York, on this ____ day of _________,
2000, before me, a Notary Public in and for the County and State of New York,
personally appeared _____________________ and ___________________, a
___________________ and __________________, respectively, of The Bank of New
York, to me personally known, who respectively executed, and affixed and
attested the corporate seal on, the foregoing instrument on behalf of said
corporation, and severally acknowledged the same to be their free act and deed
in their said capacities and the free act and deed of The Bank of New York, as
Trustee.

                                        NOTARIAL SEAL

                                        ----------------------------------------
                                        Notary Public

My Commission Expires:

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<PAGE>

                                                                       Exhibit A

                             [FORM OF FACE OF NOTE]

Registered

No. E-                                                                Registered

CUSIP

            If this Note is registered in the name of The Depository Trust
Company (the "Depository") (55 Water Street, New York, New York) or its nominee,
this Note may not be transferred except as a whole by the Depository to a
nominee of the Depository or by a nominee of the Depository to the Depository or
another nominee of the Depository or by the Depository or any such nominee to a
successor Depository or a nominee of such successor Depository unless and until
this Note is presented by an authorized agent of The Depository Trust Company to
the Issuer or its agent for registration of transfer, exchange or payment, and
any certificate issued is registered in the name of Cede & Co. or such other
name as is requested by an authorized representative of The Depository Trust
Company and any payment is made to Cede & Co. ANY TRANSFER, PLEDGE OR OTHER USE
THEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the
registered owner hereof, Cede & Co., has an interest herein.

                          CENTRAL MAINE POWER COMPANY

                           MEDIUM-TERM NOTE, SERIES E

            If applicable, the "Total Amount of OID", "Yield to Maturity" and
            "Initial Accrual Period OID" (computed under the designated method)
            below will be completed solely for the purposes of applying the
            Federal income tax original issue discount ("OID") rules.

      Floating Rate Note / /      ______% Fixed Rate Note / /

Original Issue Date:               Principal Amount:
Interest Accrual Date:             Issue Price:
Interest Payment Dates:
Maturity Date:
Redemption Date(s):                Redemption Price(s):
Repayment Date(s):                 Repayment Price(s):

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Total Amount of OID:
Yield to Maturity:                 Optional Interest Rate Reset:
Initial Accrual                    Extendible:
Period OID:                        Final Maturity Date:
                                   Other Provisions:

                Only Applicable if this is a Floating Rate Note:

Initial Interest Rate:             Spread (plus or minus):
Index Maturity:                    Spread Multiplier:
Base Rate:                         Maximum Interest Rate:
Interest Reset Period:             Minimum Interest Rate:
Interest Reset Dates:
Interest Determination Dates:
Interest Payment Period:
Calculation Dates:

            Central Maine Power Company, a Maine corporation (the "Company",
which term includes any successor issuer under the Indenture hereinafter
referred to), for value received hereby promises to pay to _____________________
or registered assigns, the principal sum of ___________________ Dollars on the
"Maturity Date", as set forth above, and to pay interest hereon as described on
the reverse hereof.

            The principal of (and premium, if any) and interest on this Note are
payable by the Company in such coin or currency of the United States of America
as at the time of payment shall be legal tender for the payment of public and
private debts.

            REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET
FORTH ON THE REVERSE HEREOF, WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES
HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

            Unless the certificate of authentication hereon has been manually
executed by or on behalf of the Trustee under the Indenture, this Note shall not
be entitled to any benefit under the Indenture, or be valid or obligatory for
any purpose.

            IN WITNESS WHEREOF, CENTRAL MAINE POWER COMPANY has caused this
instrument to be signed in its corporate name by the signatures or facsimile
signatures of its President or a Vice President, and its Treasurer or an
Assistant Treasurer, and its corporate seal or a facsimile thereof to be hereon
impressed, engraved or imprinted and attested by such signature or facsimile
signature of its Secretary or an Assistant Secretary.

                                      -9-
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                                        CENTRAL MAINE POWER COMPANY

           (Seal)
                                        By:
                                            ------------------------------------

Attest:
        ---------------------------
               Secretary                By:
                                            ------------------------------------

Trustee's Certificate of
  Authentication

Dated:

This is one of the
 Securities of the series
 designated therein
 referred to in the within-
 mentioned Indenture.

THE BANK OF NEW YORK,
  as Trustee

By:
    -------------------------------
         Authorized Signatory

                                      -10-
<PAGE>

                           [FORM OF REVERSE OF NOTE]

                          CENTRAL MAINE POWER COMPANY

                           MEDIUM-TERM NOTE, SERIES E

            1. This Note is one of a duly authorized issue of unsecured debt
securities (hereinafter called the "Securities") of the Company of the series
hereinafter specified, all such Securities issued and to be issued under an
Indenture dated as of August 1, 1989 between the Company and The Bank of New
York, as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), as amended and supplemented by the First
Supplemental Indenture, dated as of August 7, 1989, the Second Supplemental
Indenture, dated as of January 10, 1992, the Third Supplemental Indenture, dated
as of December 15, 1994, the Fourth Supplemental Indenture, dated as of February
26, 1998, and the Fifth Supplemental Indenture dated as of [   ], and as further
amended and supplemented (herein called the "Indenture"), to which Indenture
reference is hereby made for a statement of the rights and limitations of rights
thereunder of the Holders of the Securities and of the rights, obligations,
duties and immunities of the Trustee and of the Company, and the terms upon
which the Securities are and are to be authenticated and delivered. As provided
in the Indenture, the Securities may be issued in one or more series which
different series may be issued in various aggregate principal amounts, may
mature at different times, may bear interest, if any, at different rates, may be
subject to different redemption provisions, if any, may be subject to different
sinking, purchase or analogous funds, if any, may be subject to different
covenants and Events of Default and may otherwise vary as in the Indenture
provided or permitted. This Note is one of a series designated on the face
hereof as Medium-Term Notes, Series E (the "Notes"), limited to $500,000,000 in
aggregate principal amount. The Notes of this series may be issued at various
times with different maturity dates and different principal repayment
provisions, may bear interest at different rates, and may otherwise vary, all as
provided in the Indenture.

            2.A. The record date (the "Regular Record Date") with respect to any
Interest Payment Date (as defined below) shall be the date fifteen calendar days
immediately preceding such Interest Payment Date, whether or not such date shall
be a Business Day (unless otherwise shown on the face hereof or as specified
below). Interest which is payable, and is punctually paid or duly provided for,
on any Interest Payment Date shall be paid to the person in whose name the Note
is registered at the close of business on the Regular Record Date immediately
preceding such Interest Payment Date; provided, however, that the first payment
of interest on any Note with an Original Issue Date between a Regular Record
Date and the succeeding Interest

                                      -11-
<PAGE>

Payment Date will be made on the Interest Payment Date following the immediately
succeeding Regular Record Date to the registered owner on such immediately
succeeding Regular Record Date; and provided, further, that interest payable at
Maturity will be payable to the person to whom principal shall be payable.
"Maturity" means the date on which the principal amount hereof becomes due and
payable, whether at Stated Maturity or earlier by declaration of acceleration,
call for redemption or otherwise. Notwithstanding the foregoing, any interest
that is payable but not punctually paid or duly provided for on any Interest
Payment Date shall forthwith cease to be payable to the registered owner hereof
on such Regular Record Date, and may be paid to the person in whose name this
Note is registered on the close of business on a subsequent record date
established by notice given by mail, by or on behalf of the Company to such
Holder not less than fifteen days preceding such subsequent record date, such
record date to be not less than ten days preceding the date for payment of such
defaulted interest, or may be paid as more fully provided in the Indenture.
"Business Day" means any day, other than a Saturday or Sunday, that is (a) not a
day on which banking institutions are authorized or required by law or
regulation to be closed in The City of New York and (b) with respect to a LIBOR
Note, a London Banking Day. "London Banking Day" means any day on which dealings
in deposits in U.S. Dollars are transacted in the London interbank market. In
connection with any calculations, all percentages will be rounded upwards, if
necessary, to the nearest one hundred-thousandth of a percentage point, with
five one- millionths of a percentage point being rounded upwards, and all dollar
amounts used in or resulting from such calculations on the Notes will be rounded
to the nearest one cent (with one-half cent being rounded upwards).

            B. If this is a Fixed Rate Note, the Company promises to pay
interest on the principal amount from its Original Issue Date at the rate per
annum stated on the face hereof until the principal amount hereof is paid or
made available for payment. Unless otherwise provided on the face hereof, the
Company will pay interest semi-annually each September 1 and March 1 (each an
"Interest Payment Date"), commencing (except as set forth above in the case of a
Note with an Original Issue Date between a Regular Record Date and an Interest
Payment Date) with the Interest Payment Date immediately following the Original
Issue Date and at Maturity. If any Interest Payment Date would otherwise be a
day that is not a Business Day, such Interest Payment Date shall be postponed to
the next day that is a Business Day, and no interest shall accrue by reason of
such delayed payment. Each payment of interest in respect of an Interest Payment
Date shall include interest accrued to but excluding such Interest Payment Date.
Interest on Fixed Rate Notes shall be computed on the basis of a 360-day year of
twelve 30-day months (unless otherwise shown on the face hereof or as specified
below).

            C. If this is a Floating Rate Note, the Company promises to pay
interest on the principal amount from its Original Issue Date at a rate or rates
determined in accordance with the provisions below under the headings
"Determination of CD Rate",

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<PAGE>

"Determination of Commercial Paper Rate", "Determination of Federal Funds Rate",
"Determination of LIBOR", "Determination of Prime Rate", or "Determination of
Treasury Rate", depending upon whether the Base Rate specified on the face
hereof is CD Rate, Commercial Paper Rate, Federal Funds Rate, LIBOR, Prime Rate
or Treasury Rate, respectively, until the principal hereof is paid or duly made
available for payment.

            The rate of interest on each Floating Rate Note shall be reset on
the day or days specified on the face hereof (each an "Interest Reset Date") on
a daily, weekly, monthly, quarterly, semi-annual or annual basis (the "Interest
Reset Period") as specified on the face hereof. If any Interest Reset Date for
any Floating Rate Note is not a Business Day, such Interest Reset Date shall be
postponed to the next day that is a Business Day, except, (i) if the Base Rate
is LIBOR and such Business Day is in the immediately succeeding calendar month,
such Interest Reset Date shall be the immediately preceding Business Day or (ii)
if the Base Rate is Treasury Rate and the Interest Reset Date falls on a date
which is an auction date (as described below), the Interest Reset Date shall be
the following day that is a Business Day.

            The Company will pay interest monthly, quarterly, semi-annually or
annually or otherwise, in each case as specified on the face hereof under
"Interest Payment Period" commencing with the first Interest Payment Date
specified on the face hereof immediately succeeding the Original Issue Date.
Unless otherwise specified on the face hereof, the date or dates on which
interest will be payable (each an "Interest Payment Date") will be, (i) in the
case of Floating Rate Notes with a daily, weekly or monthly Interest Reset
Period, on the third Wednesday of each month or on the third Wednesday of March,
June, September and December of each year, as specified on the face hereof; (ii)
in the case of Floating Rate Notes with a quarterly Interest Reset Period, on
the third Wednesday of March, June, September and December of each year; (iii)
in the case of Floating Rate Notes with a semi-annual Interest Reset Period, on
the third Wednesday of each of the two months specified on the face hereof; and
(iv) in the case of Floating Rate Notes with an annual Interest Reset Period, on
the third Wednesday of one month of each year specified on the face hereof and,
in each case, at Maturity.

            If any Interest Payment Date other than at Maturity for any Floating
Rate Note would otherwise be a day that is not a Business Day, such Interest
Payment Date shall be postponed to the next day that is a Business Day, except
that in the case of a LIBOR Note, if such Business Day is in the immediately
succeeding calendar month, such Interest Payment Date shall be the immediately
preceding Business Day. If Maturity for any Floating Rate Note falls on a day
that is not a Business Day, payment of principal, premium, if any, and interest
with respect to such Note will be made on the immediately succeeding Business
Day with the same force and effect as if made on the due date, and no additional
interest shall be payable as a result of such delayed payment.

                                      -13-
<PAGE>

            Unless otherwise indicated on the face hereof, interest payments on
each Interest Payment Date and at Maturity for Floating Rate Notes will include
accrued interest from and including the Original Issue Date or the immediately
preceding Interest Payment Date to which interest has been paid or duly provided
for, to but excluding the applicable Interest Payment Date or the date of
Maturity. Accrued interest will be calculated by multiplying the principal
amount of a Floating Rate Note by an accrued interest factor. This accrued
interest factor will be computed by adding the interest factor calculated for
each day in the period for which accrued interest is being calculated. The
interest factor (expressed as a decimal rounded upwards, if necessary, to the
next higher one hundred-thousandth of a percentage point) for each such day will
be computed by dividing the interest rate (calculated as set forth below)
applicable to such day by 360 if the Base Rate is the CD Rate, Commercial Paper
Rate, Federal Funds Rate, LIBOR or Prime Rate, or by the actual number of days
in the year, if the Base Rate is Treasury Rate, as indicated on the face hereof.
The interest rate in effect on each day will be (a) if such day is an Interest
Reset Date, the interest rate with respect to the Interest Determination Date
(as defined below) pertaining to such Interest Reset Date, or (b) if such day is
not an Interest Reset Date, the interest rate with respect to the Interest
Determination Date (as defined below) pertaining to the immediately preceding
Interest Reset Date, subject in either case to any Maximum or Minimum Interest
Rate limitation referred to on the face hereof and to any adjustment by a Spread
and/or a Spread Multiplier referred to on the face hereof; provided, however,
that the interest rate in effect for the period from and including the Original
Issue Date to but excluding the first Interest Reset Date will be the "Initial
Interest Rate" set forth on the face hereof. The interest rate hereon will in no
event be higher than the maximum rate permitted by applicable law.

            The interest rate for each Interest Reset Period for a Floating Rate
Note will be the rate determined by the Calculation Agent on the Calculation
Date (as defined below) pertaining to the Interest Determination Date pertaining
to the Interest Reset Date for such Interest Reset Period. Unless otherwise
specified on the face hereof, the "Interest Determination Date" pertaining to an
Interest Reset Date will be, if the Base Rate is the CD Rate, Commercial Paper
Rate, Federal Funds Rate or Prime Rate, the second Business Day immediately
preceding such Interest Reset Date. Unless otherwise specified on the face
hereof, the Interest Determination Date pertaining to an Interest Reset Date
will be, if the Base Rate is LIBOR, the second London Banking Day immediately
preceding such Interest Reset Date. Unless otherwise specified on the face
hereof, the Interest Determination Date pertaining to an Interest Reset Date
will be, if the Base Rate is Treasury Rate, the day of the week in which such
Interest Reset Date falls on which direct obligations of the United States
("Treasury bills") of the Index Maturity specified on the face hereof would
normally be auctioned. Treasury bills are normally sold at auction on Monday of
each week, unless that day is a legal holiday, in which case the auction is
usually held on the following Tuesday, except that such auction may be held on
the preceding Friday. If, as the result of a legal holiday, an

                                      -14-
<PAGE>

auction is so held on the preceding Friday, such Friday will be the Interest
Determination Date pertaining to the Interest Reset Date for any Note the Base
Rate for which is the Treasury Rate occurring in the immediately succeeding
week. If an auction falls on a day that is an Interest Reset Date for any Note
the Base Rate for which is the Treasury Rate, such Interest Reset Date will be
the first Business Day immediately following such auction date.

            Unless otherwise specified on the face hereof, the "Calculation
Date", where applicable, pertaining to an Interest Determination Date will be
the earlier of (i) the tenth calendar day after such Interest Determination Date
or if such day is not a Business Day, the immediately succeeding Business Day or
(ii) the Business Day preceding the applicable Interest Payment Date or
Maturity, as the case may be.

            Subject to applicable provisions of law and except as specified
herein, on each Interest Reset Date the rate of interest shall be the rate
determined in accordance with the provisions of the applicable heading below.

            DETERMINATION OF CD RATE. If the Base Rate indicated on the face
hereof is the CD Rate, the interest rate shall equal the rate on each Interest
Determination Date specified on the face hereof for negotiable certificates of
deposit having the Index Maturity specified on the face hereof, as such rate is
published by the Board of Governors of the Federal Reserve System in
"Statistical Release H.15(519), Selected Interest Rates", or any successor
publication of the Board of Governors of the Federal Reserve System
("H.15(519)") under the heading "CDs (Secondary Market)" or, if such rate is not
so published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the CD Rate for such Interest
Determination Date will be the rate on such Interest Determination Date for
negotiable certificates of deposit of the specified Index Maturity as published
by the Federal Reserve Bank of New York in its daily statistical release
"Composite 3:30 P.M. Quotations for U.S. Government Securities" or any successor
publication of the Federal Reserve Bank of New York ("Composite Quotations")
under the heading "Certificates of Deposit". If such rate is not published in
either H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on
the Calculation Date pertaining to such Interest Determination Date, then the CD
Rate for such Interest Determination Date will be calculated by the Calculation
Agent and will be the arithmetic mean of the secondary market offered rates as
of 10:00 A.M., New York City time, on such Interest Determination Date, of three
leading nonbank dealers in negotiable U.S. dollar certificates of deposit in The
City of New York selected by the Calculation Agent for negotiable certificates
of deposit of major United States money center banks of the highest credit
standing (in the market for negotiable certificates of deposit) with a remaining
maturity closest to the specified Index Maturity in a denomination of
$5,000,000. In each of the above cases, the rate shall be adjusted by the
addition or subtraction of the Spread, if any, specified on the face hereof, or
by multiplication by the Spread Multiplier, if any, specified on the face
hereof. If the dealers selected as

                                      -15-
<PAGE>

aforesaid by the Calculation Agent are not quoting as set forth above, the CD
Rate with respect to such Interest Determination Date will be the CD Rate in
effect immediately prior to such Interest Determination Date.

            DETERMINATION OF COMMERCIAL PAPER RATE. If the Base Rate indicated
on the face hereof is the Commercial Paper Rate, the interest rate shall equal
the Money Market Yield (calculated as described below) of the rate on each
Interest Determination Date specified on the face hereof for commercial paper
having the Index Maturity specified on the face hereof, as such rate is
published in H.15(519), under the heading "Commercial Paper" or, if such rate is
not published by 3:00 P.M., New York City time, on the Calculation Date
pertaining to such Interest Determination Date, the Commercial Paper Rate for
such Interest Determination Date will be the Money Market Yield of the rate on
such Interest Determination Date for commercial paper having the specified Index
Maturity as published in Composite Quotations under the heading "Commercial
Paper". If such rate is not published in either H.15(519) or Composite
Quotations by 3:00 P.M., New York City time, on the Calculation Date pertaining
to such Interest Determination Date, then the Commercial Paper Rate for such
Interest Determination Date shall be calculated by the Calculation Agent and
shall be the Money Market Yield of the arithmetic mean of the offered rates as
of 11:00 A.M., New York City time, on such Interest Determination Date of three
leading dealers of commercial paper in The City of New York selected by the
Calculation Agent for commercial paper having the specified Index Maturity,
placed for an industrial issuer whose bond rating is "AA", or the equivalent,
from a nationally recognized rating agency. In each of the above cases, the rate
shall be adjusted by the addition or subtraction of the Spread, if any,
specified on the face hereof, or by multiplication by the Spread Multiplier, if
any, specified on the face hereof. If the dealers selected as aforesaid by the
Calculation Agent are not quoting offered rates as specified herein, the
Commercial Paper Rate with respect to such Interest Determination Date will be
the Commercial Paper Rate in effect immediately prior to such Interest
Determination Date.

            "Money Market Yield" means a yield (expressed as a percentage
rounded to the nearest one hundred-thousandth of a percentage point) calculated
in accordance with the following formula:

                          Money Market Yield = D X 360
                       ---------------------------------- X 100
                                 360 - (D X M)

where "D" refers to the applicable per annum rate for commercial paper quoted on
a bank discount basis and expressed as a decimal, and "M" refers to the actual
number of days in the interest period for which interest is being calculated.

            DETERMINATION OF FEDERAL FUNDS RATE. If the Base Rate indicated on
the face hereof is the Federal Funds Rate, the interest rate shall equal the
rate on each Interest Determination Date specified on the face hereof for
Federal Funds as

                                      -16-
<PAGE>

published in H.15(519) under the heading "Federal Funds (Effective)" or, if such
rate is not so published by 3:00 P.M., New York City time, on the Calculation
Date pertaining to such Interest Determination Date, the Federal Funds Rate for
such Interest Determination Date will then be the rate on such Interest
Determination Date as published in Composite Quotations under the heading
"Federal Funds/ Effective Rate". If such rate is not published in either
H.15(519) or Composite Quotations by 3:00 P.M., New York City time, on the
Calculation Date pertaining to such Interest Determination Date, then the
Federal Funds Rate for such Interest Determination Date will be calculated by
the Calculation Agent and will be the arithmetic mean of the rates, as of 9:00
A.M., New York City time, on such Interest Determination Date, for the last
transaction in overnight Federal Funds arranged by three leading brokers of
Federal Funds transactions in The City of New York selected by the Calculation
Agent. In each of the above cases the rate shall be adjusted by the addition or
subtraction of the Spread, if any, specified on the face hereof, or by
multiplication by the Spread Multiplier, if any, specified on the face hereof.
If the brokers selected as aforesaid by the Calculation Agent are not quoting as
set forth above, the Federal Funds Rate with respect to such Interest
Determination Date will be the Federal Funds in effect immediately prior to such
Interest Determination Date.

            DETERMINATION OF LIBOR. If the Base Rate indicated on the face
hereof is LIBOR, the interest rate with respect to each Interest Determination
Date specified on the face hereof shall be determined in accordance with the
following provisions:

            (i) With respect to any such Interest Determination Date, LIBOR will
            be either: (a) if "LIBOR Reuters" is specified on the face hereof,
            the arithmetic mean of the offered rates (unless the specified
            designated LIBOR Page (as defined below) by its terms provides only
            for a single rate, in which case such single rate shall be used) for
            deposits in United States dollars having the Index Maturity
            designated on the face hereof, commencing on the second London
            Banking Day immediately following the Interest Determination Date,
            which appear on the Designated LIBOR Page specified on the face
            hereof as of 11:00 A.M., London time, on such Interest Determination
            Date, if at least two such offered rates appear (unless, as
            aforesaid, only a single rate is required) on such Designated LIBOR
            Page, or (b) if "LIBOR Telerate" is specified on the face hereof,
            the rate for deposits in United States dollars having the Index
            Maturity specified on the face hereof, commencing on the second
            London Banking Day immediately following such Interest Determination
            Date, which appears on the Designated LIBOR Page specified on the
            face hereof as of 11:00 A.M., London time, on that Interest
            Determination Date. Notwithstanding the foregoing, if fewer than two
            offered rates appear on the Designated LIBOR Page with respect to
            LIBOR Reuters (unless the specified Designated LIBOR Page with
            respect to LIBOR Reuters by its terms provides only for a single
            rate, in which case such single rate shall

                                      -17-
<PAGE>

            be used), or if no rate appears on the Designated LIBOR Page with
            respect to LIBOR Telerate, whichever may be applicable, LIBOR in
            respect of the related Interest Determination Date will be
            determined as if the rate described in clause (ii) below had been
            specified.

            (ii) With respect to any such Interest Determination Date on which
            fewer than two offered rates appear on the Designated LIBOR Page
            with respect to LIBOR Reuters (unless the Designated LIBOR Page by
            its terms provides only for a single rate, in which case such single
            rate shall be used), or if no rate appears on the Designated LIBOR
            page with respect to LIBOR Telerate, as the case may be, the
            Calculation Agent will request the principal London office of each
            of four major banks in the London interbank market selected by the
            Calculation Agent to provide the Calculation Agent with its offered
            rate quotation for deposits in United States dollars for the period
            of the Index Maturity specified on the face hereof, commencing on
            the second London Banking Day immediately following such Interest
            Determination Date, to prime banks in the London interbank market as
            of 11:00 A.M., London time, on such Interest Determination Date and
            in a principal amount that is representative for a single
            transaction in United States dollars in such market at such time. If
            at least two such quotations are provided, LIBOR determined on such
            Interest Determination Date will be the arithmetic mean of such
            quotations. If fewer than two quotations are provided, LIBOR
            determined on such Interest Determination Date will be the
            arithmetic mean of the rates quoted as of 11:00 A.M. in The City of
            New York, on such Interest Determination Date by three major banks
            in The City of New York selected by the Calculation Agent for loans
            in United States dollars to leading banks, having the Index Maturity
            specified on the face hereof in a principal amount that is
            representative for a single transaction in United States dollars in
            such market at such time.

In each of the above cases the rate shall be adjusted by the addition or
subtraction of the Spread, if any, specified on the face hereof, or by
multiplication by the Spread Multiplier, if any, specified on the face hereof.
If the banks selected as aforesaid by the Calculation Agent are not quoting as
set forth above, LIBOR determined on such Interest Determination Date will be
LIBOR in effect on such Interest Determination Date.

            "Designated LIBOR Page" means either (a) the display on the Reuters
Monitor Money Rates Service for the purpose of displaying the London interbank
rates of major banks for United States dollars (if "LIBOR Reuters" is designated
on the face hereof), or (b) the display on the Dow Jones Telerate Service for
the purpose of displaying the London interbank rates of major banks for United
States dollars (if "LIBOR Telerate" is designated on the face hereof). If
neither LIBOR Reuters nor

                                      -18-
<PAGE>

LIBOR Telerate is specified on the face hereof, LIBOR will be determined as if
LIBOR Telerate (page 3750) had been chosen.

            DETERMINATION OF PRIME RATE. If the Base Rate indicated on the face
hereof is the Prime Rate, the interest rate shall equal the rate on each
Interest Determination Date specified on the face hereof as published in
H.15(519) under the heading "Bank Prime Loan". If such rate is not so published
by 3:00 P.M., New York City time, on the Calculation Date pertaining to such
Interest Determination Date, the Prime Rate for such Interest Determination Date
shall be calculated by the Calculation Agent and shall be the arithmetic mean of
the rates of interest publicly announced by each bank named on the Reuters
Screen USPRIME 1 Page as such bank's prime rate or base lending rate as in
effect for such Interest Determination Date as quoted on the Reuters Screen
USPRIME 1 Page on such Interest Determination Date, or, if fewer than four such
rates appear on the Reuters Screen USPRIME 1 Page for such Interest
Determination Date, the rate shall be the arithmetic mean of the prime rates
quoted on the basis of the actual number of days in the year divided by 360 as
of the close of business on such Interest Determination Date by at least two of
the three major money center banks in The City of New York selected by the
Calculation Agent. If fewer than two quotations are provided as aforesaid, the
Prime Rate for such Interest Determination Date shall be calculated by the
Calculation Agent and shall be the arithmetic mean of the prime rates quoted in
The City of New York on such date by the appropriate number of substitute banks
or trust companies organized and doing business under the laws of the United
States, or any State thereof, in each case having total equity capital of at
least U.S. $500 million and being subject to supervision or examination by a
Federal or state authority, selected by the Calculation Agent to quote such rate
or rates. In each of the above cases, the rate shall be adjusted by the addition
or subtraction of the Spread, if any, specified on the face hereof, or by
multiplication by the Spread Multiplier, if any, specified on the face hereof.

            If the Prime Rate is not published in H.15(519) and the banks or
trust companies selected as aforesaid are not quoting as mentioned in the
preceding paragraph, the Prime Rate with respect to such Interest Determination
Date will be the Prime Rate in effect immediately prior to such Interest
Determination Date. "Reuters Screen USPRIME 1 Page" means the display designated
as page "USPRIME 1" on the Reuters Monitor Money Rate Service (or such other
page as may replace page USPRIME 1 on that service for the purpose of displaying
prime rates or base lending rates of major United States banks).

            DETERMINATION OF TREASURY RATE. If the Base Rate indicated on the
face hereof is the Treasury Rate, the interest rate shall equal the rate on each
Interest Determination Date specified on the face hereof applicable to the most
recent auction of direct obligations of the United States ("Treasury bills")
having the Index Maturity specified on the face hereof, as such rate is set
forth in H.15(519) under the heading "Treasury Bills - auction average
(Investment)" or, if not so made available by 3:00

                                      -19-
<PAGE>

P.M., New York City time, on the Calculation Date pertaining to such Interest
Determination Date, the Treasury Rate for such Interest Determination Date will
be the auction average rate (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) as
otherwise announced by the United States Department of the Treasury. In the
event that the results of the auction of Treasury bills having the specified
Index Maturity are not reported as provided above by 3:00 P.M., New York City
time, on such Calculation Date or if no such auction is held in a particular
week, then the Treasury Rate shall be calculated by the Calculation Agent and
shall be the yield to maturity (expressed as a bond equivalent on the basis of a
year of 365 or 366 days, as applicable, and applied on a daily basis) of the
arithmetic mean of the secondary market bid rates, as of approximately 3:30
P.M., New York City time, on such Interest Determination Date, of three leading
primary United States government securities dealers selected by the Calculation
Agent for the issue of Treasury bills with a remaining maturity closest to the
specified Index Maturity. In each of the above cases the rate shall be adjusted
by the addition or subtraction of the Spread, if any, specified on the face
hereof, or by multiplication by the Spread Multiplier, if any, specified on the
face hereof. If the dealers selected as aforesaid by the Calculation Agent are
not quoting as mentioned in this paragraph, the Treasury Rate with respect to
such Interest Determination Date shall be the Treasury Rate in effect
immediately prior to such date.

            Initially, The Bank of New York shall be the Calculation Agent. The
Calculation Agent shall calculate the interest rate hereon in accordance with
the foregoing and will confirm in writing such calculation to the Trustee and
any Paying Agent immediately after each determination. Neither the Trustee nor
any Paying Agent shall be responsible for any such calculation. At the request
of the Holder hereof the Calculation Agent will provide to the Holder hereof the
interest rate hereon then in effect and, if determined, the interest rate which
will become effective as of the next Interest Reset Date.

            INTEREST RATE RESET. If specified on the face hereof, the Company
has the option to reset the interest rate, in the case of a Fixed Rate Note, or
to reset the Spread and/or Spread Multiplier, in the case of a Floating Rate
Note, on the date or dates specified on the face hereof (each an "Optional Reset
Date") and on the basis or formula, if any, for such resetting specified on the
face hereof.

            The Company may exercise such option by notifying the Paying Agent
of such exercise at least 45 but not more than 60 days prior to an Optional
Reset Date for this Note. Not later than 40 days prior to such Optional Reset
Date, the Paying Agent will send to the Holder hereof a Notice (the "Reset
Notice"), by facsimile transmission, hand delivery or letter (first class,
postage prepaid), setting forth (i) the election of the Company to reset the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, (ii) such new interest rate or
such new Spread and/or Spread Multiplier, as the case may be, and (iii) the

                                      -20-
<PAGE>

provisions, if any, for redemption during the period from such Optional Reset
Date to the next Optional Reset Date or, if there is no such next Optional Reset
Date, to the Stated Maturity of the principal amount of this Note (each period a
"Subsequent Interest Period"), including the date or dates on which or the
period or periods during which and the price or prices at which such redemption
may occur during such Subsequent Interest Period.

            Notwithstanding the foregoing, not later than 20 days prior to an
Optional Reset Date for a Note, the Company may, at its option, revoke the
interest rate, in the case of a Fixed Rate Note, or the Spread and/or Spread
Multiplier, in the case of a Floating Rate Note, in either case provided for in
the Reset Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a new Spread and/or Spread Multiplier which results in a higher
interest rate, in the case of a Floating Rate Note, for the Subsequent Interest
Period commencing on such Optional Reset Date by causing the Paying Agent to
send by facsimile transmission, hand delivery or letter (first class, postage
prepaid) notice of such higher interest rate or new Spread and/or Spread
Multiplier, as the case may be, to the Holder. Such notice shall be irrevocable.
All Notes with respect to which the interest rate or Spread and/or Spread
Multiplier is reset on an Optional Reset Date will bear such higher interest
rate, in the case of a Fixed Rate Note, or new Spread and/or Spread Multiplier,
in the case of a Floating Rate Note.

            If the Company elects to reset the interest rate or the Spread
and/or Spread Multiplier on an Optional Reset Date, the Holder will have the
option to elect repayment by the Company on such Optional Reset Date at a price
equal to the principal amount thereof plus any accrued interest to such Optional
Reset Date. In order for a Note to be so repaid on an Optional Reset Date on
which the interest rate or the Spread and/or Spread Multiplier is reset, the
Holder must follow the procedures set forth in paragraph 5 below for optional
repayment, except that the period for delivery of such Note or notification to
the Paying Agent shall be at least 25 but not more than 35 days prior to such
Optional Reset Date and except that a Holder who has tendered a Note for
repayment pursuant to a Reset Notice may, by written notice to the Paying Agent,
revoke any such tender for repayment until 5:00 p.m. New York City time on the
tenth day, whether or not a Business Day, prior to such Optional Reset Date.

            EXTENDIBLE NOTES. If specified on the face hereof, the Company has
the option to extend the Stated Maturity of this Note for one or more periods of
from one to five whole years (each an "Extension Period") up to but not beyond
the date of final maturity, which shall in no event be more than thirty years
from the Original Issue Date of this Note (the "Final Maturity Date"), and
Exhibit A hereto will set forth each applicable Extension Period, the Final
Maturity Date and any other terms and conditions applicable to such option.

            The Company may exercise such option by notifying the

                                      -21-
<PAGE>

Paying Agent of such exercise at least 45 but not more than 60 calendar days
prior to the Stated Maturity of this Note in effect prior to the exercise of
such option (the "Original Stated Maturity Date"). If the Company so notifies
the Paying Agent of such exercise, the Paying Agent will send, not later than 40
calendar days prior to the Original Stated Maturity Date, by facsimile
transmission, hand delivery or letter (first class, postage prepaid), to the
Holder hereof a notice (the "Extension Notice") relating to such Extension
Period, indicating (i) that the Company has elected to extend the Stated
Maturity of this Note, (ii) the new Stated Maturity, (iii) in the case of a
Fixed Rate Note, the interest rate applicable to the Extension Period or, in the
case of a Floating Rate Note, the Spread and/or Spread Multiplier applicable to
the Extension Period, and (iv) the provisions, if any, for redemption during the
Extension Period, including the date or dates on which or the period or periods
during which and the price or prices at which such redemption may occur during
the Extension Period. Upon the sending by the Paying Agent of an Extension
Notice to the Holder hereof, the Stated Maturity of this Note shall be extended
automatically, and, except as modified by the Extension Notice and as described
in the next two paragraphs, this Note will have the same terms as prior to the
sending of such Extension Notice.

            Notwithstanding the foregoing, not later than 20 calendar days prior
to the Original Stated Maturity Date of a Note, the Company may, at its option,
revoke the interest rate, in the case of a Fixed Rate Note, or the Spread and/or
Spread Multiplier, in the case of a Floating Rate Note, provided for in the
Extension Notice and establish a higher interest rate, in the case of a Fixed
Rate Note, or a new Spread and/or Spread Multiplier which results in a higher
interest rate, in the case of a Floating Rate Note, for the Extension Period by
causing the Paying Agent to send by facsimile transmission, hand delivery or
letter (first class, postage prepaid) notice of such higher interest rate or new
Spread and/or Spread Multiplier, as the case may be, to the Holder of such Note.
Such notice shall be irrevocable. All Notes with respect to which the Stated
Maturity is extended will bear such higher interest rate, in the case of a Fixed
Rate Note, or new Spread and/or Spread Multiplier, in the case of a Floating
Rate Note, for the Extension Period, whether or not tendered for repayment as
provided in the next paragraph.

            If the Company elects to extend the Stated Maturity of a Note, the
Holder of such Note will have the option to elect repayment of such Note by the
Company on the Original Stated Maturity Date at a price equal to the principal
amount thereof plus any accrued and unpaid interest to such date. In order for
a Note to be so repaid on the Original Stated Maturity Date, the Holder must
follow the procedures set forth in paragraph 5 below

                                      -22-
<PAGE>

for optional repayment, except that the period for delivery of such Note or
notification to the Paying Agent shall be at least 25 but not more than 35
calendar days prior to the Original Stated Maturity Date. A Holder who has
tendered a Note for repayment following receipt of an Extension Notice may
revoke such tender for repayment by written notice to the Paying Agent received
prior to 5:00 P.M., New York City time, on the tenth day prior to the Original
Stated Maturity Date.

            COMBINATION OF PROVISIONS. If so specified on the face hereof, this
Note may be subject to all of the provisions, or any combination of the
provisions, described above under "Interest Rate Reset" and "Extendible Notes".

            3. Payments of interest (other than interest payable at Maturity)
will be made by mailing a check to the Holder at the address of the Holder
appearing on the Securities Register on the applicable Regular Record Date,
unless otherwise agreed to by the Company. The principal amount hereof and any
premium and the interest payable at Maturity will be paid at Maturity against
presentation of this Note at the office or agency of the Company maintained for
that purpose in the Borough of Manhattan, The City of New York, or as otherwise
provided in the Indenture.

            4. If specified on the face hereof, this Note may be redeemed, as a
whole or from time to time in part, at the option of the Company, on not less
than 30 nor more than 60 days' prior notice given as provided in the Indenture,
on any Redemption Date(s) and at the related Redemption Price(s) (expressed as a
percentage of the principal amount hereof) set forth on the face hereof,
together with interest accrued and unpaid hereon to such Redemption Date. If no
such Redemption Date is set forth on the face hereof, this Note may not be so
redeemed prior to the Maturity Date specified on the face hereof. If fewer than
all the Outstanding Notes of like tenor and terms are to be redeemed, the
particular Notes to be redeemed shall be selected by the Trustee not more than
60 days prior to the Redemption Date from the Outstanding Notes of like tenor or
terms not previously called for redemption. Such selection shall be of principal
amounts in increments of $1,000 (provided that any remaining principal of any
Note shall be at least $1,000). Subject to the immediately preceding sentence,
such selection shall be made by any method as the Trustee deems fair and
appropriate. The notice of such redemption shall specify which Notes are to be
redeemed. In the event of redemption of this Note in part only, a new Note or
Notes of this series of like tenor or terms for the unredeemed portion hereof
will be issued to the Holder hereof upon the cancellation hereof.

            5. If specified on the face hereof, this Note will be subject to
repayment at the option of the Holder hereof on the Repayment Date(s) and at the
related Repayment Price(s) (expressed as a percentage of the principal amount
hereof) indicated on the face hereof. If no such Repayment Date is set forth on
the face hereof, this Note may not be so repaid prior to the Maturity Date
specified on the face

                                      -23-
<PAGE>

hereof. On each Repayment Date, if any, this Note shall be repayable in whole or
in part at the option of the Holder hereof at the applicable Repayment Price set
forth on the face hereof, together with interest accrued and unpaid hereon to
such Repayment Date. In order for this Note to be repaid in whole or in part at
the option of the Holder hereof, the Paying Agent must receive not less than 30
but not more than 45 days prior to the Repayment Date (i) the Note with the form
entitled "Option to Elect Repayment" below duly completed or (ii) a facsimile
transmission or a letter from a member of a national securities exchange or the
National Association of Securities Dealers, Inc. or a commercial bank or a trust
company in the United States of America setting forth the name of the Holder of
the Note, the principal amount of the Note, the certificate number of the Note
or a description of the Note's tenor or terms, the principal amount of the Note
to be repaid, a statement that the option to elect repayment is being exercised
thereby and a guarantee that the Note to be repaid with the form entitled
"Option to Elect Repayment" on the reverse of the Note duly completed will be
received by such Paying Agent no later than five Business Days after the date of
such facsimile transmission or letter and such Note and form duly completed are
received by such Paying Agent by such fifth Business Day. Exercise of such
repayment option shall be irrevocable. Such option may be exercised by the
Holder for less than the entire principal amount provided that the principal
amount remaining outstanding after repayment is an authorized denomination.

            6. If an Event of Default with respect to the Notes shall occur and
be continuing, the principal of all of the Notes may be declared due and payable
in the manner and with the effect provided in the Indenture. If this is an
Original Issue Discount Note and the principal amount hereof is declared to be
due and payable, the amount of principal due and payable with respect to this
Note shall be limited to the Amortized Face Amount of this Note as of the date
of such declaration. If this Note is an Original Discount Note that does not
bear stated interest, the "Amortized Face Value" hereof shall be the sum of (i)
the aggregate principal amount of this Note multiplied by the Issue Price
(expressed as a percentage of the aggregate principal amount) indicated on the
face hereof plus (ii) the portion of the difference between the dollar amount
determined pursuant to the preceding clause (i) and the principal amount of this
Note that has accrued at the Yield to Maturity set forth on the face hereof
(computed in accordance with generally accepted financial practices in effect on
the date of declaration) to such date of declaration, but in no event shall the
Amortized Face Amount of this Note exceed the principal amount hereof. An
Original Issue Discount Note is a Note, including any Zero-Coupon Note, that has
a stated redemption price at its Maturity Date that exceeds its Issue Price by
at least 0.25% of its principal amount, multiplied by the number of full years
from the Original Issue Date to the Maturity Date for such Note and any other
Note designated by the Company as issued with original issue discount for United
States federal income tax purposes.

            7. The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company

                                      -24-
<PAGE>

and the rights of the Holders of the Securities under the Indenture at any time
by the Company with the consent of the Holders of not less than a majority in
principal amount of the Securities at the time Outstanding of all series to be
affected thereby (voting as one class). The Indenture also contains provisions
permitting the Holders of a majority in principal amount of the Securities of
any series at the time Outstanding, on behalf of the Holders of all Securities
of such series, to waive compliance by the Company with certain provisions of
the Indenture and past defaults under the Indenture and their consequences with
respect to such series. In the case of any such waiver, the Holder of this Note
shall be restored to his former position and rights hereunder, such default
shall cease to exist and be deemed to have been cured and not to have occurred,
and any related Event of Default shall be deemed to have been cured, and not to
have occurred for every purpose of the Indenture; but no such waiver shall
extend to any subsequent or other default or Event of Default or impair any
right consequent thereon.

            8. No reference herein to the Indenture and no provision of this
Note or of the Indenture shall affect or impair the obligation of the Company,
which is unconditional and absolute, to pay the principal of and premium, if
any, and interest on this Note at the places, at the times, at the rates, in the
amounts and in the coin or currency as prescribed herein and in the Indenture.

            9. Notes will be issued in denominations of $1,000 and integral
multiples thereof.

            10. As provided in the Indenture and subject to certain limitations
therein set forth, this Note is transferable on the Securities Register of the
Company, upon surrender of this Note for registration of transfer at the office
or agency of the Company to be maintained for that purpose in The City of New
York. Every Note presented for registration of transfer shall (if so required by
the Company or the Securities Registrar) be duly endorsed, or accompanied by a
written instrument of transfer in form satisfactory to the Company and the
Securities Registrar duly executed, by the Holder hereof or its attorney duly
authorized in writing, and thereupon one or more new Notes of like tenor and
terms of authorized denominations and for the same aggregate principal amount
will be issued to the designated transferee or transferees.

            The Company shall not be required (i) to issue, register the
transfer of or exchange Notes to be redeemed for a period of fifteen days
preceding the date of the mailing of the notice of redemption, or (ii) to
register the transfer of or to exchange any such Note or portion thereof
selected for redemption, except the unredeemed portion of any such Note being
redeemed in part.

            No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of a Note for registration of transfer, the Company,
the Trustee and any

                                      -25-
<PAGE>

agent of the Company or the Trustee may treat the person in whose name a Note is
registered as the owner hereof for all purposes whether or not such Note be
overdue and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.

            11. Unless otherwise defined herein, all terms used in this Note
which are defined in the Indenture shall have the meaning assigned to them in
the Indenture.

            12. The Indenture and this Note shall for all purposes be governed
by, and construed in accordance with, the laws of the State of Maine, and for
all purposes this Indenture shall be construed in accordance with the laws of
said State, except that the rights and duties of the Trustee shall be governed
by the laws of the State of New York.

                                      -26-
<PAGE>

                                   ASSIGNMENT

            FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto

-----------------------------------     ----------------------------------------
Please insert social security           Please print or typewrite
or other identifying number             name and address of assignee
of assignee

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
the within Note of Central Maine Power Company and does hereby irrevocably
constitute and appoint ______________________________ attorney to transfer the
said Note on the books of the within-mentioned Company, with full power of
substitution in the premises.

Dated:
       ------------------               ----------------------------------------
                                        Notice:  The signature on this
                                        assignment must correspond with the name
                                        as written upon the face of the Note in
                                        every particular without alteration or
                                        enlargement or any change whatsoever.

                                      -27-
<PAGE>

                           OPTION TO ELECT REPAYMENT*

            The undersigned hereby irrevocably requests and instructs the
Company to repay the within Note (or portion hereof specified below) pursuant to
its terms at a price equal to the applicable Repayment Price thereof together
with interest to the Repayment Date, to the undersigned at
__________________________

--------------------------------------------------------------------------------
            Please print or typewrite name and address
            of the undersigned

            If less than the entire principal amount of the within Note is to be
repaid, specify the portion thereof that the Holder elects to have repaid
_____________________________________ and specify the denomination or
denominations (which shall be in authorized denominations) of the Notes to be
issued to the Holder for the portion of the within Note not being repaid (in the
absence of any such specification, one such Note will be issued for the portion
not being repaid): ____________________________.

Dated:
       ------------------               ----------------------------------------
                                                      Signature

*     NOTE: This option is NOT available to a holder unless this Note contains
      an express provision granting to the holder hereof an option to elect
      repayment.

                                      -28-EMPLOYMENT AGREEMENT
                                  BY AND AMONG

                               PEOPLES STATE BANK

                                       AND

                               PSB BANCGROUP, INC.

                                       AND

                                 WESLEY T. SMALL

         THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into this 9th day of
November 1999, by and among PEOPLES STATE BANK, a Florida  chartered  commercial
bank ("Bank"),  PSB BANCGROUP,  INC.,  the Bank's parent  holding-company  and a
Florida Corporation ("Corporation"), and WESLEY T. SMALL ("Employee"). The Bank,
the  Corporation  and the  Employee are  collectively  referred to herein as the
"Parties."

                                    RECITALS

         WHEREAS,  the Bank and the  Corporation  wish to retain Employee as the
Bank's  President  and  Chief  Executive  Officer  to  perform  the  duties  and
responsibilities  as are described in this  Agreement and as the Bank's Board of
Directors ("Board") may assign to Employee from time to time; and

         WHEREAS,  Employee  desires to become employed by the Bank and to serve
as the Bank's President and Chief Executive Officer in accordance with the terms
and provisions of this Agreement.

         NOW,  THEREFORE,  in consideration of the mutual  agreements  contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Parties hereto represent, warrant, undertake,
covenant and agree as follows:

                                 OPERATIVE TERMS

         1.  Employment  and Term.  The Bank shall employ  Employee and Employee
shall be  employed  pursuant  to the  terms of this  Agreement  to  perform  the
services  specified in Section 2 herein. The initial term of employment shall be
for a period of twelve (12) months, commencing on November 15, 1999.

         Upon mutual written agreement,  the Parties may extend the term of this
Agreement  for two six- month periods (the  "Extensions").  Prior to agreeing to
either of the Extensions, the Board shall review Employee's performance and this
Agreement.

         In the event the Employee  gives notice of  termination  of employment,
the  Bank may  elect,  at its sole  option,  to have the term of this  Agreement
expire  immediately  or upon the thirtieth  (30th) day following the delivery to
the Bank and the Corporation of such notice of termination.  Except as otherwise
provided in the following paragraph with respect to a voluntary  termination for
Good Reason, a voluntary employment  termination by the Employee shall result in
the  termination  of the  rights  and  obligations  of the  Parties  under  this
Agreement;  provided, however, that the terms and provisions of Section 12 shall
continue to apply.

Exhibit 10.6

                                        1

<PAGE>

         In the event the Bank desires to involuntarily terminate the employment
of Employee (for purposes of this Agreement,  a voluntary employment termination
by the Employee for Good Reason shall be treated as an  involuntary  termination
of the  Employee's  employment  without  Cause),  the Bank shall  deliver to the
Employee a notice of termination, and the following provisions shall apply:

                  (a) In the event the  involuntary  termination  is for  Cause,
                  this Agreement  shall terminate  immediately  upon delivery to
                  the Employee of such notice of termination. Such a termination
                  for Cause shall  result in the  termination  of all rights and
                  obligations of the Parties under this Agreement.

                  (b) In the event the involuntary termination is without Cause,
                  the  Employee  shall be  entitled  to  receive  the  severance
                  benefits set forth in Sections 9(f) and 9(g) herein.

         2.       Position, Responsibilities and Duties.   During the term of
this Agreement, Employee shall serve in the following capacities and shall
fulfill the following responsibilities and duties:

                  (a)  Specific  Duties:  Employee  shall  serve  as the  Bank's
                  President and Chief Executive Officer, through election by the
                  Board. In such capacity,  Employee shall have the same powers,
                  duties and  responsibilities  of supervision and management of
                  the Bank usually  accorded to a President and Chief  Executive
                  Officer  of  similar  financial  institutions.   In  addition,
                  Employee  shall use his best efforts to perform the duties and
                  responsibilities  enumerated  in this  Agreement and any other
                  duties  assigned  to  Employee by the Board and to utilize and
                  develop  contacts and customers to enhance the business of the
                  Bank.  Specifically,  Employee  shall devote his full business
                  time and attention and use his best efforts to accomplish  and
                  fulfill the following duties and responsibilities,  as well as
                  other  duties  assigned to  Employee  from time to time by the
                  Board:

                           (i)      manage Bank personnel;

                           (ii)     serve on such committees as appointed by the
                                    Board from time to time;

                           (iii)    supervise all Bank activities;

                           (iv)     work closely with the Bank's  Executive Vice
                                    President,  Robert W. Woodard,  specifically
                                    in the area of Bank operations;

                           (v)      keep  the  Board   informed   of   important
                                    developments     concerning    the    Bank's
                                    activities,    industry   developments   and
                                    regulatory initiatives affecting the Bank;

                           (vi)     maintain  adequate  expense records relating
                                    to  Employee's  activities  on behalf of the
                                    Bank;

                           (vii)    recommend  marketing efforts to increase the
                                    business of the Bank;

Exhibit 10.6

                                        2

<PAGE>

                           (viii)   coordinate  with the Bank's  Executive  Vice
                                    President,   other  officers,   accountants,
                                    auditors and counsel to the extent necessary
                                    to further the business of the Bank, keeping
                                    in  compliance   with  government  laws  and
                                    regulations  and otherwise  keeping the Bank
                                    in as good a financial  and legal posture as
                                    possible; and

                           (ix)     conduct and undertake all other  activities,
                                    responsibilities,    and   duties   normally
                                    expected to be undertaken  and  accomplished
                                    by a President and Chief  Executive  Officer
                                    of a financial  institution similar in scope
                                    and operation to the Bank's business.

                  (b) General  Duties:  During the term of this  Agreement,  and
                  except for illness,  vacation  periods and leaves of absences,
                  Employee  shall  devote all of his  working  time,  attention,
                  skill and best efforts to accomplish  and  faithfully  perform
                  all of the duties  assigned to Employee on a full-time  basis.
                  Employee shall, at all times, conduct himself in a manner that
                  will reflect  positively upon the Bank.  Employee shall obtain
                  such licenses,  certificates,  accreditations and professional
                  memberships  and  designations  as  the  Bank  may  reasonably
                  require.  Employee shall join and maintain  membership in such
                  social and civic  organizations as Employee or the Board deems
                  appropriate to foster the Bank's contacts and business network
                  in the community.

         3.       Compensation.   During the term of this Agreement, Employee
shall be compensated as follows:

                  (a) Base Salary:  Employee  shall  receive an annual salary of
                  $75,000  (the  "Base  Salary")  in  equal   installments,   in
                  accordance with the Bank's standard payroll practices, reduced
                  appropriately  by deductions  for federal  income  withholding
                  taxes,  social security taxes and other deductions required by
                  applicable laws. The Bank may adjust the Base Salary from time
                  to time  based  upon  the  Board's  evaluation  of  Employee's
                  performance.  In no event,  however,  will the Base  Salary be
                  reduced without Employee's written concurrence.

                  (b)  Benefit  Plans:  During the term of this  Agreement,  the
                  Employee  will be entitled to  participate  in and receive the
                  benefits of any profit-sharing  plans, 401(k) plans,  deferred
                  compensation  plans,  or other plans,  benefits and privileges
                  given  to  employees  and  executives  of the Bank  which  are
                  currently  in effect at the  execution  of this  Agreement  or
                  which may come into  existence  thereafter,  to the extent the
                  Employee is otherwise eligible and qualifies to so participate
                  in and receive such benefits or privileges. The Bank shall not
                  make any changes in such plans,  benefits or privileges  which
                  would  adversely  affect  the  Employee's  rights or  benefits
                  thereunder,  unless such change  occurs  pursuant to a program
                  applicable to all executive officers (Vice President or above)
                  of the Bank and does not result in a  proportionately  greater
                  adverse change in the rights of or benefits to the Employee as
                  compared with any other executive officer of the Bank. Nothing
                  paid to the Employee under any plan or  arrangement  presently
                  in effect or made  available  in the future shall be deemed to
                  be in lieu of the Base Salary payable to the Employee pursuant
                  to Section 3 herein.

Exhibit 10.6

                                        3

<PAGE>

         4.       Payment of Business Expenses.  Employee is authorized to incur
reasonable  expenses in performing his duties.  The Bank will reimburse Employee
for authorized expenses,  according to the Bank's established policies, promptly
after Employee's presentation of an itemized account of such expenditures.

         5.       Vacation.  Employee  is  entitled  to  three  (3)  weeks  paid
vacation time per year on a non-cumulative  basis. Two (2) weeks of the vacation
must be taken during two (2) consecutive weeks.

         6.       Fringe Benefits.

                  (a) Medical  Benefits:  Employee is entitled to participate in
                  all medical  and health  care  benefit  plans  through  health
                  insurance,  corporate funds,  medical  reimbursement  plans or
                  other plans, if any, provided,  or to be provided, by the Bank
                  for its employees.

                  (b) Club  Memberships  and Education:  The Bank will reimburse
                  Employee for membership dues for joining service organizations
                  such as the Rotary  Club or Kiwanis  Club.  The Bank will also
                  reimburse  Employee  for  admission  or  attendance  fees  for
                  educational meetings or seminars offered by such organizations
                  as the Florida Bankers Association.

         7.       Disability/Illness.

                  (a) Illness:  Employee  shall be paid his full Base Salary for
                  any period of his illness or  incapacity:  provided  that such
                  illness  or  incapacity  does not  render  Employee  unable to
                  perform his duties under this  Agreement  for a period  longer
                  than  three  (3)  consecutive  months.  At  the  end  of  such
                  three-month   period,   the  Bank  may  terminate   Employee's
                  employment and this Agreement.

                  (b) Disability: If the Bank terminates this Agreement pursuant
                  to  Employee's  disability  as  determined  under Section 7(a)
                  herein,  the  Bank  shall  pay to  Employee,  as a  disability
                  payment,  an amount equal to  Employee's  monthly Base Salary,
                  payable  in  accordance  with  the  Bank's  standard   payroll
                  practices,  commencing  on the  effective  date of  Employee's
                  termination and ending on the earlier of:

                            (i)     the date Employee returns to full time
                                    employment in  his capacity as the Bank's
                                    President and Chief Executive Officer;

                           (ii)     Employee's full time employment by another
                                    financial institution;

                           (iii)    three  (3)  months  after  the  date of such
                                    termination,  after which  Employee  will be
                                    entitled  to  receive   benefits  under  any
                                    disability  insurance  plan  provided by the
                                    Bank; or

                           (iv)     the date of Employee's death.

         The Bank may satisfy its obligations under this Section, at its option,
         through the purchase of disability  insurance.  The  provisions of such
         policy will  control  the amounts  paid to  Employee.  Such  disability
         insurance will be coordinated  with any disability plans made available
         to Employee pursuant to Section 6 herein.

Exhibit 10.6

                                        4

<PAGE>

                  (c) Continuation of Coverages: During any period of illness or
         disability,   the  Bank  will  continue  any  other  life,  health  and
         disability  coverages  for  Employee  substantially  identical  to  the
         coverages  maintained  prior to Employee's  termination for disability.
         Such coverages shall cease upon the earlier of:

                           (i)      Employee's full time employment by another
                                    financial institution;

                           (ii)     one (1) year after the date of such
                                    termination (with the exception of
                                    disability insurance coverage); or

                           (iii)    the date of Employee's death.

                  (d) No Reduction  in Base  Salary:  During the period in which
         Employee is disabled or subject to illness or incapacity, other than as
         described  in Section  7(b)  herein,  there  shall be no  reduction  in
         Employee's Base Salary.

         8. Death During Employment. In the event of Employee's death during the
term of this  Agreement,  the Bank's  obligation to Employee shall be limited to
the portion of  Employee's  compensation  which would be payable up to the first
working  day  of the  first  month  after  Employee's  death,  except  that  any
compensation  payable to Employee under any benefit plan  maintained by the Bank
will be paid pursuant to its terms.

         9.       Termination.

                  (a)  Illness,   Incapacity  or  Death:  This  Agreement  shall
                  terminate  upon  Employee's  illness,  incapacity  or death in
                  accordance with the provisions of Sections 7 and 8 herein.

                  (b) Termination  for Cause:  The Bank shall have the right, at
                  any time, upon prior written notice of termination  satisfying
                  the  requirements  of  Section  11 herein,  to  terminate  the
                  Employee's  employment  hereunder,  including  termination for
                  Cause.  For the  purpose of this  Agreement,  termination  for
                  Cause  shall  mean   termination   for  personal   dishonesty,
                  incompetence, willful misconduct, material breach of fiduciary
                  duty, intentional failure to perform the duties stated in this
                  Agreement,  willful  violation of any law,  rule or regulation
                  (other than traffic violations or similar  offenses),  willful
                  violation of a final cease-and-desist  order, personal default
                  on indebtedness to a third party which is not corrected within
                  30 days  from  the date of  default,  willful  or  intentional
                  breach or negligence or misconduct in the  performance of such
                  duties or material  breach of any provision of this  Agreement
                  as determined by a court of competent jurisdiction or in final
                  agency action by a federal or state  regulatory  agency having
                  jurisdiction  over the Bank. For purposes of this Section,  no
                  act,  or  failure  to act,  on the  Employee's  part  shall be
                  considered  "willful"  unless done,  or omitted to be done, by
                  him not in good faith and without  reasonable  belief that his
                  action  or  omission  was in the best  interest  of the  Bank;
                  provided  that any act or omission  to act by the  Employee in
                  reasonable  reliance  upon an  opinion  of counsel to The Bank
                  shall not be deemed to be  willful.  In the event  Employee is
                  terminated  for  Cause,   Employee  shall  have  no  right  to
                  compensation  or other benefits for any period after such date
                  of termination.

Exhibit 10.6

                                        5

<PAGE>

                  (c) Involuntary Termination:  If the Employee is terminated by
                  the  Bank  other  than  for  Cause  or in  connection  with  a
                  Change-in-Control  of the  Corporation  (as defined in Section
                  9[e]  herein),  Employee's  right to  compensation  and  other
                  benefits  under  this  Agreement  shall  be as  set  forth  in
                  Sections 9(f)(i) and 9(g) herein. In the event the Employee is
                  terminated by the Bank in connection with a  Change-in-Control
                  of the Corporation, Employee's right to compensation and other
                  benefits  under  this  Agreement  shall  be as  set  forth  in
                  Sections 9(f)(ii) and 9(h) herein.

                  (d)  Termination  for Good Reason:  Employee may terminate his
                  employment  hereunder  for Good  Reason.  For purposes of this
                  Agreement,  "Good Reason" shall mean (i) a failure by the Bank
                  to comply with any material provision of this Agreement, which
                  failure has not been cured within ten business (10) days after
                  a notice of such  noncompliance has been given by the Employee
                  to the Bank; or (ii) subsequent to a Change-in-Control  of the
                  Corporation  as defined in Section 9(e) herein and without the
                  Employee's express written consent, any of the following shall
                  occur:   the   assignment   to  the  Employee  of  any  duties
                  inconsistent   with   the   Employee's   positions,    duties,
                  responsibilities and status with the Bank immediately prior to
                  a  Change-in-Control  of  the  Corporation;  a  change  in the
                  Employee's reporting responsibilities, titles or offices as in
                  effect  immediately  prior  to a  Change-in-  Control  of  the
                  Corporation;  any removal of the Employee from, or any failure
                  to re-elect the Employee to, any of such positions,  except in
                  connection   with  a  termination  of  employment  for  Cause,
                  disability,  death,  or removal  pursuant to Sections  9(a) or
                  9(b) herein; a reduction by the Bank in the Employee's  annual
                  salary as in effect  immediately prior to a Change-in- Control
                  of the  Corporation;  the  failure of the Bank to  continue in
                  effect any bonus, benefit or compensation plan, life insurance
                  plan, health and accident plan or disability plan in which the
                  Employee is participating  at the time of a  Change-in-Control
                  of the  Corporation,  or the  taking of any action by the Bank
                  which would adversely  affect the Employee's  participation in
                  or materially reduce the Employee's benefits under any of such
                  plans, or the transfer of the Employee to any location outside
                  of Columbia  County,  Florida or the assignment of substantial
                  duties  to  the  Employee  to be  completed  outside  Columbia
                  County, Florida.

                  (e)  Change-in-Control:  "Change-in-Control" is defined herein
                  to mean an event where a person:  (i) directly or  indirectly,
                  or acting through one or more other persons, owns, controls or
                  has  power  to vote  more  than  50% of any  class of the then
                  outstanding  voting  securities  of the  Corporation;  or (ii)
                  controls in any manner the  election of the  directors  of the
                  Corporation.    For    purposes   of   this    Agreement,    a
                  Change-in-Control  shall be  deemed  not to have  occurred  in
                  connection with a reorganization,  consolidation, or merger of
                  the Corporation  where the  stockholders  of the  Corporation,
                  immediately  before the consummation of the transaction,  will
                  own over 50% of the total combined voting power of all classes
                  of stock entitled to vote of the surviving entity  immediately
                  after the transaction.

                  (f)      Severance Payment:

                           (i)      If  the   Employee   shall   terminate   his
                                    employment  for Good  Reason as  defined  in
                                    Section 9(d)  herein,  or if the Employee is
                                    terminated  by the Bank for other than Cause
                                    pursuant  to Section  9(c)  herein,  then in
                                    lieu of any further  salary  payments to the
                                    Employee for periods  subsequent to the date

Exhibit 10.6

                                        6

<PAGE>

                                    of termination, the Employee shall be paid,
                                    as severance, twelve (12) months Base Salary

                           (ii)     In  the  event   Employee's   employment  is
                                    terminated  as  a  result  of  a  Change-in-
                                    Control  or  a   Change-in-Control   of  the
                                    Corporation occurs within twelve (12) months
                                    of the Employees' involuntary termination or
                                    termination for Good Reason,  Employee shall
                                    be entitled to a severance  payment equal to
                                    his current Base Salary.  Any payment  under
                                    Section  9(f)(i) and 9(f)(ii)  shall be made
                                    in    substantially    equal    semi-monthly
                                    installments  on the fifteenth and last days
                                    of each month until paid in full.

                  (g)  Additional  Severance  Benefits:  Unless the  Employee is
                  terminated for Cause pursuant to Section 9(b) herein, pursuant
                  to Section  10(b)  herein,  or  pursuant to a  termination  of
                  employment  by the Employee  for other than Good  Reason,  the
                  Bank  shall  maintain  in  full  force  and  effect,  for  the
                  continued  benefit of the Employee for the  remaining  term of
                  this Agreement,  or twelve (12) months  (whichever is longer),
                  all Employee  benefit plans and programs in which the Employee
                  was entitled to participate  immediately  prior to the date of
                  termination;  provided, however, that the Employee's continued
                  participation   is  possible   under  the  general  terms  and
                  provisions of such plans and programs. Further, the Bank shall
                  pay for the same or  similar  benefits  if such  benefits  are
                  available to the Employee on an individual or group basis as a
                  result of  contractual  or statutory  provisions  requiring or
                  permitting such  availability  including,  but not limited to,
                  health insurance covered under COBRA.

                  (h) Mitigation: Employee shall not be required to mitigate the
                  amount of any payment  provided for in Sections  9(f) and 9(g)
                  of this Agreement by seeking other employment or otherwise.

         10.      Required  Provisions by  Regulation.  The Parties  acknowledge
that the laws and regulations governing the Bank require that certain provisions
be provided in each  employment  agreement  with  officers and  employees of the
Bank. The Parties agree to be bound by the following provisions:

                  (a)  Suspension/Temporary  Prohibition:  If  the  Employee  is
                  suspended and/or temporarily  prohibited from participating in
                  the  conduct of the Bank's  affairs by a notice  served  under
                  Section  655.037  Florida  Statutes or under  Section  8(e) or
                  (g)(1)  of  the  Federal  Deposit  Insurance  Act  [12  U.S.C.
                  ss.1818(e)(3)  and (g)(1)] the Bank's  obligations  under this
                  Agreement  shall be  suspended  as of the date of such service
                  unless stayed by appropriate  proceedings.  If the charges and
                  the notice are dismissed, the Bank may in its discretion:

                        (i)   pay the Employee all or part of his compensation
                              withheld while the obligations under this
                              Agreement are suspended; and

                        (ii)  reinstate (in whole or part) any of the Bank's
                              obligations which were suspended.

                  (b) Permanent  Prohibition:  If the Employee is removed and/or
                  permanently  prohibited from  participating  in the conduct of
                  the Bank's affairs by an order issued under Section

Exhibit 10.6

                                        7

<PAGE>

                  655.037  Florida  Statutes or Section 8(e)(4) or (g)(1) of the
                  Federal  Deposit  Insurance  Act [12 U.S.C.  ss.1818(e)(4)  or
                  (g)(1)],  all of the Bank's  obligations  under this Agreement
                  shall terminate as of the effective date of the order, but the
                  Employee's vested rights, if any shall not be affected.

                  (c) Default  Under FDIA: If the Bank is in default [as defined
                  in Section 3(x)(1) of the Federal Deposit  Insurance Act], all
                  obligations  under this  Agreement  shall  terminate as of the
                  date of default,  but this  subsection of this Agreement shall
                  not affect the Employee's vested rights if any.

                  (d)  Regulatory   Termination:   All  obligations  under  this
                  Agreement  shall be  terminated,  except to the extent  that a
                  determination   has  been  made  that   continuation  of  this
                  Agreement is necessary for continued operation of the Bank:

                           (i)      by the Director or his or her  designee,  at
                                    the  time  the  Federal  Deposit   Insurance
                                    Corporation    ("FDIC")   enters   into   an
                                    agreement  to  provide  assistance  to or on
                                    behalf  of  the  Bank  under  the  authority
                                    contained  in Section  13(c) of the  Federal
                                    Deposit Insurance Act; or

                           (ii)     by the  Department or the Director or his or
                                    her designee,  at the time the Department or
                                    the Director or his or her designee approves
                                    a  supervisory  merger to  resolve  problems
                                    related to operation of the Bank or when the
                                    Bank's  determined  by the Director to be in
                                    unsafe or unsound condition.

                           Any  of  the  Employee's  rights  that  have  already
                           vested,  however,  shall  not  be  affected  by  such
                           action.  For  purposes  of  this  subsection  of this
                           Agreement,   the  term  "Director"   shall  mean  the
                           Director of the FDIC.

         11.      Notice of Termination.

                  (a) Employee's  Notice:  Employee  shall have the right,  upon
                  prior written  notice of  termination  of not less than thirty
                  (30) days,  to terminate  his  employment  hereunder.  In such
                  event,  Employee  shall  have  no  right  after  the  date  of
                  termination to  compensation  or other benefits as provided in
                  this Agreement,  unless such termination is for "Good Reason",
                  as defined in Section 9(d) herein.  If the Employee provides a
                  notice of termination for Good Reason, the date of termination
                  shall be the date on which the notice of termination is given.

                  (b) Specificity:  Any termination of the Employee's employment
                  by the Bank or by Employee  shall be  communicated  by written
                  notice of termination to the other Party hereto.  For purposes
                  of this  Agreement,  a "notice  of  termination"  shall mean a
                  dated   notice   which   shall:   (i)  indicate  the  specific
                  termination  provision in the Agreement  relied upon; (ii) set
                  forth in reasonable detail the facts and circumstances claimed
                  to  provide  a  basis  for   termination   of  the  Employee's
                  employment  under the  provision so  indicated;  and (iii) set
                  forth the date of  termination,  which  shall be not less than
                  thirty (30) days nor more than forty-five (45) days after such
                  notice  of  termination  is  given,  except in the case of the

Exhibit 10.6

                                        8

<PAGE>

                  Bank's termination of the Employee's  employment for Cause, in
                  which case date of  termination  shall be the date such notice
                  of termination is given.

                  (c) Delivery of Notices:  All notices  given or required to be
                  given  herein  shall  be in  writing,  sent by  United  States
                  first-class  certified or registered mail, postage prepaid, by
                  way  of  overnight  carrier  or by  hand  delivery.  If to the
                  Employee  (or to the  Employee's  spouse  or  estate  upon the
                  Employee's   death)   notice  shall  be  sent  to   Employee's
                  last-known  address,  and if to the Bank and the  Corporation,
                  notice   shall   be  sent  to   their   respective   corporate
                  headquarters.   All  such  notices  shall  be  effective  when
                  deposited  in the mail if sent via first-  class  certified or
                  registered  mail, or upon delivery if by hand delivery or sent
                  via overnight  carrier.  Any Party, by notice in writing,  may
                  change or designate the place for receipt of all such notices.

         12. Post-Termination  Obligations.  The Bank shall pay to Employee such
compensation as is required pursuant to this Agreement;  provided,  however, any
such payment shall be subject to Employee's post-termination  cooperation.  Such
cooperation shall include the following:

                           (i)      Employee shall furnish such  information and
                                    assistance as may be reasonably  required by
                                    the Bank or the  Corporation  in  connection
                                    with any  litigation  or  settlement  of any
                                    dispute   between   the  Bank   and/or   the
                                    Corporation  and a borrower and/or any other
                                    third parties  (including without limitation
                                    serving  as a  witness  in  court  or  other
                                    proceedings);

                           (ii)     Employee  shall provide such  information or
                                    assistance    to   the   Bank   and/or   the
                                    Corporation    in   connection    with   any
                                    regulatory   examination  by  any  state  or
                                    federal regulatory agency;

                           (iii)    Employee shall keep the Bank's trade secrets
                                    and  other   proprietary   or   confidential
                                    information  secret  to the  fullest  extent
                                    practicable,  subject to compliance with all
                                    applicable laws.

         Upon submission of proper receipts,  the Bank shall promptly  reimburse
Employee for any  reasonable  expenses in current by Employee in complying  with
the provisions of this Section.

         13.  Attorneys' Fees.  In the event that any claim or controversy
hereunder is the subject of any litigation or  arbitration  between or among the
Parties,  the  prevailing  party shall be entitled to an award of all reasonable
costs, including attorneys' fees.

         14.  Indebtedness.  If  during  the  term of this  Agreement,  Employee
becomes indebted to the Bank for any reason, the Bank may, at its election,  set
off and collect any sums due Employee out of any amounts  which the Bank may owe
Employee  from his Base  Salary  or other  compensation.  Furthermore,  upon the
termination  of  this  Agreement,   all  sums  owed  by  Employee  shall  become
immediately due and payable. Employee shall pay all expenses and attorneys' fees
actually or necessarily  incurred by the Bank in connection  with any collection
proceeding  for  Employee's  indebtedness  to  us.  Notwithstanding  any  of the
foregoing,  any indebtedness to us secured by a mortgage on Employee's residence
shall not be subject to the foregoing  provisions,  and shall be governed by the
loan documents evidencing such indebtedness.

Exhibit 10.6

                                        9

<PAGE>

         15. Maintenance of Trade Secrets and Confidential Information. Employee
shall use his best efforts and utmost  diligence to guard and protect all of the
Bank's trade secrets and  confidential  information.  Employee shall not, either
during the term or after  termination of this  Agreement,  for whatever  reason,
use, in any capacity,  or divulge or disclose in any manner, to any Person,  the
identity of the Bank's customers,  or its customer lists,  methods of operation,
marketing and promotional methods,  processes,  techniques,  systems,  formulas,
programs  or other trade  secrets or  confidential  information  relating to the
Bank's business.  Upon  termination of this Agreement or Employee's  employment,
for any reason,  Employee shall  immediately  return and deliver to the Bank all
records and papers and all matters of whatever  nature which bear trade  secrets
or confidential information relating to the Bank.

         16.      Competitive Activities.

                  (a)  Limitation on Outside  Activities:  Employee  agrees that
                  during the term of this  Agreement,  except  with the  express
                  consent  of  the  Board,   Employee  will  not,   directly  or
                  indirectly, engage or participate in, become a director of, or
                  render advisory or other services for, or in connection  with,
                  or become  interested in, or make any financial  investment in
                  any firm, corporation,  business entity or business enterprise
                  competitive  with or to any  business  of the Bank;  provided,
                  however,  that  Employee  shall not be precluded or prohibited
                  from owning passive investments,  including investments in the
                  securities of other  financial  institutions,  so long as such
                  ownership does not require Employee to devote substantial time
                  to  management  or control of the  business or  activities  in
                  which Employee has invested.

                  (b) Agreement Not to Compete:  Employee  acknowledges  that by
                  virtue of his employment with the Bank,  Employee will acquire
                  an intimate  knowledge  of the  activities  and affairs of the
                  Bank, including trade secrets and other confidential  matters.
                  Employee,  therefore,  agrees  that  during  the  term of this
                  Agreement,  and for a period of eight (8) months (in the event
                  Employee does not receive severance  compensation) or fourteen
                  (14)  months (in the event  Employee  does  receive  severance
                  compensation)   following   the   termination   of  Employee's
                  employment  hereunder,  Employee  shall not  become  employed,
                  directly or  indirectly,  whether as an Employee,  independent
                  contractor, consultant, or otherwise, with a federally-insured
                  financial   institution  located  in,  or  with  any  business
                  enterprise,  business  entity  or  Person  whose  intent is to
                  organize  another  financial  institution in, Columbia County,
                  Florida.

                  Employee  further  agrees  that for a period  of  twelve  (12)
                  months  following the  termination  of  Employee's  employment
                  hereunder  for any  reason,  Employee  shall not  directly  or
                  indirectly  solicit the business of any then current  customer
                  of  the  Bank,  regardless  of  whether  or not  Employee  was
                  responsible for generating  such  customer's  business for the
                  Bank. This restriction  shall apply to both loan customers and
                  depositors of the Bank.

                  Employee    hereby   agrees   that   the   duration   of   the
                  anticompetitive  covenant set forth herein is reasonable,  and
                  its geographic scope is not unduly restrictive.

Exhibit 10.6

                                       10

<PAGE>

         17.      Remedies for Breach.

                  (a)  Arbitration:  The  Parties  agree  that,  except  for the
                  specific  remedies  for  injunctive  relief  as  contained  in
                  Section 17(b) and other equitable  relief,  any controversy or
                  claim  arising out of or relating  to this  Agreement,  or any
                  breach thereof, including,  without limitation, any claim that
                  this Agreement or any portion  thereof is invalid,  illegal or
                  otherwise voidable,  shall be submitted to binding arbitration
                  before  and in  accordance  with  the  Rules  of the  American
                  Arbitration  Association  and judgment upon the  determination
                  and/or  award of such  arbitrator  may be entered in any court
                  having  jurisdiction  thereof;  provided,  however,  that this
                  clause  shall not be construed to permit the award of punitive
                  damages  to  either  Party.   The  prevailing  Party  to  said
                  arbitration  shall  be  entitled  to an  award  of  reasonable
                  attorney's  fees.  The  venue  for  arbitration  shall  be  in
                  Columbia County, Florida.

                  (b) Injunctive Relief: The Parties  acknowledge and agree that
                  the  services  to be  performed  by  Employee  are special and
                  unique and that money damages cannot fully compensate the Bank
                  in the event of  Employee's  violation  of the  provisions  of
                  Section 16 of this  Agreement.  Thus, in the event of a breach
                  of any of the provisions of such Section, Employee agrees that
                  the  Bank,   upon   application   to  a  court  of   competent
                  jurisdiction,  shall be entitled to an injunction  restraining
                  Employee from any further breach of the terms and provision of
                  such Section.  Should the Bank prevail in an action seeking an
                  injunction restraining Employee,  Employee shall pay all costs
                  and  reasonable  attorneys'  fees  incurred by the Bank in and
                  relating to obtaining such injunction.  Such injunctive relief
                  may be obtained  without bond and Employee's  sole remedy,  in
                  the  event  of the  entry  of such  injunction,  shall  be the
                  dissolution of such injunction. Employee hereby waives any and
                  all claims for damages by reason of the  wrongful  issuance of
                  any such injunction.

                  (c) Cumulative  Remedies:  Notwithstanding any other provision
                  of this Agreement,  the injunctive relief described in Section
                  17(b)  herein  and all  other  remedies  provided  for in this
                  Agreement  which  are  available  to the Bank as a  result  of
                  Employee's  breach of this  Agreement,  are in addition to and
                  shall not limit any and all remedies  existing at or in equity
                  which may also be available to the Bank.

         18.  Assignment.  This  Agreement  shall inure to the benefit of and be
binding upon the Employee,  and to the extent  applicable,  his heirs,  assigns,
executors,  and personal  representatives,  and to the Bank and the Corporation,
and to the extent applicable,  their successors, and assigns, including, without
limitation,  any person,  partnership,  or corporation  which may acquire all or
substantially  all of the Bank's or the  Corporation's  assets and business,  or
with or into which the Bank or Corporation may be  consolidated  or merged,  and
this provision shall apply in the event of any subsequent merger, consolidation,
or  transfer,  unless  such  merger or  consolidation  or  subsequent  merger or
consolidation  is a  transaction  of the type which would result in  termination
under Sections 10(c) and 10(d) herein.

         19.      Miscellaneous.

                  (a)  Amendment  of  Agreement:  Unless as  otherwise  provided
                  herein,  this  Agreement may not be modified or amended except
                  in writing signed by the Parties.

Exhibit 10.6

                                       11

<PAGE>

                  (b) Certain Definitions:  For purposes of this Agreement,  the
                  following  terms  whenever  capitalized  herein shall have the
                  following meanings:

                           (i)      "Person"  shall  mean  any  natural  person,
                                    corporation,    partnership    (general   or
                                    limited),  trust,  association  or any other
                                    business entity.

                           (ii)     "Attorneys'  Fees"  shall  include the legal
                                    fees and disbursements  charged by attorneys
                                    and their  related  expenses,  court  costs,
                                    paralegal fees, etc. incurred in settlement,
                                    trial, appeal or in bankruptcy proceedings.

                  (c) Headings for Reference  Only: The headings of the Sections
                  and the Subsections  herein are included solely for convenient
                  reference   and  shall  not   control   the   meaning  of  the
                  interpretation of any of the provisions of this Agreement.

                  (d)  Governing  Law/Jurisdiction:   This  Agreement  shall  be
                  construed in  accordance  with and governed by the laws of the
                  State of Florida.  Any  litigation  involving  the Parties and
                  their rights and obligations hereunder shall be brought in the
                  appropriate court in Columbia County, Florida.

                  (e)  Severability:  If any of the provisions of this Agreement
                  shall be held  invalid for any reason,  the  remainder of this
                  Agreement  shall not be affected  thereby and shall  remain in
                  full force and effect in accordance  with the remainder of its
                  terms.

                  (f) Entire  Agreement:  This Agreement and all other documents
                  incorporated  or  referred  to  herein,   contain  the  entire
                  agreement  of the  Parties  and there are no  representations,
                  inducements or other  provisions other than those expressed in
                  writing   herein.   This  Agreement   amends,   supplants  and
                  supersedes any and all prior agreements between the Parties.

                  (g)  Waiver:  No course of conduct by the Parties and no delay
                  or omission of any Party to exercise  any right or power given
                  under this Agreement shall: (i) impair the subsequent exercise
                  of any right or power,  or (ii) be construed to be a waiver of
                  any default or any acquiescence in or consent to the curing of
                  any default while any other  default shall  continue to exist,
                  or be construed to be a waiver of such  continuing  default or
                  of any  other  right  or power  that  shall  theretofore  have
                  arisen.  Any power  and/or  remedy  granted by law and by this
                  Agreement to any Party  hereto may be  exercised  from time to
                  time, and as often as may be deemed expedient. All such rights
                  and powers shall be cumulative to the fullest extent permitted
                  by law.

                  (h) Pronouns:  As used herein,  words in the singular  include
                  the plural,  and the masculine include the feminine and neuter
                  gender, as appropriate.

                  (i) Recitals:  The Recitals set forth at the beginning of this
                  Agreement  shall  be  deemed  to  be  incorporated  into  this
                  Agreement by this reference as if fully set forth herein,  and
                  this Agreement  shall be interpreted  with reference to and in
                  light of such Recitals.

Exhibit 10.6

                                       12

<PAGE>

         IN WITNESS WHEREOF,  the Parties hereto have executed this Agreement as
of the day and year first written above.

EMPLOYEE                                       PEOPLES STATE BANK

 /s/ Wesley T. Small                           By: /s/ A. C. Milton
--------------------------                        ---------------------
Wesley T. Small, Employee                          A.C. Milton,
                                                   Chairman of the Board and
                                                   Acting Chief Executive
                                                   Officer and President

 /s/ Penny Cooper                                  /s/ Jimmie Kirk
--------------------------                        ----------------------
Witness                                            Witness

                                               PSB BANCGROUP, INC.

                                               By:  /s/ Robert W. Woodard
                                                    --------------------------
                                                    Robert W. Woodard,
                                                    President and Chief
                                                    Executive Officer

                                                     /s/ Jimmie Kirk
                                                     -------------------------
                                                     Witness

Exhibit 10.6

                                       13

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