EMPLOYMENT AGREEMENT
                                  BY AND AMONG
                               PSB BANCGROUP, INC.
                                       AND
                       PEOPLES STATE BANK IN ORGANIZATION
                                       AND
                                  C. F. DOUGLAS


     THIS EMPLOYMENT AGREEMENT ("Agreement") by and among PSB BancGroup, Inc., a
Florida Corporation ("PSB"),  Peoples State Bank, in organization  ("Bank"), and
C. F. Douglas  ("Employee") shall be effective on or before the day on which the
Bank commences operations.  PSB and the Bank are collectively referred to herein
as the  "Company"  and the Company and  Employee  are  collectively  referred to
herein as the "Parties".


                                    RECITALS

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

     WHEREAS,  Employee  desires to be  employed by the Bank and to serve as the
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 term of  employment  shall be for three (3)
years,  commencing  on or  before  the day the Bank  commences  operations  (the
"Effective Date"),  unless extended or terminated pursuant to the provisions set
forth herein.

     2.  Position,   Responsibilities  and  Duties.  During  the  term  of  this
Agreement,  Employee  shall serve as the Bank's  President  and Chief  Executive
Officer when the Bank commences  operations.  In such  capacity,  Employee shall
have the same powers,  duties and responsibilities of supervision and management
of the Bank usually  accorded to the  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:


<PAGE>

         (i)      manage all personnel of the Bank;

         (ii)     serve  as a member  of the  Board  of  Directors,  if and when
                  elected to such a position;

         (iii)    serve on such  committees  of the Board as  appointed  to from
                  time to time;

         (iv)     keep the Board informed of important  developments  concerning
                  the Bank,  industry  developments  and regulatory  initiatives
                  affecting the Bank;

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

         (vi)     improve the  profitability  of the Bank in accordance with the
                  Annual  Business Plan as prepared by management and adopted by
                  the Board;

         (vii)    coordinate with the Bank's attorneys and accountants and other
                  service  providers  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

         (viii)   conduct and undertake all other activities,  responsibilities,
                  and duties normally expected to be undertaken and accomplished
                  by the  President and Chief  Executive  Officer of a financial
                  institution similar in scope and operation to our 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 Company.  Employee shall obtain such
     licenses,  certificates,  accreditations  and professional  memberships and
     designations as the Company 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 Company's  contacts and business
     network in the community.

               (c)  Policies  and  Manual:  Employee  agrees to comply  with the
     policies  and  procedures  that are adopted by the Company and  implemented
     from  time to time as  described  in the  Employee  Manual,  including  any
     policies  relating to a "drug free work  place".  In that  regard  Employee
     agrees to submit to the same testing procedures, if any, which apply to all
     employees of the Company. Employee has read and understands the contents of
     the  Employee  Manual  and  acknowledges  that the  Employee  Manual may be
     modified,  amended,  supplemented  and updated  from time to time as may be
     deemed appropriate.


<PAGE>

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

               (a) Base Salary:  Until the Bank commences  operations,  Employee
     shall be  compensated  by PSB.  Employee  shall  receive an initial  annual
     salary of  Seventy-Four  Thousand Two Hundred and Fifty  Dollars  ($74,250)
     (the "Base  Salary") in equal  installments,  in  accordance  with standard
     payroll practices,  reduced  appropriately by deductions for federal income
     withholding taxes,  social security taxes and other deductions  required by
     applicable  laws. Such base salary shall be reviewed  annually by the Board
     of Directors.

               (b) Additional Compensation: Upon commencement of operations, the
     Bank may pay Employee  incentive  compensation when and if the Board adopts
     an  incentive  compensation  plan.  The  payment  for  any  such  incentive
     compensation  would be payable on such  terms and  conditions  as the Board
     determines from time to time and adopts by resolution.

               (c) Other 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
     Company 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.  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.

               (d) Incentive Stock Options:  The Company will designate Employee
     as a key  employee  eligible for the grant of stock  options  under the PSB
     Bancorp,  Inc.,  1998 Stock Option Plan (the "Stock Option Plan").  In that
     connection, the Company will grant to Employee under the terms of the Stock
     Option Plan, a  non-statutory  option to acquire up to 10,000 shares of PSB
     common stock, over a ten-year period.  The grant of the stock options shall
     be made strictly in accordance  with the terms of the Stock Option Plan and
     in accordance with the Company's  standard form of Stock Option  Agreement.
     The options will contain an exercise price of $9 per share and will vest in
     three (3) annual installments  beginning with the year of grant. As part of
     the consideration for the Stock Options,  Employee agrees that for a period
     of  twenty-four  (24) months  following  any event of  termination  defined
     herein,  Employee will not accept  employment with any existing or proposed
     business  organization  which then  competes or intends to compete with the
     Company anywhere in Columbia County, Florida.
<PAGE>

    4.    Payment  of  Business  Expenses.   Employee  is  authorized  to  incur
          reasonable  expenses  in  performing  his  duties.  The  Company  will
          reimburse Employee for authorized expenses, according to the Company's
          established  policies,  promptly after  Employee's  presentation of an
          itemized  account  of  such  expenditures,  including  mileage  at the
          Internal  Revenue  allowed  rate  for the use of  Employee's  personal
          automobile.

    5.    Vacation.  Employee is entitled to four (4) weeks paid  vacation  time
          per year on a  non-cumulative  basis  beginning  the first fiscal year
          following commencement of operations.

    6.    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.

     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;

                    (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 Company 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.

<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 Company'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
Company will be paid pursuant to its terms.

     9.   Termination.

               (a) Failure of Bank to Commence Operations: In the event the Bank
     fails to commence  operations for any reason on or before December 1, 1998,
     this  Agreement  may be  terminated  by PSB upon thirty  (30) days  written
     notice to Employee.

                (b) 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.

               (c) Termination for Just Cause: The Company 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 just cause.  For the purpose of this
     Agreement,  termination for just cause shall mean any of the following acts
     committed by Employee:

                    (i)   Personal dishonesty;

                    (ii)  Incompetence;

                    (iii) A pattern of socially unacceptable behavior;

                    (iv)  Willful misconduct;

                    (v)   Breach of fiduciary duty involving personal profit;
<PAGE>

                    (vi)  Intentional failure to perform stated duties;

                    (vii) Willful  violation  of any  law,  rule  or  regulation
                          (other than traffic violations or similar offenses) or
                          any final cease-and- desist order; or

                    (viii) Material breach of any provision of this Agreement.

               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 Company;  provided that
     any act or omission to act by the Employee in  reasonable  reliance upon an
     opinion of counsel to the Company shall not be deemed to be willful. In the
     event Employee is terminated  for just cause,  Employee shall have no right
     to  compensation  or other  benefits  for any  period  after  such  date of
     termination.

               (d)  Effective  Date  of  Termination:  The  termination  of this
     Agreement and Employee's employment shall be effective upon the delivery to
     Employee  of written  notice or at such later time as may be  specified  in
     such notice,  and Employee shall immediately vacate the Bank premises on or
     before such effective date.

               (e) Involuntary Termination: If the Employee is terminated by the
     Company,  other than for just cause or at such time as  Employee  no longer
     serves  as  President  and  Chief  Executive  Officer  of the  Bank,  or in
     connection  with a change in control of the  Company (as defined in Section
     9[g] herein),  Employee's  right to  compensation  and other benefits under
     this Agreement  shall be as set forth in Sections  9(h)(i) and 9(i) herein.
     In the event the  Employee is  terminated  in  connection  with a change in
     control of the Company, Employee's right to compensation and other benefits
     under this  Agreement  shall be as set forth in Sections  9(h)(ii) and 9(i)
     herein. In the event employee is terminated  because he no longer serves as
     President and Chief Executive  Officer of the Bank,  Employee shall have no
     further right to compensation or benefits provided for herein.

               (f)  Termination  for Good  Reason:  Employee may  terminate  his
     employment  hereunder for good reason by giving written notice to the Board
     of Directors or the Chairman thereof. For purposes of this Agreement, "good
     reason" shall mean (i) a failure by the Company to comply with any material
     provision  of this  Agreement,  which  failure  has not been  cured  within
     fifteen  (15) days after a notice of such  noncompliance  has been given by
     the  Employee  to PSB or the  Company;  or (ii)  subsequent  to a change in
     control as  defined in Section  9(g)  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 PSB and the Bank immediately prior
     to  a  change   in   control;   a  change  in  the   Employee's   reporting
     responsibilities,  titles or  offices as in effect  immediately  prior to a
     change in control of PSB or the Bank;  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 just cause,  disability,
     death, or removal  pursuant to Sections 9(b) or 9(c) herein; a reduction in
     the Employee's annual salary as in effect  immediately prior to a change in
     control;  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 PSB or the Bank, or the taking of any action by PSB or
     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.
<PAGE>

               (g) Change in Control:  For purposes of this Agreement,  a change
     in control  shall mean a change in ownership of stock in PSB or the Bank. A
     "change in control"  for  purposes of this  Agreement is defined to mean an
     event where a person:

                    (i)   Acquires  more than 25  percent of any class of voting
                          stock of PSB or the Bank;

                    (ii)  Acquires irrevocable proxies representing more than 25
                          percent of any class of voting stock of PSB;

                    (iii) Acquires   any   combination   of  voting   stock  and
                          irrevocable proxies  representing more than 25 percent
                          of any class of voting stock of PSB; or

                    (iv)  Controls  in any manner the  election of a majority of
                          the directors of PSB or the Bank.

               (h)  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  Company  for other  than just  cause  pursuant  to
          Section 9(e) herein,  then in lieu of any further  salary  payments to
          the  Employee  for  periods  subsequent  to the  date of  termination,
          Employee  shall be paid,  as  severance,  an amount  which would equal
          Employee's  total  compensation  for the  remainder of the term of the
          Agreement,  plus any incentive  compensation which Employee would have
          been entitled to hereunder;

                         (ii) In the event  Employee's  employment is terminated
          as a result of a change in  control  or a change in  control of PSB or
          the  Bank  occurs  within   twelve  (12)  months  of  the   Employees'
          involuntary  termination,  Employee  shall be  entitled to a severance
          payment  equal  to  Employee's  total  annual  compensation  plus  any
          incentive  compensation  which  Employee  would have been  entitled to
          hereunder;
<PAGE>

                         (iii) Any payment  under  Section  9(h)(i) and 9(h)(ii)
          shall be made in substantially equal semi-monthly  installments on the
          fifteenth and last days of each month until paid in full.

               (i) Additional Severance Benefits:  Unless Employee is terminated
     for just cause  pursuant to Section 9(e) herein,  pursuant to Section 10(b)
     herein,  or pursuant to a  termination  of  employment  by the Employee for
     other  than good  reason,  the  Company  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
     Company  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.

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

     10. Required Provisions by Regulation. The Company and Employee acknowledge
that the  laws and  regulations  governing  the  Parties  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:  If the Employee is suspended from office and/or
     temporarily  prohibited  from  participating  in the  conduct of the Bank's
     affairs pursuant to actions taken by the Florida  Department of Banking and
     Finance  ("DOBF")  or by notice  served  under  Section  8(e)(3) or Section
     8(g)(1) of the Federal  Deposit  Insurance Act ("FDIA") (12 U.S.C.  Section
     1818[e][3]  and  Section  1818[g][1]),  the Bank's  obligations  under this
     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 the  Employee  all or part of the
     compensation  withheld  while its  obligations  under this  Agreement  were
     suspended,  and (ii) reinstate (in whole or in part) any of its obligations
     which were suspended.

               (b) Permanent Prohibition: If the Employee is removed from office
     and/or permanently  prohibited from participating in the conduct of PSB and
     the  Bank's  affairs by an order  issued by the DOBF or by an order  issued
     under Section  8(e)(4) or Section  8(g)(1) of the FDIA (12 U.S.C.  Sections
     1818[e](4]  and [g][1]),  all  obligations of the Bank under this Agreement
     shall terminate as of the effective date of the order, but vested rights of
     the  Employee  and the  Bank as of the  date of  termination  shall  not be
     affected.
<PAGE>

                (c) Golden Parachute: Any payments made to the Employee pursuant
      to this Agreement, or otherwise, are subject to and conditioned upon their
      compliance with 12 U.S.C. Section 1828(k) and any regulations  promulgated
      thereunder.

               (d) Default Under FDIA: If the Bank is in default,  as defined in
     Section  3(x)(1)  of the FDIA (12  U.S.C.  Section  1813[x][1])  to mean an
     adjudication  or other  official  determination  by any court of  competent
     jurisdiction,  the  appropriate  federal  banking  agency  or other  public
     authority  pursuant  to  which  a  conservator,  receiver  or  other  legal
     custodian is appointed for the Bank, all  obligations  under this Agreement
     shall  terminate  as of the  date of  default,  but  vested  rights  of the
     Employee and the Bank as of the date of termination shall not be affected.

     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(e) 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  Company 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  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 termination of the
     Employee's  employment  for just 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  Employer,  notice  shall  be  sent  to the
     Chairman of the Board at the main office of PSB. 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.  The Parties,  by notice in writing,  may change or designate  the
     place for receipt of all such notices.

     12.  Post-Termination  Obligations.  The Company 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:
<PAGE>

               (i) Employee shall furnish such information and assistance as may
     be reasonably  required by the Company in connection with any litigation or
     settlement of any dispute between the Company,  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
     Company  in  connection  with any  regulatory  examination  by any state or
     federal regulatory agency;

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

     13. Fees and  Kickbacks.  It shall be considered a material  breach of this
Agreement  if Employee  receives:  (i) either  directly or  indirectly  any fee,
kickback,  or thing of value in connection with any loan made by the Company; or
(ii)  any  portion,  split or  percentage  of any  charge,  either  directly  or
indirectly,  given to or accepted by the Company or any subsidiary or affiliate,
in connection with any loan made by the Company or its affiliates;  or (iii) any
fee,  kickback or compensation of any kind in connection with the  participation
by the Company in any loan from any other source.

     14.  Indebtedness.  If during the term of this Agreement,  Employee becomes
indebted to the Company for any reason,  the Company may, at its  election,  set
off and collect any sums due Employee  out of any amounts  which the Company 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 attorney's fees
actually  or  necessarily  incurred  by  the  Company  in  connection  with  any
collection   proceeding   for   Employee's    indebtedness   to   the   Company.
Notwithstanding any of the foregoing, any indebtedness to the Company 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.

     15.  Maintenance of Trade Secrets and  Confidential  Information.  Employee
shall use his best efforts and utmost  diligence to guard and protect all of the
Company'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  Company'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 Company's  business.  Upon  termination  of this  Agreement or Employee's
employment, for any reason, Employee shall immediately return and deliver to the
Company all records  and papers and all  matters of whatever  nature  which bear
trade secrets or confidential information relating to the Company.

<PAGE>


     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 Company;  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 other than minimal 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  Company,  Employee  will  acquire  an
     intimate knowledge of the activities and affairs of the Company,  including
     trade secrets and other confidential matters. Employee,  therefore,  agrees
     that  during the term of this  Agreement,  and for a period of  twenty-four
     (24) months 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,  in  the
     financial  services  industry  with any  business  enterprise  or  business
     entity, or Person who competes or intends to compete directly or indirectly
     with any office of the Company located in Columbia County, Florida.

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

     17.  Remedies for Breach.

               (a) Arbitration:  The Parties agree that, except for the specific
     remedies for  injunctive  relief and other  equitable  relief  contained in
     Subsection  16(b) and (c) below, 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 of 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 Company 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 Company,  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  Company
     prevail in an action seeking an injunction  restraining Employee,  Employee
     shall pay all costs and  reasonable  attorneys fees incurred by the Company
     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.
<PAGE>

               (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  Company 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 Company.

     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 Company, and to the extent applicable,
its  successors,  and  assigns,  including,   without  limitation,  any  person,
partnership,  or corporation  which may acquire all or substantially  all of the
Company's  assets  and  business,  or with  or into  which  the  Company  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.

                (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 travel and
                lodging 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.
<PAGE>


               (d) Governing  Law/Venue:  This  Agreement  shall be construed in
     accordance  with  and  governed  by the  laws  of  the  State  of  Florida.
     Notwithstanding  the  Provisions  of Section  19(a)  herein,  venue for any
     litigation involving the Parties and their rights and obligations hereunder
     shall be brought in any 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.
     No modification, waiver or discharge of any provision or any breach of this
     Agreement  shall  be  effective  unless  it is in  writing  signed  by both
     Parties.  A Party's  waiver of the other Party's breach of any provision of
     this  Agreement,  shall not operate,  or be  construed,  as a waiver of any
     subsequent  breach  of that  provision  or of any other  provision  of this
     Agreement.

               (g) Waiver:  No course of conduct by the Company or Employee  and
     no delay or omission  of the  Company or Employee 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.




                  [Signatures Follow This Page]

<PAGE>



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

PSB BancGroup, Inc.                Peoples State Bank, In Organization



By: /s/ Alton C. Milton                   By:       /s/ Alton C. Milton
-----------------------                   -----------------------------
        Alton C. Milton                                 Alton C. Milton
        Chairman of the Board                           Proposed Chairman
                                                             of the Board


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



Employee


           /s/ C. F. Douglas
           -----------------
               C. F. Douglas


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