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                                                                    EXHIBIT 10.2

                             EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made effective as of March 31, 1999, by and between
PALMYRA SAVINGS (the "BANK"), PFSB BANCORP, INC., (the "COMPANY"), a Missouri
corporation; and RONALD L. NELSON ("EXECUTIVE").

         WHEREAS, EXECUTIVE serves in a position of substantial responsibility;

         WHEREAS, the BANK wishes to assure itself of the services of EXECUTIVE
for the period provided in this Agreement; and

         WHEREAS, EXECUTIVE is willing to serve in the employ of the BANK on a
full-time basis for said period.

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and upon the other terms and conditions hereinafter provided, the
parties hereby agree as follows:

1.       POSITION AND RESPONSIBILITIES.

         During the period of his employment hereunder, EXECUTIVE agrees to
serve as Vice President, Treasurer and Secretary of the Bank. EXECUTIVE also
agrees to serve, if elected, as an officer and director of the COMPANY or any
subsidiary or affiliate of the COMPANY or the BANK. EXECUTIVE shall render
administrative and management duties to the BANK such as are customarily
performed by persons situated in a similar executive capacity.

2.       TERMS AND DUTIES.

         (a)  The term of this Agreement shall be deemed to have commenced as of
the date first above written and shall continue for thirty six (36) months
thereafter. Commencing on the first anniversary date, and continuing at each
anniversary date thereafter, the Board of Directors of the BANK (the "Board")
may extend the Agreement for an additional year. Prior to the extension of the
Agreement as provided herein, the Board of Directors of the BANK will conduct a
formal performance evaluation of EXECUTIVE for purposes of determining whether
to extend the Agreement, and the results thereof shall be included in the
minutes of the Board's meeting.

         (b)  During the period of his employment hereunder, except for periods
of absence occasioned by illness, reasonable vacation periods, and reasonable
leaves of absence, EXECUTIVE shall devote substantially all his business time,
attention, skill, and efforts to the faithful performance of his duties
hereunder including activities and services related to the organization,
operation and management of the BANK; provided, however, that, with the approval
of the Board, as evidenced by a resolution of such Board, from time to time,
EXECUTIVE may serve, or continue to serve, on the boards of directors of, and
hold any other offices or positions in, companies or organizations, which, in
such Board's judgment, will not present any conflict of interest with the BANK,
or materially affect the performance of EXECUTIVE's duties pursuant to this
Agreement.
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3.       COMPENSATION AND REIMBURSEMENT.

         (a)  The compensation specified under this Agreement shall constitute
the salary and benefits paid for the duties described in Sections 1 and 2. The
BANK shall pay EXECUTIVE as compensation a salary of $51,500 per year ("Base
Salary"). Such Base Salary shall be payable in accordance with the customary
payroll practices of the BANK. During the period of this Agreement, EXECUTIVE's
Base Salary shall be reviewed at least annually; the first such review will be
made no later than one year from the date of this Agreement. Such review shall
be conducted by a Committee designated by the Board, and the Board may increase
EXECUTIVE's Base Salary. In addition to the Base Salary provided in this Section
3(a), the BANK shall provide EXECUTIVE at no cost to EXECUTIVE with all such
other benefits as are provided uniformly to permanent full-time employees of the
BANK.

         (b)  The BANK will provide EXECUTIVE with employee benefit plans,
arrangements and perquisites substantially equivalent to those in which
EXECUTIVE was participating or otherwise deriving benefit from immediately prior
to the beginning of the term of this Agreement, and the BANK will not, without
EXECUTIVE's prior written consent, make any changes in such plans, arrangements
or perquisites which would adversely affect EXECUTIVE's rights or benefits
thereunder. Without limiting the generality of the foregoing provisions of this
Subsection (b), EXECUTIVE will be entitled to participate in or receive benefits
under any employee benefit plans including, but not limited to, retirement
plans, supplemental retirement plans, pension plans, profit-sharing plans,
health-and-accident plan, medical coverage or any other employee benefit plan or
arrangement made available by the BANK in the future to its senior executives
and key management employees, subject to, and on a basis consistent with, the
terms, conditions and overall administration of such plans and arrangements.
EXECUTIVE will be entitled to incentive compensation and bonuses as provided in
any plan, or pursuant to any arrangement of the BANK, in which EXECUTIVE is
eligible to participate. Nothing paid to EXECUTIVE under any such plan or
arrangement will be deemed to be in lieu of other compensation to which
EXECUTIVE is entitled under this Agreement, except as provided under Section
5(e).

         (c)  In addition to the Base Salary provided for by paragraph (a) of
this Section 3, the BANK shall pay or reimburse EXECUTIVE for all reasonable
travel and other obligations under this Agreement and may provide such
additional compensation in such form and such amounts as the Board may from time
to time determine.

4.       PAYMENTS TO EXECUTIVE UPON AN EVENT OF TERMINATION.

         (a)  Upon the occurrence of an Event of Termination (as herein defined)
during EXECUTIVE's term of employment under this Agreement, the provisions of
this Section shall apply. As used in this Agreement, an "Event of Termination"
shall mean and include any one or more of the following: (i) the termination by
the BANK of EXECUTIVE's full-time employment hereunder for any reason other than
a Change in Control, as defined in Section 5(a) hereof; disability, as defined
in Section 6(a) hereof; death; retirement, as defined in Section 7 hereof; or
Termination for

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Cause, as defined in Section 8 hereof; (ii) EXECUTIVE's resignation from the
BANK's employ, upon (A) unless consented to by EXECUTIVE, a material change in
EXECUTIVE's function, duties, or responsibilities, which change would cause
EXECUTIVE's position to become one of lesser responsibility, importance, or
scope from the position and attributes thereof described in Sections 1 and 2,
above (any such material change shall be deemed a continuing breach of this
Agreement), (B) a relocation of EXECUTIVE's principal place of employment by
more than 35 miles from its location at the effective date of this Agreement, or
a material reduction in the benefits and perquisites to EXECUTIVE from those
being provided as of the effective date of this Agreement, (C) the liquidation
or dissolution of the BANK, or (D) any material breach of this Agreement by the
BANK. Upon the occurrence of any event described in clauses (A), (B), (C) or
(D), above, EXECUTIVE shall have the right to elect to terminate his employment
under this Agreement by resignation upon not less than sixty (60) days prior
written notice given within a reasonable period of time not to exceed, except in
case of a continuing breach, four (4) calendar months after the event giving
rise to said right to elect.

         (b)  Upon the occurrence of an Event of Termination, the BANK shall pay
EXECUTIVE, or, in the event of his subsequent death, his beneficiary or
beneficiaries, or his estate, as the case may be, as severance pay or liquidated
damages, or both, a sum equal to the payments due to EXECUTIVE for the remaining
term of the Agreement, including Base Salary, bonuses, and any other cash or
deferred compensation paid or to be paid (including the value of employer
contributions that would have been made on EXECUTIVE's behalf over the remaining
term of the agreement to any tax-qualified retirement plan sponsored by the BANK
as of the Date of Termination), to EXECUTIVE for the term of the Agreement
provided, however, that if the BANK is not in compliance with its minimum
capital requirements or if such payments would cause the BANK's capital to be
reduced below its minimum capital requirements, such payments shall be deferred
until such time as the BANK is in capital compliance. All payments made pursuant
to this Section 4(b) shall be paid in substantially equal monthly installments
over the remaining term of this Agreement following EXECUTIVE's termination;
provided, however, that if the remaining term of the Agreement is less than one
(1) year (determined as of EXECUTIVE's Date of Termination), such payments and
benefits shall be paid to EXECUTIVE in a lump sum within thirty (30) days of the
Date of Termination.

         (c)  Upon the occurrence of an Event of Termination, the BANK will
cause to be continued life, medical, dental and disability coverage
substantially identical to the coverage maintained by the BANK for EXECUTIVE
prior to his termination. Such coverage shall cease upon the expiration of the
remaining term of this Agreement.

5.       CHANGE IN CONTROL.

         (a)  No benefit shall be paid under this Section 5 unless there shall
have occurred a Change in Control of the COMPANY or the BANK. For purposes of
this Agreement, a "Change in Control" of the COMPANY or the BANK shall be deemed
to occur (a) if there occurs a change in control of the BANK or the COMPANY
within the meaning of the Home Owners Loan Act of 

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1933 and 12 C.F.R. Part 574, (b) if any person (as such term is used in Sections
13(d) and 14(d)(2) of the Exchange Act) is or becomes the beneficial owner,
directly or indirectly, of securities of the COMPANY or the BANK representing
twenty-five percent (25%) or more of the combined voting power of the COMPANY's
or the BANK's then outstanding securities, (c) if the membership of the board of
directors of the COMPANY or the BANK changes as the result of a contested
election, such that individuals who were directors at the beginning of any
twenty-four (24) month period (whether commencing before or after the date of
adoption of this Agreement) do not constitute a majority of the Board at the end
of such period, or (d) upon the consummation of a transaction approved by the
shareholders of the COMPANY or the BANK involving a merger, consolidation, sale
or disposition of all or substantially all of the COMPANY's or the BANK's
assets, or a similar transaction occurs in which the COMPANY or the BANK is not
the resulting entity.

         (b)  If any of the events described in Section 5(a) hereof constituting
a Change in Control have occurred or the Board of the BANK or the COMPANY has
reasonably determined that a Change in Control (as defined herein) has occurred,
EXECUTIVE shall be entitled to the benefits provided in paragraphs (c), (d) and
(e) of this Section 5 upon his subsequent involuntary termination following the
effective date of a Change in Control (or voluntary termination within twelve
(12) months of the effective date of a Change in Control following any material
demotion, loss of title, office or significant authority, material reduction in
his annual compensation or benefits (other than a reduction affecting the BANK's
personnel generally), or the relocation of his principal place of employment by
more than 35 miles from its location immediately prior to the Change in
Control), unless such termination is because of his death, retirement as
provided in Section 7, termination for Cause, or termination for Disability.

         (c)  Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK shall pay EXECUTIVE, or in the event of his
subsequent death, his beneficiary or beneficiaries, or his estate, as the case
may be, as severance pay or liquidated damages, or both, a sum equal to 2.99
times EXECUTIVE's "base amount," within the meaning of (S)(S).280G(b)(3) of the
Internal Revenue Code of 1986 ("Code"), as amended. Such payment shall be made
in a lump sum paid within ten (10) days of EXECUTIVE's Date of Termination.

         (d)  Upon the occurrence of a Change in Control followed by EXECUTIVE's
termination of employment, the BANK will cause to be continued life, medical,
dental and disability coverage substantially identical to the coverage
maintained by the BANK for EXECUTIVE prior to his severance. Such coverage shall
cease upon the expiration of thirty-six (36) months. In addition, EXECUTIVE
shall be entitled to receive the value of employer contributions that would have
been made on EXECUTIVE's behalf over the remaining term of the agreement to any
tax-qualified retirement plan sponsored by the BANK as of the Date of
Termination.

         (e)  Notwithstanding the preceding paragraphs of this Section 5, in the
event that the aggregate payments or benefits to be made or afforded to
EXECUTIVE under this Section, together with any other payments or benefits
received or to be received by EXECUTIVE in connection with a Change in Control,
would be deemed to include an "excess parachute payment" under (S)(S).280G of 

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the Code, then, at the election of EXECUTIVE, (i) such payments or benefits
shall be payable or provided to EXECUTIVE over the minimum period necessary to
reduce the present value of such payments or benefits to an amount which is one
dollar ($1.00) less than three (3) times EXECUTIVE's "base amount" under
(S)(S).280G(b)(3) of the Code or (ii) the payments or benefits to be provided
under this Section 5 shall be reduced to the extent necessary to avoid treatment
as an excess parachute payment with the allocation of the reduction among such
payments and benefits to be determined by EXECUTIVE.

6.       TERMINATION FOR DISABILITY.

         (a)  If EXECUTIVE shall become disabled as defined in the BANK's then
current disability plan (or, if no such plan is then in effect, if EXECUTIVE is
permanently and totally disabled within the meaning of Section 22(e)(3) of the
Code as determined by a physician designated by the Board), the BANK may
terminate EXECUTIVE's employment for "Disability."

         (b)  Upon EXECUTIVE's termination of employment for Disability, the
BANK will pay EXECUTIVE, as disability pay, a bi-weekly payment equal to three-
quarters (3/4) of EXECUTIVE's bi-weekly rate of Base Salary on the effective
date of such termination. These disability payments shall commence on the
effective date of EXECUTIVE's termination and will end on the earlier of (i) the
date EXECUTIVE returns to the full-time employment of the BANK in the same
capacity as he was employed prior to his termination for Disability and pursuant
to an employment agreement between EXECUTIVE and the BANK; (ii) EXECUTIVE's 
full-time employment by another employer; (iii) EXECUTIVE attaining the age of
sixty-five (65); or (iv) EXECUTIVE's death; or (v) the expiration of the term of
this Agreement. The disability pay shall be reduced by the amount, if any, paid
to EXECUTIVE under any plan of the BANK providing disability benefits to
EXECUTIVE.

         (c)  The BANK will cause to be continued life, medical, dental and
disability coverage substantially identical to the coverage maintained by the
BANK for EXECUTIVE prior to his termination for Disability. This coverage and
payments shall cease upon the earlier of (i) the date EXECUTIVE returns to the
full-time employment of the BANK, in the same capacity as he was employed prior
to his termination for Disability and pursuant to an employment agreement
between EXECUTIVE and the BANK; (ii) EXECUTIVE's full-time employment by another
employer; (iii) EXECUTIVE's attaining the age of sixty-five (65); (iv)
EXECUTIVE's death; or (v) the expiration of the term of this Agreement.

         (d)  Notwithstanding the foregoing, there will be no reduction in the
compensation otherwise payable to EXECUTIVE during any period during which
EXECUTIVE is incapable of performing his duties hereunder by reason of temporary
disability.

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7.  TERMINATION UPON RETIREMENT; DEATH OF EXECUTIVE; RESIGNATION

    Termination by the BANK of EXECUTIVE based on "Retirement" shall mean
retirement at or after attaining age sixty-five (65) or in accordance with any
retirement arrangement established with EXECUTIVE's consent with respect to him.
Upon termination of EXECUTIVE upon Retirement, EXECUTIVE shall be entitled to
all benefits under any retirement plan of the BANK or the COMPANY and other
plans to which EXECUTIVE is a party.  Upon the death of EXECUTIVE during the
term of this Agreement,  the BANK shall pay to EXECUTIVE's estate the
compensation due to EXECUTIVE through the last day of the calendar month in
which his death occurred.  Upon the voluntary resignation of EXECUTIVE during
the term of this Agreement, other than in connection with an Event of
Termination, the BANK shall pay to EXECUTIVE the compensation due to EXECUTIVE
through his Date of Termination.

8.  TERMINATION FOR CAUSE.

    For purposes of this Agreement, "Termination for Cause" shall include
termination because of EXECUTIVE's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal profit, intentional
failure to perform stated duties, willful violation of any law, rule, or
regulation (other than traffic violations or similar infractions) or final
cease-and-desist order, or material breach of any provision of this Agreement.
Notwithstanding the foregoing, EXECUTIVE shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths (3/4) of the members of the Board at a meeting of the Board called
and held for that purpose (after reasonable notice to EXECUTIVE and an
opportunity for him, together with counsel, to be heard before the Board),
finding that in the good faith opinion of the Board, EXECUTIVE was guilty of
conduct justifying termination for Cause and specifying the reasons thereof.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after termination for Cause.  Any stock options granted to EXECUTIVE
under any stock option plan or any unvested awards granted under any other stock
benefit plan of the BANK, the COMPANY, or any subsidiary or affiliate thereof,
shall become null and void effective upon EXECUTIVE's receipt of Notice of
Termination for Cause pursuant to Section 10 hereof, and shall not be
exercisable by EXECUTIVE at any time subsequent to such Termination for Cause.

9.  REQUIRED PROVISIONS.

    (a) The BOARD may terminate EXECUTIVE's employment at any time, but any
termination by the BOARD, other than Termination for Cause, shall not prejudice
EXECUTIVE's right to compensation or other benefits under this Agreement.
EXECUTIVE shall not have the right to receive compensation or other benefits for
any period after Termination for Cause as defined in Section 8 herein.

    (b) If EXECUTIVE is suspended and/or temporarily prohibited from
participating in the conduct of the BANK's affairs by a notice served under
Section 8(e)(3) or (g)(1) of the Federal 

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Deposit Insurance Act ("FDIA") (12 U.S.C. 1818(e)(3) and (g)(1)), the BANK's
obligations under the Agreement shall be suspended as of the date of service,
unless stayed by appropriate proceedings. If the charges in the notice are
dismissed, the BANK may, in its discretion, (i) pay EXECUTIVE all or part of the
compensation withheld while its contract obligations were suspended and (ii)
reinstate (in whole or in part) any of its obligations that were suspended.

    (c) If EXECUTIVE is removed and/or permanently prohibited from
participating in the conduct of the BANK's affairs by an order issued under
Section 8(e)(4) or (g)(1) of the FDIA (12 U.S.C. 1818(e)(4) or (g)(1)), all
obligations of the BANK under the Agreement shall terminate as of the effective
date of the order, but vested rights of the contracting parties shall not be
affected.

    (d) If the BANK is in default (as defined in Section 3(x)(1) of the FDIA),
all obligations under this Agreement shall terminate as of the date of default,
but this paragraph shall not affect any vested rights of the parties.

    (e) All obligations under this Agreement shall be terminated (except to the
extent determined that continuation of the Agreement is necessary for the
continued operation of the BANK):  (i) by the Director of the Office of Thrift
Supervision (the "Director") or his designee at the time the Federal Deposit
Insurance Corporation enters into an agreement to provide assistance to or on
behalf of the BANK under the authority contained in Section 13(c) of the FDIA or
(ii) by the Director, or his designee at the time the Director or such designee
approves a supervisory merger to resolve problems related to operation of the
BANK or when the BANK is determined by the Director to be in an unsafe or
unsound condition.  Any rights of the parties that have already vested, however,
shall not be affected by such action.

    (f) Any payments made to EXECUTIVE pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
(S)1828(k) and any regulations promulgated thereunder.

10. NOTICE.

    (a) Any purported termination by the BANK or by EXECUTIVE shall be
communicated by Notice of Termination to the other party hereto.  For purposes
of this Agreement, a "Notice of Termination" shall mean a written notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of EXECUTIVE's employment under the provision so
indicated.

    (b) "Date of Termination" shall mean (A) if EXECUTIVE's employment is
terminated for Disability, thirty (30) days after a Notice of Termination is
given (provided that he shall not have returned to the performance of his duties
on a full-time basis during such thirty (30) day period), and (B) if his
employment is terminated for any other reason,  other than Termination for
Cause, the date 

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specified in the Notice of Termination . In the event of EXECUTIVE's Termination
for Cause, the Date of Termination shall be the same as the date of the Notice
of Termination.

    (c) If, within thirty (30) days after any Notice of Termination is given,
the party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, except upon the occurrence of a
Change in Control and voluntary termination by EXECUTIVE in which case the Date
of Termination shall be the date specified in the Notice, the Date of
Termination shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding arbitration award, or
by a final judgment, order or decree of a court of competent jurisdiction (the
time for appeal therefrom having expired and no appeal having been perfected)
and provided further that the Date of Termination shall be extended by a notice
of dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.

11. NON-COMPETITION.

    (a) Upon any termination of EXECUTIVE's employment hereunder pursuant to an
Event of Termination as provided in Section 4 hereof, EXECUTIVE agrees not to
compete with the BANK and/or the COMPANY for a period of one (1) year following
such termination in any city, town or county in which the BANK and/or the
COMPANY has an office or has filed an application for regulatory approval to
establish an office, determined as of the effective date of such termination.
EXECUTIVE agrees that during such period and within said cities, towns and
counties, EXECUTIVE shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the BANK and/or the
COMPANY.  The parties hereto, recognizing that irreparable injury will result to
the BANK and/or the COMPANY, its business and property in the event of
EXECUTIVE's breach of this Subsection 11(a) agree that in the event of any such
breach by EXECUTIVE, the BANK and/or the COMPANY will be entitled, in addition
to any other remedies and damages available, to an injunction to restrain the
violation hereof by EXECUTIVE, EXECUTIVE's partners, agents, servants,
employers, employees and all persons acting for or with EXECUTIVE.  EXECUTIVE
represents and admits that in the event of the termination of his employment
pursuant to Section 4 hereof, EXECUTIVE's experience and capabilities are such
that EXECUTIVE can obtain employment in a business engaged in other lines and/or
of a different nature than the BANK and/or the COMPANY, and that the enforcement
of a remedy by way of injunction will not prevent EXECUTIVE from earning a
livelihood.  Nothing herein will be construed as prohibiting the BANK and/or the
COMPANY from pursuing any other remedies available to the BANK and/or the
COMPANY for such breach or threatened breach, including the recovery of damages
from EXECUTIVE.

    (b) EXECUTIVE recognizes and acknowledges that the knowledge of the
business activities and plans for business activities of the BANK and affiliates
thereof, as it may exist from time to time, is a valuable, special and unique
asset of the business of the BANK.  EXECUTIVE will not, during or after the term
of his employment, disclose any knowledge of the past, present, planned or
considered business activities of the BANK or affiliates thereof to any person,
firm, corporation, 

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<PAGE>
 
or other entity for any reason or purpose whatsoever. Notwithstanding the
foregoing, EXECUTIVE may disclose any knowledge of banking, financial and/or
economic principles, concepts or ideas which are not solely and exclusively
derived from the business plans and activities of the BANK. In the event of a
breach or threatened breach by EXECUTIVE of the provisions of this Section, the
BANK will be entitled to an injunction restraining EXECUTIVE from disclosing, in
whole or in part, the knowledge of the past, present, planned or considered
business activities of the BANK or affiliates thereof, or from rendering any
services to any person, firm, corporation, other entity to whom such knowledge,
in whole or in part, has been disclosed or is threatened to be disclosed.
Nothing herein will be construed as prohibiting the BANK from pursuing any other
remedies available to the BANK for such breach or threatened breach, including
the recovery of damages from EXECUTIVE.

12.  SOURCE OF PAYMENTS.

     All payments provided in this Agreement shall be timely paid in cash or
check from the general funds of the BANK.  The COMPANY, however, guarantees all
payments and the provision of all amounts and benefits due hereunder to
EXECUTIVE and, if such payments are not timely paid or provided by the BANK,
such amounts and benefits shall be paid or provided by the COMPANY.

13.  EFFECT ON PRIOR AGREEMENTS AND EXISTING BENEFITS PLANS.

     This Agreement contains the entire understanding between the parties hereto
and supersedes any prior employment agreement between the BANK or any
predecessor of the BANK and EXECUTIVE, except that this Agreement shall not
affect or operate to reduce any benefit or compensation inuring to EXECUTIVE of
a kind elsewhere provided.  No provision of this Agreement shall be interpreted
to mean that EXECUTIVE is subject to receiving fewer benefits than those
available to him without reference to this Agreement.

14.  NO ATTACHMENT.

     (a) Except as required by law, no right to receive payments under this
Agreement shall be subject to anticipation, commutation, alienation, sale,
assignment, encumbrance, charge, pledge, or hypothecation, or to execution,
attachment, levy, or similar process or assignment by operation of law, and any
attempt, voluntary or involuntary, to affect any such action shall be null,
void, and of no effect.

     (b) This Agreement shall be binding upon, and inure to the benefit of,
EXECUTIVE, the BANK, the COMPANY and their respective successors and assigns.

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<PAGE>
 
15.  MODIFICATION AND WAIVER.

     (a) This Agreement may not be modified or amended except by an instrument
in writing signed by the parties hereto.

     (b) No term or condition of this Agreement shall be deemed to have been
waived, nor shall there by any estoppel against the enforcement of any provision
of this Agreement, except by written instrument of the party charged with such
waiver or estoppel.  No such written waiver shall be deemed a continuing waiver
unless specifically stated therein, and each such waiver shall operate only as
to the specific term or condition waived and shall not constitute a waiver of
such term or condition for the future as to any act other than that specifically
waived.

16.  SEVERABILITY.

     If, for any reason, any provision of this Agreement, or any part of any
provision, is held invalid, such invalidity shall not affect any other provision
of this Agreement or any part of such provision not held so invalid, and each
such other provision and part thereof shall to the full extent consistent with
law continue in full force and effect.

17.  HEADINGS FOR REFERENCE ONLY.

     The headings of sections and paragraphs herein are included solely for
convenience of reference and shall not control the meaning or interpretation of
any of the provisions of this Agreement.

18.  GOVERNING LAW.

     This Agreement shall be governed by the laws of the State of Missouri,
unless otherwise specified herein; provided, however, that in the event of a
conflict between the terms of this Agreement and any applicable federal or state
law or regulation, including , specifically, 12 C.F.R. Section 563.39(b),  the
provisions of such law or regulation shall prevail.

19.  PAYMENT OF LEGAL FEES.

     All reasonable legal fees paid or incurred by EXECUTIVE pursuant to any
dispute or question of interpretation relating to this Agreement shall be paid
or reimbursed by the BANK, if EXECUTIVE is successful pursuant to a legal
judgment, arbitration or settlement.

20.  INDEMNIFICATION.

     The BANK shall provide EXECUTIVE (including his heirs, executors and
administrators) with coverage under a standard directors' and officers'
liability insurance policy at its expense, or in lieu thereof, shall indemnify
EXECUTIVE (and his heirs, executors and administrators) to the fullest 

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<PAGE>
 
extent permitted under Missouri law against all expenses and liabilities
reasonably incurred by him in connection with or arising out of any action, suit
or proceeding in which he may be involved by reason of his having been a
director or officer of the BANK (whether or not he continues to be a directors
or officer at the time of incurring such expenses or liabilities), such expenses
and liabilities to include, but not be limited to, judgment, court costs and
attorneys' fees and the cost of reasonable settlements. The provisions of 12
C.F.R. 545.121 shall apply to the BANK's obligations under this Section 20.

21.  SUCCESSOR TO THE BANK OR THE COMPANY.

     The BANK and the COMPANY shall require any successor or assignee, whether
direct or indirect, by purchase, merger, consolidation or otherwise, to all or
substantially all the business or assets of the BANK or the COMPANY, expressly
and unconditionally to assume and agree to perform the BANK's or the COMPANY's
obligations under this Agreement, in the same manner and to the same extent that
the BANK or the COMPANY would be required to perform if no such succession or
assignment had taken place.

     IN WITNESS WHEREOF, the BANK and the COMPANY have caused this Agreement to
be executed and their seal to be affixed hereunto by a duly authorized officer,
and EXECUTIVE has signed this Agreement, all on the 31st day of March, 1999

ATTEST:                         PALMYRA SAVINGS


/s/ Ronald L. Nelson            BY: /s/ L. Edward Schaeffer
--------------------                -----------------------
                                    L. Edward Schaeffer
                                    For the Entire Board of Directors

ATTEST:                         PFSB BANCORP, INC.


/s/ Ronald L. Nelson            BY: /s/ L. Edward Schaeffer
--------------------                -----------------------
                                    L. Edward Schaeffer
                                    For the Entire Board of Directors


WITNESS:                        EXECUTIVE



/s/ Diane L. Smith              /s/ Ronald L. Nelson
------------------              --------------------
                                Ronald L. Nelson

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