Document:

Exhibit 10.9

                             EMPLOYMENT AGREEMENT

      THIS AGREEMENT, made September 30, 2003, by and between Peoples State
Bank, Wausau, Wisconsin, a Wisconsin banking corporation, ("the Bank") and Todd
R. Toppen, of Wausau, Wisconsin ("Mr. Toppen").

      WITNESSETH:

      WHEREAS, the Bank has employed Mr. Toppen for many years and Mr. Toppen
has performed his duties in a highly satisfactory manner; and

      WHEREAS, the Bank wished to continue to employ Mr. Toppen and Mr. Toppen
wishes to continue his employment by the Bank on the terms and conditions
hereinafter provided;

      NOW, THEREFORE, in consideration of the premises, covenants and mutual
agreements contained herein, the Bank and Mr. Toppen agree as follows:

      1.    Employment.  Subject to the earlier termination of this agreement
pursuant to the terms hereof, Mr. Toppen is hereby employed effective as of the
date first written above (the "Commencement Date") as Vice President of the
Bank; provided, however, that Mr. Toppen may be employed in such other capacity
as the Board of Directors of the Bank shall deem appropriate and in the best
interests of the Bank.  Mr. Toppen agrees to serve in such capacity or
capacities on the terms and conditions hereinafter set forth.

      2.    Term.  The term of this agreement shall commence on  the
Commencement Date and shall end at midnight on the Expiration Date.  For
purposes of this agreement, the term "Expiration Date" shall mean the first to
occur of (a) the date of Mr. Toppen's death, or (b) the later of (1) the first
anniversary of the Commencement Date and (2) the date to which the term of this
agreement has most recently been extended pursuant to the following sentence.
On the first anniversary of the Commencement Date (and on the first anniversary
of each subsequent extension of the term of this agreement), the term of this
agreement shall automatically be extended for one year unless not less than 90
days prior to the Expiration Date of the original or any extended term, either
party gives notice to the other that automatic extensions of the term of this
agreement (and, consequently, the Expiration Date) pursuant to this sentence
shall cease.  The term "Term of Employment" shall mean the period beginning on
the Commencement Date and ending on the earlier of the Expiration Date or the
date on which Mr. Toppen's employment is terminated pursuant to paragraphs 5 or
8.

      3.    Extent of Services.  Mr. Toppen agrees to devote his full-time
attention and efforts (except during vacation periods, periods of illness and
other approved absences as provided for in paragraph 4(c)) to the duties of any
office held by him during the Term of Employment, provided, however, that Mr.
Toppen's devotion of a reasonable and de minimis portion of his attention or
efforts to the management of his personal affairs during normal business hours
shall not constitute a breach of the foregoing requirement.
<PAGE>
      4.    Compensation and Reimbursement.

            (a)   Salary.  The Bank shall pay to Mr. Toppen a salary based on
      an annual amount of $94,000.  The Bank may increase Mr. Toppen's salary
      from the amount specified herein during the Term of Employment, but may
      not decrease Mr. Toppen's salary from any previously established amount.
      Mr. Toppen's salary shall be payable at such times and in such
      installments as are consistent with the manner in which the salaries of
      other executive officers of the Bank are paid.

            (b)   Incentive Compensation.  During the Term of Employment, Mr.
      Toppen shall be entitled to receive such additional compensation from the
      Bank as may be provided for officers of commensurate position or rank
      under the terms of any incentive program from time to time maintained and
      in effect at the Bank for executive officers.

            (c)   Other Benefits.  During the Term of Employment, Mr. Toppen
      shall be entitled to receive all benefits and perquisites ordinarily
      provided to executive officers of the Bank, including coverage under a
      director's and officer's liability insurance policy,  and Mr. Toppen
      shall participate in all employee benefit plans or fringe benefit
      programs now or hereafter established or maintained by the Bank
      including, but not limited to, group insurance plans, pension benefit
      plans, welfare benefit plans,  pay practices, and vacation and sick leave
      benefits.  Mr. Toppen shall be entitled to participate in all plans or
      programs maintained by the Bank on terms no less favorable than those
      generally available to officers of the Bank and at a level of
      participation commensurate with his office.

            (d)   Expenses.  The Bank shall pay or reimburse Mr. Toppen, upon
      submission of vouchers by him, for all entertainment, travel, meal, hotel
      accommodation, and miscellaneous expenses reasonably incurred by him in
      the interest of the Bank's business during the Term of Employment.

      5.    Termination of Employment.

            (a)   Termination by the Bank for Good Cause.  The Bank may
      terminate Mr. Toppen's employment prior to the Expiration Date for good
      cause only upon compliance with the requirements of this paragraph 5(a).
      "Good cause" for termination of Mr. Toppen's employment by the Bank shall
      consist only of one or more of the following: (i) the commission of an
      act or acts by Mr. Toppen which results in a payment to the Bank or to
      PSB Holdings, Inc. ("PSB") of a claim filed by the Bank or PSB under a
      blanket banker fidelity bond policy as from time to time and at any time
      maintained; (ii) the willful and continuing failure to perform his duties
      in accordance with standards or policies established, from time to time,
      or at any time, by the Bank, after a written demand for substantial
      performance is delivered to Mr. Toppen by the Board which specifically
      identifies the manner in which the Board believes that Mr. Toppen has not
      substantially performed his duties; (iii) the commission by Mr. Toppen of
      any crime of moral turpitude, of dishonesty, of breach of trust, of
      theft, of embezzlement, of misapplication of funds, of unauthorized
      issuance of obligations or of false entries; (iv) any intentional,
      reckless, or negligent act or omission to act by Mr. Toppen which results
      in the violation by Mr. Toppen of any policy established by the Bank
      which is designed to insure compliance with applicable banking,
<PAGE>
      securities, employment discrimination or other laws which causes or
      results in the Bank's violation of such laws, except any act done by Mr.
      Toppen in good faith, as determined in the reasonable discretion of the
      Board of Directors of the Bank, or which results in a violation of such
      policies or law which is, in the reasonable sole discretion of such
      Board, immaterial;  (v) any intentional, reckless, or negligent act or
      omission to act by Mr. Toppen which results in a violation of an
      employment policy maintained by the Bank which is applicable to all other
      employees (for example, employment policies relating to the use of drugs
      or alcohol) and which, by the terms of such policy, is grounds for
      termination of employment, or (vi) Mr. Toppen's physical or mental
      disability, if such disability either results in Mr. Toppen receiving
      permanent disability payments pursuant to any group disability insurance
      policy or prevents Mr. Toppen from the normal performance of his duties
      for a continuous period of at least six months.  Upon the occurrence of
      any event constituting good cause for which the Bank elects to terminate
      Mr. Toppen's employment prior to the Expiration Date, the Bank shall
      provide written notice to Mr. Toppen, which shall state the good cause
      for termination, and Mr. Toppen's termination of employment shall be
      effective as of the date specified in such notice.  In the event of
      termination of Mr. Toppen's employment in accordance with the conditions
      of this paragraph (a), on the effective date of Mr. Toppen's termination
      of employment, the Term of Employment shall end, all of Mr. Toppen's
      obligations pursuant to this agreement (except for those provided in
      paragraphs 6 and 7) shall end and the Bank's obligations to pay
      compensation or provide benefits to Mr. Toppen pursuant to paragraph 4
      shall end.

            (b)   Termination by the Bank Other Than for Good Cause.  The Bank
      may terminate Mr. Toppen's employment prior to the Expiration Date for
      any reason other than good cause (as defined in paragraph 5(a)) upon
      providing 30 days written notice to Mr. Toppen specifying the effective
      date of Mr. Toppen's termination of employment.  If the Bank terminates
      Mr. Toppen's employment other than for good cause under paragraph 5(a),
      the Term of Employment and all of Mr. Toppen's obligations pursuant to
      this agreement (except for those provided in paragraphs 6 and 7) shall
      end on the effective date of Mr. Toppen's termination of employment and
      the Bank shall provide, for a period beginning on the effective date of
      Mr. Toppen's termination of employment,  as a severance benefit to Mr.
      Toppen and as liquidated damages for breach by the Bank of its otherwise
      applicable obligations hereunder, (i) a monthly cash payment equal to the
      amount which would, except for Mr. Toppen's termination of employment,
      have been paid to Mr. Toppen, if then living, as salary under paragraph
      4(a) for the remainder of the current or any extended term of this
      agreement, but in no event shall such payments be for a period of less
      than 12 months, and (ii) until Mr. Toppen becomes eligible for coverage
      under the health insurance plan of another employer of Mr. Toppen,
      coverage for Mr. Toppen, under the same terms then available to executive
      officers of the Bank, under any group health insurance program in which
      Mr. Toppen was a participant on the effective date of Mr. Toppen's
      termination of employment or under such successor plan or program as
      maintained after such date for the benefit of the Bank's employees but in
      no event longer than the period for which payments are made pursuant to
      clause (i).  Mr. Toppen shall not, by virtue of his severance benefit and
      liquidated damages rights, acquire any right, title or interest in
      particular assets of the Bank, and such rights shall be no greater than
<PAGE>
      the right of any unsecured general creditor of the Bank.  Despite any
      other provision of this agreement, Mr. Toppen shall not be entitled to
      any severance benefit or liquidated damages, and the Bank shall not be
      obligated to pay any such benefit or damages, if Mr. Toppen violates the
      provisions of paragraphs 6 or 7.

            (c)   Voluntary Termination by Mr. Toppen.  Mr. Toppen may
      terminate his employment at any time upon providing 30 days prior written
      notice to the Bank stating the effective date of his termination.  In any
      such event, all obligations of the Bank to Mr. Toppen under this
      agreement and all obligations of Mr. Toppen to the Bank (except those
      provided for in paragraphs 6 and 7) shall cease and the Term of
      Employment shall end on the effective date of Mr. Toppen's termination of
      employment.

      6.    Restrictive Covenant.  Mr. Toppen agrees, subject to the provisions
of paragraph 8, that during the Term of Employment and during the one-year
period which ends on the first anniversary of the effective date of Mr.
Toppen's termination of employment:

            (a)   he will not, within a radius of 25 miles of the principal
      office of the Bank in Wausau, Wisconsin or any branch or subsidiary
      office or operation of the Bank, directly or indirectly, perform services
      for, or on behalf of, any depository institution doing business as a
      bank, savings and loan association, or any other entity which competes
      for the Bank's retail or commercial loan business (each a "Financial
      Institution") if such services are the same or substantially similar to
      the services he performed for the Bank during the 12-month period
      immediately preceding his termination of employment; and

            (b)   he will not, directly or indirectly, solicit loans, deposits
      or other business on behalf of any Financial Institution from any person,
      corporation, limited liability company, partnership or other entity or
      organization:

                  (i)  who was a customer of the Bank on the date of his
            termination of employment or within the one year period ending on
            the date of his termination of employment;

                  (ii) was identified to management of the Bank by him, or by
            management of the Bank to him, as a potential customer of the Bank
            within the six-month period ending on the date of his termination
            of employment, or

                  (iii) was solicited by him for loans, deposits or other
            business on behalf of any Financial Institution at any time during
            the one-year period ending on the date of his termination of
            employment; and

            (c)   he will not, directly or indirectly, for himself or for any
      other person induce or attempt to induce any customer of the Bank to
      cease doing business with the Bank, or in any way interfere with the
      relationship between any customer of the Bank and the Bank.

For purposes of this paragraph 6, the term "directly or indirectly" includes
(a) any sale through any medium and (b) the direct or indirect ownership,
<PAGE>
management, operation, control, service as a director for, or association or
employment with, any Financial Institution if such Financial Institution is
engaged in the activities prohibited to Mr. Toppen by the provisions of this
paragraph 6 and Mr. Toppen's activities or services for such Financial
Institution involve the activities and services which are the same or
substantially similar to those services performed by him for the Bank;
provided, however, that an aggregate beneficial ownership interest of
Mr. Toppen of less than 5% of the equity interests in any Financial Institution
(or affiliate thereof) whose stock is registered pursuant to the provision of
the Securities Exchange Act of 1934 shall be deemed not to constitute a
violation of this provision.  Mr. Toppen further agrees that the restrictions
set forth in this agreement are reasonably necessary to protect the reasonable
interests of the Bank.

      7.    Confidential Information.  Mr. Toppen agrees that during the Term
of Employment and for a two year period following the termination of his
employment he will not reveal to any individual who is not then either employed
by, retained by, or on the Board of Directors of PSB, or any of its
subsidiaries, without the consent of PSB or the Bank, any confidential or
proprietary information of PSB or the Bank, the revealing of which would
adversely affect the business of PSB or the Bank, unless Mr. Toppen discloses
such matters in response to a subpoena or to discovery proceedings concerning a
matter in litigation or based on advice of counsel acceptable to the Bank that
such disclosure is appropriate or necessary under applicable law or regulation.

      8.    Change of Control.  In the event of a Change of Control, the
following provisions of this agreement shall apply notwithstanding any other
terms or conditions of this agreement:

            (a)   Upon a Change of Control, the "Term of Employment" for
      purposes of paragraph 2 shall mean the period equal in length to the Term
      of Employment then remaining on the date immediately prior to the Change
      of Control, but in no event for a period of less than 12 months, and the
      "Expiration Date" shall mean the first to occur of (i) Mr. Toppen's
      death, or (ii) his termination pursuant to paragraph 5, or (iii) his
      termination pursuant to paragraph 8(b).  Notwithstanding any other
      provision of this agreement or any incentive compensation plan then in
      effect,  Mr. Toppen shall be awarded, for each fiscal year ending during
      the Employment Period following the Change in Control, an annual bonus
      (the "Annual Bonus") in cash at least equal to his average annual bonus
      under any bonus plan with respect to performance during each of the three
      full calendar years prior to the effective date of the Change in Control,
      regardless of when such bonus was actually paid (the "Recent Annual
      Bonus") and each such Annual Bonus shall be paid no later than the end of
      the third month of the fiscal year next following the fiscal year for
      which the Annual Bonus is awarded but such amount shall be offset by any
      amount accrued under any other incentive compensation plan maintained
      after the Change of Control.

            (b)   Termination of Employment by Mr. Toppen for Good Reason.
      Mr. Toppen's employment may be terminated by Mr. Toppen during the Term
      of Employment for Good Reason if, (i) within 60 days of the date of
      occurrence of a triggering event, Mr. Toppen notifies the Bank in writing
      of his intention to treat such event as Good Reason, (ii) within 30 days
      following receipt of such notice provided for in (i), the Bank fails to
      cure the triggering event and (iii) within 30 days following the
<PAGE>
      expiration of the 30 day period described in (ii), Mr. Toppen voluntarily
      terminates his employment by giving written notice to the Bank.

            (c)   Good Reason.  For purposes of this agreement, "Good Reason"
      shall mean the occurrence of one or more of the following events
      subsequent to the public announcement of, or actual knowledge of the Bank
      or PSB of, any actual or proposed transaction which results, directly or
      indirectly, within 270 days of the date of such announcement or
      knowledge, in a Change of Control (each of which shall be a "triggering
      event"):

                  (i)  the assignment to Mr. Toppen of any duties inconsistent
            in any respect with the duties or responsibilities then held by Mr.
            Toppen (except if his status, title, or authority has been
            increased), or any other action by the Bank which results in a
            diminution in such duties or responsibilities, excluding for this
            purpose an isolated, insubstantial and inadvertent action not taken
            in bad faith and which is remedied by the Bank promptly after
            receipt of notice thereto given by Mr. Toppen;

                  (ii)  any failure by the Bank to comply with any of the
            provisions of paragraph 4 of this agreement, other than an
            isolated, insubstantial and inadvertent failure not occurring in
            bad faith and which is remedied by the Bank promptly after receipt
            of notice thereof given by Mr. Toppen, unless the Bank agrees to
            fully compensate Mr. Toppen for any such reduction;

                  (iii)  Mr. Toppen is required to locate his office more than
            25 miles from the then current location of the his principal
            office, excluding business travel reasonably consistent with the
            amount of travel required of him prior to such relocation;

                  (iv)  any purported termination by the Bank of Mr. Toppen's
            employment otherwise than as expressly permitted by this agreement;

                  (v)  any failure of any successor (whether direct or
            indirect, by purchase, merger, consolidation or otherwise) to all
            or substantially all of the business and/or assets of the Bank to
            assume expressly and agree to perform this agreement in the same
            manner and to the same extent that the Bank would be required to
            perform it if no such succession had taken place; or

                  (vi)  the Bank's or PSB's request that Mr. Toppen perform an
            illegal, or wrongful act in violation of the Bank's code of conduct
            policies.

            (d)   Severance Benefit on Termination by Mr. Toppen for Good
      Reason.  Upon termination of Mr. Toppen's employment by Mr. Toppen
      pursuant to paragraph 8(a) or by the Bank for a reason other than good
      cause subsequent to the public announcement of, or the Bank's or PSB's
      actual knowledge of, any actual or proposed transaction which results,
      directly or indirectly, within 270 days of the date of such announcement
      or knowledge, in a Change of Control, all obligations of the Bank to
      Mr. Toppen under this agreement and all obligations of Mr. Toppen to the
      Bank (except those provided for in paragraph 7) shall cease and the Term
      of Employment shall end (the "Date of Termination") and:
<PAGE>
                  (i)  subject to paragraph 8(f), the Bank shall pay to Mr.
            Toppen in a lump sum in cash within 30 days after the Date of
            Termination the aggregate of the following amounts:

                        (A)  the sum of (1) Mr. Toppen's base salary under
                  paragraph 4(a) through the Date of Termination and any
                  accrued incentive compensation to the extent not theretofore
                  paid, and (2) the product of (a) an amount equal to any
                  incentive compensation earned by Mr. Toppen for the most
                  recently completed fiscal year during the Term of Employment,
                  if any and (b) a fraction, the numerator of which is the
                  number of days in the current fiscal year through the Date of
                  Termination, and the denominator of which is 365; and

                        (B)  the amount equal to the amount of base salary to
                  which Mr. Toppen would have been entitled pursuant to
                  paragraph 4(a) had his termination of employment not
                  occurred, but in no event an amount less than 100% of Mr.
                  Toppen's then current base salary;

                  (ii)  until Mr. Toppen becomes eligible for coverage under
            the health insurance plan of another employer of Mr. Toppen,
            coverage for Mr. Toppen, under the same terms then available to
            executive officers of the Bank, under any group health insurance
            program in which Mr. Toppen was a participant on the effective date
            of Mr. Toppen's termination of employment or under such successor
            plan or program as maintained after such date for the benefit of
            the Bank's employees; and

                  (iii)  to the extent not theretofore paid or provided, the
            Bank shall timely pay or provide to Mr. Toppen any other amounts or
            benefits required to be paid or provided or which he is eligible to
            receive under any plan, program, policy or practice or contract or
            agreement of the Bank and its affiliated companies.

            (e)   Definition of Change of Control.  For the purpose of this
      agreement, a "Change of Control" shall be deemed to have occurred:

                  (i)  when any "person" as defined in Section 3(a)(9) of the
            Securities Exchange Act of 1934, as amended (the "Exchange Act")
            and as used in Sections 13(d) and 14(d) thereof, including a
            "group" as defined in Section 13(d) of the Exchange Act, excluding
            any employee benefit plan sponsored or maintained by PSB or any
            subsidiary of PSB (including any trustee of such plan acting as
            trustee), directly or indirectly, becomes the "beneficial owner"
            (as defined in Rule 13d-3 under the Exchange Act, as amended from
            time to time), of securities of PSB or the Bank representing 30% or
            more of the combined voting power of the Bank's or PSB's then
            outstanding securities with respect to the election of the
            directors of the Bank or PSB; or

                  (ii)  when, during any period of 24 consecutive months, the
            individuals who, at the beginning of such period, constitute the
            Board of Directors of the PSB (the "Incumbent Directors") cease for
            any reason other than death to constitute at least a majority
            thereof, provided, however, that a director who was not a director
<PAGE>
            at the beginning of such 24-month period shall be deemed to have
            satisfied such 24-month requirement (and be an Incumbent Director)
            if such director was elected by, or on the recommendation of or
            with the approval of, at least a majority of the directors who then
            qualified as Incumbent Directors either actually (because they were
            directors at the beginning of such 24-month period) or by prior
            operation of this provision; or

                  (iii)  the occurrence of a transaction requiring stockholder
            approval of the acquisition of the Bank by an entity other than PSB
            or a 50% or more owned subsidiary of PSB or shareholder approval of
            the acquisition of PSB through purchase of assets, or by merger,
            consolidation or otherwise, except in the case of a transaction
            pursuant to which, immediately after the transaction, PSB's
            shareholders immediately prior to the transaction own at least 60%
            of the combined voting power of the surviving entity's then
            outstanding securities with respect to the election of the
            directors of such entity solely be reason of such transaction; or

                  (iv)  the liquidation or dissolution of the Bank or PSB.

            (f)   Limitation on Benefits.

                  (i)  Notwithstanding any other provision of this agreement,
            the present value of all amounts payable pursuant to this paragraph
            8 which would constitute "parachute payments" (as such term is
            defined in Section 280G of the Internal Revenue Code of 1986 as
            amended (the "Code"), and any regulations promulgated thereunder),
            together with the present value of all other benefits payable by
            the Bank to Mr. Toppen under any other plans and the Bank which
            would also constitute "parachute payments," shall in no event equal
            or exceed an amount (the "Testing Amount") equal to 3 times Mr.
            Toppen's "base amount" (as such term is defined in Section 280G of
            the Code and any regulations promulgated thereunder), it being the
            intention of the parties that no payment made pursuant to this
            agreement shall constitute an "excess parachute payment" (as such
            term is defined in Section 280G of the Code and any regulations
            promulgated thereunder).  In the event that the present value of
            the payments provided for in this paragraph 8 together with the
            present value of such other amounts, without taking into account
            this paragraph (f), equals or exceeds the Testing Amount, then the
            amount of the payments provided for in this paragraph 8 and under
            such plans shall be reduced, beginning with the payments which are
            last in time, until the present value of all such payments is less
            than the Testing Amount.  For purposes of this paragraph 8, present
            value shall be determined in the manner provided in Section 280G of
            the Code and the regulations promulgated thereunder.

                  (ii)  It is the intention of the parties that the provisions
            of this paragraph 8 be construed to reduce the amounts otherwise
            payable hereunder only to the extent necessary to avoid the
            disallowance of the deduction by the Bank for any such amounts or
            the imposition of an excise tax on Mr. Toppen for any such amounts,
            under federal income tax law as it currently exists or may
            hereafter be amended.
<PAGE>
                  (iii)  In the event the provisions of this paragraph 8
            require any reduction in the amount to be paid to Mr. Toppen under
            this paragraph 8 of this Agreement, the Bank shall deliver to Mr.
            Toppen concurrently with such payment a statement signed by a
            partner or principal of its independent accounting firm setting
            forth the basis for and computation of such reduction and
            certifying that such computation is made in good faith.

      9.    Miscellaneous.

            (a)   Notices.  Any notice required or permitted to be given under
      this agreement shall not be deemed to have been given unless delivered in
      person or mailed, postage prepaid by certified mail addressed, in the
      case of Mr. Toppen, to his last known residence as specified by him in a
      notice to the Bank, or, in the case of the Bank to its principal office.

            (b)   Benefits and Obligations.  This agreement shall be binding
      upon, shall inure to the benefit of the Bank and its successors or
      assigns, and, as provided for herein, PSB, and shall be enforceable by
      the Bank and its respective successors and assigns, and Mr. Toppen, his
      heirs, assigns or legal representatives; provided, however, that the
      obligations of Mr. Toppen contained herein may not be delegated or
      assigned.

            (c)   Entire Agreement; Amendment.  This agreement constitutes the
      entire agreement between the parties with respect to the subject matter
      hereof and may only be amended by an agreement in writing signed by all
      of the parties hereto.

            (d)   Waiver.  The failure of any party hereto to insist, in any
      one or more instances, upon performance of any of the terms and
      conditions of this agreement, shall not be construed as a waiver or
      relinquishment of any right granted hereunder or of the future
      performance of any such term, covenant or condition.

            (e)   Severability.  In the event that any portion of this
      agreement may be held to be invalid or unenforceable for any reason, the
      parties hereto agree that said invalidity or unenforceability, shall not
      effect the other portions of this agreement and that the remaining
      covenants, terms and conditions or portions thereof shall remain in full
      force and effect and any court of competent jurisdiction may so modify
      the objectionable provision as to make it valid and enforceable.

            (f)   Governing Laws.  This agreement shall be governed by and
      construed in accordance with the internal laws of the State of Wisconsin
      without reference to conflicts or law principles.

            (g)   Captions.  The captions contained in this agreement are for
      the convenience of the Bank and Mr. Toppen and shall not be deemed or
      construed as in any way limiting or extending the language of the
      provisions to which such captions refer.

      IN WITNESS WHEREOF, the Bank and Mr. Toppen have caused this instrument
to be executed as of the date first written above.
<PAGE>

                                           PEOPLES STATE BANK

                                           By:   DAVID K. KOPPERUD
                                                 David K. Kopperud
                                                 As its President

                                                 TODD R. TOPPEN
                                                 Todd R. ToppenEXHIBIT 4.2(C)

                      AMENDMENT NO. 2 TO THE THIRD AMENDED
                  AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
                                       OF
                          EQUITY INNS PARTNERSHIP, L.P.

         This Amendment No. 2 (this "Amendment") to the Third Amended and
Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P. dated
June 25, 1997 (the "Partnership Agreement") is entered into as of August 11,
2003, by and among Equity Inns, Inc., a Tennessee corporation (the
"Corporation"), Equity Inns Trust, a Maryland real estate investment trust (the
"General Partner"), and the limited partners (the "Limited Partners") of Equity
Inns Partnership, L.P. (the "Partnership"). All capitalized terms used herein
and not otherwise defined shall have the meanings assigned to them in the
Partnership Agreement.

         WHEREAS, the Corporation, which is the sole shareholder of the General
Partner, on even date herewith, has issued 3,000,000 shares of its 8.75% Series
B Cumulative Preferred Stock, $.01, par value per share, having a liquidation
preference equivalent to $25.00 per share (the "Series B Preferred Stock"), and
has sold such Series B Preferred Stock in an underwritten public offering and
may issue and sell up to an aggregate of 450,000 additional shares of Series B
Preferred Stock (the "Series B Offering");

         WHEREAS, the Corporation desires to contribute the net proceeds of the
sale of the Series B Preferred Stock through the General Partner to the
Partnership in exchange for the issuance to the General Partner of preferred
partnership interests in the Partnership as set forth herein;

         WHEREAS, the General Partner is authorized to cause the Partnership to
issue interests in the Partnership to the General Partner in exchange for such
contribution of such net proceeds made by the Corporation through the General
Partner;

         WHEREAS, the Partnership will use the net proceeds to redeem from the
General Partner currently outstanding Series A Preferred Units in the
Partnership (as set forth herein).

         NOW, THEREFORE, in consideration of the mutual covenants herein
contained, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree to amend
the Partnership Agreement as follows:

         Section 1.        Contribution.

         The Corporation hereby contributes through the General Partner to the
Partnership the entire net proceeds received by the Corporation from the
issuance of the Series B Preferred Stock. As provided in Section 4.02(g) of the
Partnership Agreement, the Corporation shall be deemed to have made a Capital
Contribution to the Partnership in an amount equal to the gross proceeds raised
in connection with the issuance of such shares of Series B Preferred Stock,
which is $75,000,000, plus up to an additional $11,250,000 of proceeds from up
to 450,000 additional shares of Series B Preferred Stock, and the Partnership
shall be deemed simultaneously to have paid, pursuant to Section 6.05(b) of the
Partnership Agreement, for the costs and expenses relating to the offer,
registration and sale of the Series B Preferred Stock.
<PAGE>

         Section 2.    Issuance of Series B Preferred Units.

         In consideration of the contribution to the Partnership made by the
Corporation through the General Partner pursuant to Section 1 hereof, the
Partnership hereby issues to the General Partner 3,000,000 Series B Preferred
Units (as defined below) and may issue to the General Partner an additional
450,000 Series B Preferred Units.

         Section 3.    Definitions.

         Article I of the Partnership Agreement is hereby amended by inserting
in the appropriate alphabetical locations the following definitions of Series B
Preferred Return, Series B Preferred Stock and Series B Preferred Units, as
follows:

         "Series B Preferred Return" means an annualized amount equal to $2.1875
per Series B Preferred Unit.

         "Series B Preferred Stock" means the 8.75% Series B Cumulative
Preferred Stock, $.01 par value, of the Corporation.

         "Series B Preferred Units" means the Preferred Units issued to the
General Partner in exchange for the net proceeds of the issuance by the
Corporation of its Series B Preferred Stock, which Series B Preferred Units
shall have the designations, preferences, privileges, limitations and relative
rights set forth in Section 4.02(c)(ii) hereof.

         Section 4.    Redemption of Series A Preferred Units.

         The Partnership hereby redeems the Series A Preferred Units in the
Partnership. Effective upon the redemption of the Series A Preferred Units,
Section 4.02(c)(i) of the Partnership Agreement, as set forth in Section 4 of
Amendment No. 1 to the Partnership Agreement dated June 25, 1998, shall be
deleted in its entirety and Section 4.02(c)(i) shall hereinafter read
"[Intentionally Left Blank]".

         Section 5.    Creation of Series B Preferred Units.

         Article IV of the Partnership Agreement is hereby amended by adding
Section 4.02(c)(ii) as follows:

                  "(ii) 8.75% Series B Cumulative Preferred Units.

         (1) Designation and Number. A series of Preferred Units, designated the
         "8.75% Series B Cumulative Preferred Units" (the "Series B Preferred
         Units"), is hereby established. The number of Series B Preferred Units
         shall be as set forth on Exhibit A hereto.

         (2) Rank. The Series B Preferred Units will, with respect to
         distribution rights and rights upon liquidation, dissolution or winding
         up of the Partnership, rank (i) senior to all classes or series of
         Common Units of the Partnership, and to all Partnership Units ranking
         junior to the Series B Preferred Units with respect to distribution
<PAGE>

         rights or rights upon liquidation, dissolution or winding up of the
         Partnership; (ii) on a parity with all Partnership Units issued by the
         Partnership the terms of which specifically provide that such
         Partnership Units rank on a parity with the Series B Preferred Units
         with respect to distribution rights or rights upon liquidation,
         dissolution or winding up of the Partnership; and (iii) junior to all
         existing and future indebtedness of the Partnership. The term
         "Partnership Units" does not include convertible debt securities, which
         will rank senior to the Series B Preferred Units prior to conversion.

         (3)      Distributions.

                  (a) Holders of the Series B Preferred Units are entitled to
         receive, when and as distributed by the General Partner out of
         available cash flow, preferential cumulative cash distributions in an
         amount equal to the excess, if any, of (i) the cumulative Series B
         Preferred Return for the current and all prior years over (ii) the sum
         of all prior Series B Preferred Return distributions pursuant to this
         Section 4.02(c)(ii)(3). Distributions on the Series B Preferred Units
         shall be cumulative from the date of original issue and shall be
         payable quarterly in arrears on or before the last day of January,
         April, July and October of each year, or, if not a Business Day (as
         defined below), the next succeeding business day (each, a "Distribution
         Payment Date"). The first distribution will be paid on or before
         October 31, 2003. The first distribution will be prorated for less than
         a full quarter. Any distribution payable on the Series B Preferred
         Units for any partial distribution period will be computed on the basis
         of a 360-day year consisting of twelve 30 day months. Distributions
         will be payable to holders of record as they appear in the ownership
         records of the Partnership at the close of business on the applicable
         record date, which shall be the last Business Day of each of March,
         June, September and December immediately preceding such Distribution
         Payment Date, or on such other date designated by the General Partner
         of the Partnership for the payment of distributions that is not more
         than 30 nor less than 10 days prior to such Distribution Payment Date
         (each, a "Distribution Record Date"). "Business Day" shall mean any
         day, other than a Saturday or Sunday, that is neither a legal holiday
         nor a day on which banking institutions in New York City are authorized
         or required by law, regulation or executive order to close.

                  (b) The amount of any distributions accrued on any Series B
         Preferred Units at any Distribution Payment Date shall be the amount of
         any unpaid distributions accumulated thereon, to and including such
         Distribution Payment Date, whether or not earned or declared, and the
         amount of distributions accrued on any Series B Preferred Units at any
         date other than a Distribution Payment Date shall be equal to the sum
         of the amount of any unpaid distributions accumulated thereon, to and
         including the last preceding Distribution Payment Date, whether or not
         earned or declared, plus an amount calculated on the basis of the
         Series B Preferred Return for the period after such last preceding
         Distribution Payment Date to and including the date as of which the
         calculation is made based on a 360-day year of twelve 30-day months.

                  (c) Except as provided in subsection (a) hereof, the holder of
         the Series B Preferred Units will not be entitled to any distributions
         in excess of full cumulative distributions as described above and shall
         not be entitled to participate in the earnings or assets of the
         Partnership, and no interest, or sum of money in lieu of interest,
         shall be payable in respect of any distribution payment or payments on
         the Series B Preferred Units which may be in arrears.
<PAGE>

                  (d) No distributions on Series B Preferred Units shall be
         declared by the General Partner or paid or set apart for payment by the
         Partnership if the terms and provisions of any agreement of the
         Partnership, including any agreement relating to its indebtedness,
         prohibit such declaration, payment or setting apart for payment or
         provide that such declaration, payment or setting apart for payment
         would constitute a breach thereof or a default thereunder, or if such
         declaration or payment shall be restricted or prohibited by law.
         Notwithstanding the foregoing, distributions on the Series B Preferred
         Units will accrue whether or not the Partnership has earnings, whether
         or not there is available cash flow for the payment of such
         distributions and whether or not such distributions are declared.
         Accrued but unpaid distributions on the Series B Preferred Units will
         not bear interest and holders of the Series B Preferred Units will not
         be entitled to any distributions in excess of full cumulative
         distributions described above.

                  (e) Except as set forth in the next sentence, no distributions
         will be declared or paid or set apart for payment on any Partnership
         Units or any other series of Preferred Units ranking, as to
         distributions, on a parity with or junior to the Series B Preferred
         Units (other than a distribution of the Partnership's Common Units or
         any other class of Partnership Units ranking junior to the Series B
         Preferred Units as to distributions and upon liquidation) for any
         period unless full cumulative distributions have been or
         contemporaneously are declared and paid or declared and a sum
         sufficient for the payment thereof is set apart for such payment on the
         Series B Preferred Units for all past distribution periods and the then
         current distribution period. When distributions are not paid in full
         (or a sum sufficient for such full payment is not so set apart) upon
         the Series B Preferred Units and any other series of Preferred Units
         ranking on a parity as to distributions with the Series B Preferred
         Units, all distributions declared upon the Series B Preferred Units and
         any other series of Preferred Units ranking on a parity as to
         distributions with the Series B Preferred Units shall be declared pro
         rata so that the amount of distributions declared per Series B
         Preferred Unit and such other series of Preferred Units shall in all
         cases bear to each other the same ratio that accrued distributions per
         Series B Preferred Unit and such other series of Preferred Units (which
         shall not include any accrual in respect of unpaid distributions for
         prior distribution periods if such Preferred Units do not have a
         cumulative distribution) bear to each other.

                  (f) Except as provided in the immediately preceding paragraph,
         unless full cumulative distributions on the Series B Preferred Units
         have been or contemporaneously are declared and paid or declared and a
         sum sufficient for the payment thereof is set apart for payment for all
         past distribution periods and the then current distribution period, no
         distributions (other than a distribution of Common Units or other
         Partnership Units ranking junior to the Series B Preferred Units as to
         distributions and upon liquidation) shall be declared or paid or set
         aside for payment nor shall any other distribution be declared or made
         upon the Common Units, or any other Partnership Units ranking junior to
         or on a parity with the Series B Preferred Units as to distributions or
         upon liquidation, nor shall any Common Units, or any other Partnership
         Units in the Partnership ranking junior to or on a parity with the
         Series B Preferred Units as to distributions or upon liquidation be
         redeemed, purchased or otherwise acquired for any consideration (or any
         monies be paid to or made available for a sinking fund for the
         redemption of any such units) by the Partnership. Holders of Series B
         Preferred Units shall not be entitled to any distribution, whether
         payable in cash, property or securities in excess of full cumulative
         distributions on the Series B Preferred Units as provided above.
<PAGE>

         (4) Liquidation Preference. Upon any voluntary or involuntary
         liquidation, dissolution or winding up of the affairs of the
         Partnership, the holders of Series B Preferred Units are entitled to be
         paid out of the assets of the Partnership legally available for
         distribution to its partners a liquidation preference of $25.00 per
         Series B Preferred Unit (the "Liquidation Preference"), plus an amount
         equal to any accrued and unpaid distributions with respect to the
         Series B Preferred Units to the date of payment, but without interest,
         before any distribution of assets is made to holders of Common Units or
         any other class or series of Partnership Units in the Partnership that
         ranks junior to the Series B Preferred Units as to liquidation rights.
         The Partnership will promptly provide to the holders of Series B
         Preferred Units written notice of any event triggering the right to
         receive such Liquidation Preference. After payment of the full amount
         of the Liquidation Preference, the holders of Series B Preferred Units
         will have no right or claim to any of the remaining assets of the
         Partnership. If, upon any voluntary or involuntary dissolution,
         liquidation, or winding up of the Partnership, the amounts payable with
         respect to the Liquidation Preference, plus an amount equal to any
         accrued and unpaid distributions to the date of payment, of the Series
         B Preferred Units and any other units of the Partnership ranking as to
         any such distribution on a parity with the Series B Preferred Units are
         not paid in full, the holders of the Series B Preferred Units and of
         such other units will share ratably in any such distribution of assets
         of the Partnership in proportion to the full respective preference
         amounts to which they are entitled. The consolidation or merger of the
         Partnership with or into any other partnership, corporation, trust or
         entity or of any other partnership or corporation with or into the
         Partnership, or the sale, lease or conveyance of all or substantially
         all of the property or business of the Partnership, shall not be deemed
         to constitute a liquidation, dissolution or winding up of the
         Partnership.

         (5)      Redemption.

                  (a) The Series B Preferred Units are not redeemable by the
         Partnership prior to August 11, 2008. On and after August 11, 2008, the
         Partnership, at its option upon not less than 30 nor more than 60 days'
         written notice, may redeem the Series B Preferred Units, in whole or in
         part, at any time or from time to time, for cash at a redemption price
         of $25.00 per Series B Preferred Unit, plus all accrued and unpaid
         distributions thereon to the date fixed for redemption, without
         interest. A holder shall surrender its Series B Preferred Units at the
         place designated in such notice and shall be entitled to the redemption
         price and any accrued and unpaid distributions payable upon such
         redemption following such surrender. If notice of redemption of any
         Series B Preferred Units has been given and if the funds necessary for
         such redemption have been set aside by the Partnership in trust for the
         benefit of the holders of any Series B Preferred Units so called for
         redemption, then from and after the redemption date distributions will
         cease to accrue on such Series B Preferred Units, such Series B
         Preferred Units shall no longer be deemed outstanding and all rights of
         the holders of such Series B Preferred Units will terminate, except the
<PAGE>

         right to receive the redemption price. If less than all of the
         outstanding Series B Preferred Units are to be redeemed, the Series B
         Preferred Units to be redeemed shall be selected pro rata (as nearly as
         may be practicable without creating fractional Series B Preferred
         Units) or by any other equitable method determined by the General
         Partner.

                  (b) Notice of redemption will be mailed or delivered to
         holders of Series B Preferred Units not less than 30 nor more than 60
         days prior to the redemption date. In addition to any information
         required by law, each notice shall state: (i) the Redemption Date; (ii)
         the Redemption Price; (iii) the number of Series B Preferred Units to
         be redeemed; (iv) the place or places where the Series B Preferred
         Units are to be surrendered for payment of the redemption price; and
         (v) that distributions on the Series B Preferred Units to be redeemed
         will cease to accrue on such redemption date. If less than all of the
         Series B Preferred Units held by any holder are to be redeemed, the
         notice mailed to such holder shall also specify the number of Series B
         Preferred Units held by such holder to be redeemed.

                  (c) Immediately prior to any redemption of Series B Preferred
         Units, the Partnership shall pay, in cash, any accumulated and unpaid
         distributions through the redemption date, unless a redemption date
         falls after a Distribution Record Date and prior to the corresponding
         Distribution Payment Date, in which case each holder of Series B
         Preferred Units at the close of business on such Distribution Record
         Date shall be entitled to the distribution payable on such shares on
         the corresponding Distribution Payment Date notwithstanding the
         redemption of such shares before such Distribution Payment Date.

                  (d) If the Partnership exercises its optional redemption right
         with respect to the Series B Preferred Units pursuant to this Section
         4.02(c)(ii)(5), then the Corporation must redeem a corresponding number
         of shares of Series B Preferred Stock. Similarly, if the Corporation
         exercises its optional redemption right with respect to shares of
         Series B Preferred Stock, then the Partnership must redeem a
         corresponding number of Series B Preferred Units.

         (6) Conversion. Except as provided in Section 4.02(c)(ii)(5) hereof,
         the Series B Preferred Units are not redeemable for, convertible into
         or exchangeable for any other property or securities of the Partnership
         or the General Partner."

         Section 6.    Allocation of Profit and Loss.

         Article V, Section 5.01(e) is hereby deleted in its entirety and the
following new Section 5.01(e) is inserted in its place:

                  "(e) Priority Allocations With Respect To Series B Preferred
         Units. After giving effect to the allocations set forth in Sections
         5.01(b), (c), and (d) hereof, but before giving effect to the
         allocations set forth in Section 5.01(a), Net Operating Income shall be
         allocated to the General Partner until the aggregate amount of Net
         Operating Income allocated to the General Partner under this Section
         5.01(e) for the current and all prior years equals the aggregate amount
         of the Series B Preferred Return paid to the General Partner pursuant
         to Sections 4.02(c)(ii)(3) and 4.02(c)(ii)(4) hereof for the current
         and all prior years. For purposes of this Section 5.01(e), "Net
         Operating Income" means the excess, if any, of the Partnership's gross
         income over its expenses (but not taking into account depreciation,
         amortization, or any other noncash expenses of the Partnership),
         calculated in accordance with the principles of Section 5.01(g)
         hereof."

<PAGE>

         IN WITNESS WHEREOF, the foregoing Amendment No. 1 to the Third Amended
and Restated Agreement of Limited Partnership of Equity Inns Partnership, L.P.
has been signed and delivered as of this 11th day of August, 2003, by the
undersigned sole general partner of the Partnership, as general partner and on
behalf of the Limited Partners, and by the Corporation as non-Partner party to
the Partnership Agreement.

                                   EQUITY INNS TRUST, a Maryland real estate
                                   investment trust, as sole General Partner

                                   By:     /s/ Howard A. Silver
                                           ------------------------------------
                                   Name:   Howard A. Silver
                                   Title:  President and Chief Operating Officer

                                   EQUITY INNS TRUST, a Maryland real estate
                                   investment trust, as General Partner, on
                                   behalf of the Limited Partners pursuant to
                                   Section 8.02 and Article XI of the
                                   Partnership Agreement

                                   By:     /s/ Howard A. Silver
                                           ------------------------------------
                                   Name:   Howard A. Silver
                                   Title:  President and Chief Operating Officer

                                   EQUITY INNS, INC., a Tennessee corporation,
                                   as a non-Partner party to the Partnership
                                   Agreement

                                   By:     /s/ Howard A. Silver
                                           ------------------------------------
                                   Name:   Howard A. Silver
                                   Title:  President and Chief Operating Officer

<PAGE>

                                    Exhibit A

                            SERIES B PREFERRED UNITS
                       (Effective as of October 10, 2003)

<TABLE>
<CAPTION>

                                Cash Amount of Capital                         Percentage of Series B
Partner and Address                 Contribution           Preferred Units        Preferred Units
-------------------             ----------------------     ---------------     ----------------------
<S>                             <C>                        <C>                 <C>
Equity Inns Trust                   $86,250,000               3,450,000              100.0%
                                     ----------               ---------
7700 Wolf River Boulevard
Memphis, TN  38138
                                    $86,250,000               3,450,000              100.0%
                                    ===========               =========              =====
</TABLE>

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