- --------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the
- ---- Securities Exchange Act of 1934
For the quarterly period ended September 30, 1999
Transition report under Section 13 or 15(d) of the Exchange Act
- ----
For the transition period from to
------------ ------------
Commission file number 333-44161
PSB BANCGROUP, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Florida 59-3454146
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
500 South First Street
Lake City, Florida 32025
(Address of Principal Executive Offices)
(904) 754-0002
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 12, 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days:
YES X NO
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date;
Common stock, par value $.01 per share 514,478 shares
- -------------------------------------- --------------------------
(class) Outstanding at October 20, 1999
- --------------------------------------------------------------------------------
(CONFORMED COPY)
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements Page
---------------------------- ----
Condensed Consolidated Balance Sheets -
At September 30, 1999 (unaudited) and At December 31, 1998 (unaudited)...................................2
Condensed Consolidated Statements of Operations -
Three and Nine Months ended September 30, 1999 and 1998 (unaudited)......................................3
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
Nine Months Ended September 30, 1999 (unaudited).........................................................4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1999 and 1998 (unaudited)................................................5
Notes to Condensed Consolidated Financial Statements (unaudited).........................................6-8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations...............................................................................9-10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings..................................................................................11
Item 6. Exhibits and Reports on Form 8-K...................................................................11
SIGNATURES.....................................................................................................12
</TABLE>
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30, December 31,
------------- ------------
Assets 1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash and due from banks $ 686,905 17,520
Interest-bearing deposits 144,256 27,048
Federal funds sold 3,732,000 -
---------- -------
Total cash and cash equivalents 4,563,161 44,568
Securities available for sale 525,380 -
Securities held to maturity 1,000,000 -
Loans, net of allowance for loan losses of $16,158 in 1999 1,885,738 -
Premises and equipment, net 335,106 232,687
Restricted security, Federal Home Loan Bank stock, at cost 9,400 -
Deferred tax asset 205,785 119,285
Accrued interest receivable and other assets 135,376 47,043
---------- --------
Total $ 8,659,946 443,583
========= =======
Liabilities and Stockholders' Equity (Deficit)
Deposits:
Demand deposits 811,022 -
Savings and NOW deposits 808,875 -
Money-market deposits 631,414 -
Time deposits 2,016,735 -
--------- -------
Total deposits 4,268,046 -
Borrowings - 465,000
Accrued interest payable and other liabilities 141,291 -
---------- -------
Total liabilities 4,409,337 465,000
--------- -------
Stockholders' equity (deficit):
Preferred stock, $.01 par value, 2,000,000 shares authorized,
none issued or outstanding - -
Common stock, $.01 par value, 8,000,000 shares authorized,
514,478 and 3,942 shares issued and outstanding in
1999 and 1998, respectively 5,145 40
Additional paid-in capital 4,587,657 177,350
Accumulated deficit (342,193) (198,807)
---------- -------
Total stockholders' equity (deficit) 4,250,609 (21,417)
--------- -------
Total $ 8,659,946 443,583
========= =======
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Interest income:
Loans $ 37,976 - 45,521 -
Securities 21,604 - 22,110 -
Other interest-earning assets 48,093 10,034 145,927 10,501
-------- ------ ------- --------
Total interest income 107,673 10,034 213,558 10,501
------- ------ ------- -------
Interest expense:
Deposits 23,644 - 29,764 -
Borrowings - 3,496 12,071 4,336
----------- ------- ------- --------
Total interest expense 23,644 3,496 41,835 4,336
------- ------- ------- --------
Net interest income 84,029 6,538 171,723 6,165
Provision for loan losses 10,686 - 16,158 -
------- ------- ------- ------
Net interest income after provision
for loan losses 73,343 6,538 155,565 6,165
------- ------- ------- --------
Noninterest income-
Service charges on deposit accounts
and other fees 4,554 - 5,403 -
------- ------- ------- --------
Noninterest expense:
Salaries and employee benefits 87,543 46,712 237,148 97,732
Occupancy expense 20,819 15,434 44,272 46,975
Professional fees 4,352 15,000 19,752 31,648
Printing and office supplies 5,352 896 14,728 6,572
Telephone expense 1,689 1,689 8,288 3,689
Other 35,078 6,840 66,666 21,647
------- ------- ------- --------
Total other expense 154,833 86,571 390,854 208,263
------- ------ ------- -------
Loss before income tax benefit (76,936) (80,033) (229,886) (202,098)
Income tax benefit (29,185) (30,012) (86,500) (75,786)
------- ------ ------- -------
Net loss $ (47,751) (50,021) (143,386) (126,312)
======= ====== ======= =======
Loss per share, basic and diluted $ (.09) (12.69) (.37) (32.04)
========= ======= ========= ========
Weighted-average number of shares
outstanding, basic and diluted 513,967 3,942 388,253 3,942
======= ====== ======= ========
Dividends per share $ - - - -
======= ====== ======= ========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statement of Stockholders' Equity (Deficit)
For the Nine Months Ended September 30, 1999
<TABLE>
<CAPTION>
Total
Additional Stockholders'
Preferred Common Paid-In Accumulated Equity
Stock Stock Capital Deficit (Deficit)
----- ----- ------- ------- ---------
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1998 (unaudited) $ - 40 177,350 (198,807) (21,417)
Retire common stock (3,942 shares) - (40) (177,350) - (177,390)
(unaudited)
Common stock issuance (513,478 shares)
net of stock issuance costs of
$37,500 (unaudited) - 5,135 4,578,667 - 4,583,802
Proceeds from issuance of common stock,
exercise of warrants (1,000 shares)
(unaudited) - 10 8,990 - 9,000
Net loss (unaudited) - - - (143,386) (143,386)
------- ---------------------- ------- ----------
Balance at September 30, 1999 (unaudited) $ - 5,145 4,587,657 (342,193) 4,250,609
======= ===== ========= ======= =========
</TABLE>
See Accompanying Notes to Condensed Consolidated Financial Statements.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Condensed Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
-------------
1999 1998
---- ----
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (143,386) (126,312)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 8,120 -
Provision for loan losses 16,158 -
Credit for deferred income taxes (86,500) (75,786)
Increase in accrued interest receivable and other assets (88,333) (9,508)
Increase in accrued interest payable and other liabilities 141,291 -
---------- ------
Net cash used in operating activities (152,650) (211,606)
---------- -------
Cash flows from investing activities:
Purchase of securities available for sale (525,380) -
Purchase of securities held to maturity (1,000,000) -
Purchase of property and equipment (110,539) (53,443)
Net increase in loans (1,901,896) -
Purchase of restricted security (9,400) -
----------- -------
Net cash used in investing activities (3,547,215) (53,443)
--------- -------
Cash flows from financing activities:
Net increase in demand, savings, NOW and money-
market deposits 2,251,311 -
Net increase in time deposits 2,016,735 -
Net (decrease) increase in borrowings (465,000) 200,000
Retirement of common stock (177,390) -
Net proceeds from issuance of common stock 4,592,802 -
--------- -------
Net cash provided by financing activities 8,218,458 200,000
--------- -------
Net increase (decrease) in cash and cash equivalents 4,518,593 (65,049)
Cash and cash equivalents at beginning of period 44,568 77,842
----------- -------
Cash and cash equivalents at end of period $ 4,563,161 12,793
========= =======
Supplemental disclosure of cash flow information-
Cash paid during the period
for:
Interest $ 23,621 4,336
=========== ========
Income taxes $ - -
=========== ========
See Accompanying Notes to Condensed Consolidated Financial Statements.
</TABLE>
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited)
(1) Description of Business and Summary of Significant Accounting Policies
General. PSB BancGroup, Inc. ("PSB") was incorporated on June 30, 1997. PSB
owns 100% of the outstanding common stock of Peoples State Bank
("Bank") (collectively the "Company"). PSB was organized simultaneously
with the Bank and its only business is the ownership and operation of
the Bank. The Bank is a Florida state-chartered commercial bank and its
deposits are insured by the Federal Deposit Insurance Corporation. The
Bank opened for business on April 28, 1999 and provides community
banking services to businesses and individuals in Lake City, Florida.
The Company's fiscal year end is December 31.
In the opinion of management, the accompanying condensed consolidated
financial statements contain all adjustments (consisting principally of
normal recurring accruals) necessary to present fairly the financial
position at September 30, 1999, the results of operations for the
three- and nine-month periods ended September 30, 1999 and 1998 and
cash flows for the nine-month periods ended September 30, 1999 and
1998. The results of operations for the three and nine months ended
September 30, 1999 are not necessarily indicative of the results to be
expected for the year ending December 31, 1999.
Basis of Presentation. The accompanying condensed consolidated financial
statements include the accounts of PSB and the Bank. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The accounting and reporting practices of the Company
conform to generally accepted accounting principles and to general
practices within the banking industry.
Estimates. The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Securities. Securities may be classified as either trading, held to
maturity or available for sale. Trading securities are held principally
for resale and recorded at their fair values. Unrealized gains and
losses on trading securities are included immediately in earnings.
Held-to-maturity securities are those which the Company has the
positive intent and ability to hold to maturity and are reported at
amortized cost. Available-for-sale securities consist of securities not
classified as trading securities nor as held-to-maturity securities.
Unrealized holding gains and losses, net of tax, on available-for-sale
securities are reported as a net amount in a separate component of
stockholders' equity until realized. At September 30, 1999, cost
approximated market value for securities available for sale. Gains and
losses on the sale of available-for-sale securities are determined
using the specific-identification method. Premiums and discounts on
securities available for sale are recognized in interest income using
the interest method over the period to maturity.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Loans Receivable. Loans receivable that management has the intent and
ability to hold for the foreseeable future or until maturity or pay-off
are reported at their outstanding principal adjusted for any
charge-offs, the allowance for loan losses, and any deferred fees or
costs on originated loans.
Loan origination fees and certain direct origination costs are
capitalized and recognized as an adjustment of the yield of the related
loan.
The accrual of interest on impaired loans is discontinued when, in
management's opinion, the borrower may be unable to meet payments as
they become due. When interest accrual is discontinued, all unpaid
accrued interest is reversed. Interest income is subsequently
recognized only to the extent cash payments are received.
The allowance for loan losses is increased by charges to income and
decreased by charge-offs (net of recoveries). Management's periodic
evaluation of the adequacy of the allowance is based on the Company's
past loan loss experience, known and inherent risks in the portfolio,
adverse situations that may affect the borrower's ability to repay, the
estimated value of any underlying collateral, and current economic
conditions.
Premises and Equipment. Premises and equipment are stated at cost less
accumulated depreciation. Depreciation expense is computed on the
straight-line basis over the estimated useful life of each type of
asset.
Income Taxes. Deferred tax assets and liabilities are reflected at
currently enacted income tax rates applicable to the period in which
the deferred tax assets or liabilities are expected to be realized or
settled. As changes in tax laws or rates are enacted, deferred tax
assets and liabilities are adjusted through the provision for income
taxes.
Organizational and Preopening Costs. Organizational and preopening costs
totaled $363,523 and were charged to expense as incurred.
Off-Balance-Sheet Instruments. In the ordinary course of business the
Company has entered into off-balance-sheet financial instruments
consisting of commitments to extend credit. Such financial instruments
are recorded in the financial statements when they are funded.
Advertising. The Company expenses all media advertising as incurred.
Loss Per Share. Basic and diluted loss per share have been computed on the
basis of the weighted-average number of shares of common stock
outstanding during the period.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Notes to Condensed Consolidated Financial Statements (unaudited), Continued
(1) Description of Business and Summary of Significant Accounting Policies,
Continued
Future Accounting Requirements. Financial Accounting Standards 133 -
Accounting for Derivative Investments and Hedging Activities requires
companies to record derivatives on the balance sheet as assets or
liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for
depending on the use of the derivatives and whether they qualify for
hedge accounting. The key criterion for hedge accounting is that the
hedging relationship must be highly effective in achieving offsetting
changes in fair value or cash flows. The Company will be required to
adopt this Statement January 1, 2001. Management does not anticipate
that this Statement will have a material impact on the Company.
(2) Loan Impairment and Loan Losses. No loans were identified as impaired
at September 30, 1999 or 1998. The activity in the allowance for loan
losses is as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Balance at beginning of period $ 5,472 - - -
Provision charged to earnings 10,686 - 16,158 -
------ ------ ------ ---
Balance at end of period $ 16,158 - 16,158 -
====== ====== ====== ===
</TABLE>
(3) Regulatory Matters. PSB's primary source of generating income is from
the Bank's operations. Banking laws and regulations limit the
amount of dividends that may be paid by the Bank to PSB. The FDIC
requires insured banks to maintain certain specified levels of
capital.
Leverage-Capital Ratio. The FDIC requires banks to maintain a
minimum leverage-capital ratio of Tier I (as defined) to total
assets. The leverage-capital ratio generally ranges from 3% to 5%
based on the bank's rating under the regulatory rating system. The
Bank's required leverage-capital ratio at September 30, 1999 was 4%.
Risk-Weighted Assets Capital Ratios. The FDIC has also adopted a
risk-based capital statement of policy which imposes an additional
capital standard on insured banks. Under this regulation, a bank
must classify its assets and certain off-balance sheet activities
into categories, and maintain specified levels of capital for each
category. The amount of capital that is required is dependent upon
the amount of risk attributed to each category by the FDIC. A bank
must have a total risk-based capital ratio of no less than 8% and a
Tier I capital to risk-weighted assets ratio of no less than 4%.
Under the statement of policy, certain assets are required to be
deducted from risk-based capital. Such assets include certain
nonqualifying intangible assets, unconsolidated banking and finance
subsidiaries, investments in securities subsidiaries and reciprocal
holdings of capital instruments with other banks. In addition, the
FDIC may consider deducting other assets on a case-by-case basis or
investments in other subsidiaries on a case-by-case basis or based
on the general characteristics or functional nature of the
subsidiaries.
At September 30, 1999, the Bank was in compliance with all
regulatory capital requirements.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
Three and Nine Months Ended September 30, 1999 and 1998
General
PSB BancGroup, Inc. ("PSB"), which was incorporated on June 30, 1997, owns
100% of the outstanding common stock of Peoples State Bank ("Bank")
(collectively the "Company"). PSB's only business is the ownership and
operation of the Bank. The Bank is a Florida state- chartered commercial
bank and its deposits are insured by the Federal Deposit Insurance
Corporation. The Company's fiscal year end is December 31.
Liquidity and Capital Resources
The Company's primary source of cash during the nine months ended September
30, 1999 was from the net proceeds from the sale of common stock of $4.6
million and net deposit inflows of $4.3 million. Cash was used primarily to
purchase securities of $1.5 million, originate loans, net of principal
repayments totaling $1.9 million and repay borrowings of $.5 million. At
September 30, 1999, the Company had outstanding commitments to originate
loans totaling $.4 million. At September 30, 1999, the Bank exceeded its
regulatory liquidity requirements.
Common Stock Offering
As of September 30, 1999, the Company has sold 514,478 shares of common
stock, which includes the exercise of 1,000 warrants (see below), for an
aggregate of $4.6 million. The Company incurred $37,500 in offering expenses
relating to their public offering of the Company's common stock and
warrants. Offering expenses were deducted from the proceeds received from
the sale of common stock and warrants.
Common Stock Warrants
During the initial offering period shares have been offered in units with a
unit consisting of one share of common stock and one warrant. Each warrant
entitles the holder thereof to purchase one share of additional common stock
for $9 per share during the 48 month period following the effective date of
registration of the shares. As of September 30, 1999, there were 512,478
warrants outstanding entitling the holders to purchase 512,478 shares of the
Company's common stock. During the nine months ended September 30, 1999,
1,000 warrants were exercised to purchase 1,000 shares of common stock.
Results of Operations:
General. Net losses for the three and nine months ended September 30, 1999,
were $47,751 and $143,386, respectively. The Bank commenced operations on
April 28, 1999. A discussion of operating results at September 30, 1999, or
for the three and nine months ended September 30, 1999 and 1998 would not be
meaningful. At September 30, 1999, the Company had not achieved the asset
size to operate profitably.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
Year 2000
The Company is acutely aware of the many areas affected by the Year 2000
computer issue, including those addressed by the Federal Financial Institutions
Examination Council ("FFIEC") in its interagency statement which provided an
outline for institutions to effectively manage the Year 2000 challenges. A Year
2000 plan has been approved by the Board of Directors which includes multiple
phases, tasks to be completed, and target dates for completion. Issues addressed
therein include awareness, assessment, renovation, validation, implementation,
testing and contingency planning.
The Company has formed a Year 2000 committee that is charged with the oversight
of completing the Year 2000 project on a timely basis. The Company has completed
its awareness, assessment, renovation, validation, implementation and testing
phases. Since it routinely upgrades and purchases technologically advanced
software and hardware on a continual bases, the Company has determined that the
costs of making modifications to correct any Year 2000 issues will not
materially affect reported results from operations.
The Company's vendors and suppliers have been contacted for written confirmation
of their product's readiness for the Year 2000 compliance. All significant
vendors of the Company have provided confirmation that they are Year 2000
compliant. The Company's main service provider has completed testing of its
mission critical application software; the test results, which have been
documented and validated, are deemed to be Year 2000 compliant. FFIEC guidance
on testing Year 2000 compliance of service providers states that proxy tests are
acceptable compliance tests. In proxy testing, the service provider tests with a
representative sample of financial institutions that use a particular service,
with the results of such testing shared with all similarly situated clients of
the service provider. The Company has authorized the acceptance of proxy testing
since the proxy tests have been conducted with financial institutions that are
similar in type and complexity to its own, using the same version of Year 2000
ready software and the same hardware and operating systems. The Company
personnel have also performed Year 2000 testing on their computer databases and
software applications and have found them to be Year 2000 ready.
The Company also recognizes the importance of determining that its borrowers are
facing the Year 2000 problem in a timely manner to avoid deterioration of the
loan portfolio solely due to this issue. All material relationships have been
identified and questionnaires have been completed to assess the inherent risks.
Deposit customers have received statement stuffers and information material in
this regard. The Company plans to work on a one-on-one basis with any borrower
who has been identified as having high Year 2000 risk exposure.
Accordingly, management does not believe that the Company has incurred or will
incur material costs associated with the Year 2000 issue. Yet, there can be no
assurances that all hardware and software that the Company will use will be Year
2000 compliant. Management cannot predict the amount of financial difficulties
it may incur due to customers and vendors inability to perform according to
their agreements with the Company or the effects that other third parties may
cause as a result of this issue. Therefore, there can be no assurance that the
failure or delay of others to address the issue or that the costs involved in
such process will not have a material adverse effect on the Company's business,
financial condition, and results of operations.
The Company's contingency plans relative to Year 2000 issues have been
finalized. Based on testing results, the Company's mission critical systems have
been deemed to be Year 2000 compliant and, therefore a contingency plan has not
been developed with respect to those systems. A Business Resumption Contingency
Plan (the ABRCP@) has been developed and approved by the Board of Directors. The
BRCP assumes power outages and telephone disruptions. The Company has tested and
validated the BRCP. It is anticipated that The Company's deposit customers will
have increased demands for cash in the latter part of 1999 and correspondingly
the Company will maintain higher liquidity levels.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On August 27, 1999, the Board of Directors of the Bank terminated the
employment of the Bank's President, C.F. Douglas. The termination was
for just cause due to Mr. Douglas' failure to abide by the specific
directives of the Board which emanated from the hiring of his son under
circumstances that violated Florida banking statutes. In conjunction
with the termination of employment, PSB removed Mr. Douglas as a
director of the Bank. On September 14, 1999, Mr. Douglas filed a civil
suit in the Circuit Court for Columbia County, Florida, against PSB, the
Bank, and seven of the eight Bank directors. The compliant alleges
breach of contract, tortious interference with his employment contract
and a claim of fraudulent inducement with regard to his agreeing to
enter into his employment contract. The suit alleges damages in excess
of $15,000. The Company and the named directors have filed a motion to
dismiss the lawsuit.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits. The following exhibits are filed with or incorporated by
reference into this report. The exhibits marked by a single asterisk (*)
were previously filed as a part of PSB's Registration Statement on Form
SB-2, as effective with the Securities and Exchange Commission on
January 13, 1998, Registration No. 333-44161 and are hereby incorporated
by reference. The exhibits marked by a double asterisk (**) were
previously filed as part of PSB's Amendment No. 3 to the Registration
Statement on Form SB-2 as filed with the Securities and Exchange
Commission on May 18, 1998, Registration No. 333-44161 and hereby
incorporated by reference. The exhibit numbers correspond to the exhibit
numbers in the referenced documents.
Exhibit No. Description of Exhibit
----------- ----------------------
*3.1 Articles of Incorporation of PSB Bancgroup, Inc.
*3.2 Bylaws of PSB Bancgroup, Inc.
*4.1 Specimen Common Stock Certificate
*4.2 Specimen Warrant Certificate
*4.4 PSB Bancgroup, Inc. Warrant Plan
**4.5 Amended and Restated Warrant Plan
*10.1 Employment Agreement with Robert W. Woodard
*10.2 Land Purchase Agreement
**10.3 Addendum to Land Purchase Agreement
**10.4 Amended Employment Agreement with Robert W. Woodard
10.5 Employment Agreement with C.F. Douglas
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K. There were no reports on Form 8-K filed during the
three months ended September 30, 1999.
<PAGE>
PSB BANCGROUP, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PSB BANCGROUP, INC.
(Registrant)
Date: November 2, 1999 By: /s/ Robert W. Woodard
-------------------------- -----------------------
Robert W. Woodard, President
and Chief Executive Officer
(Chief Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from Form 10-QSB
for the period ended September 30, 1999 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 687
<INT-BEARING-DEPOSITS> 144
<FED-FUNDS-SOLD> 3,732
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 525
<INVESTMENTS-CARRYING> 1,000
<INVESTMENTS-MARKET> 994
<LOANS> 1,902
<ALLOWANCE> 16
<TOTAL-ASSETS> 8,660
<DEPOSITS> 4,268
<SHORT-TERM> 0
<LIABILITIES-OTHER> 141
<LONG-TERM> 0
0
0
<COMMON> 5
<OTHER-SE> 4,246
<TOTAL-LIABILITIES-AND-EQUITY> 8,660
<INTEREST-LOAN> 46
<INTEREST-INVEST> 22
<INTEREST-OTHER> 146
<INTEREST-TOTAL> 214
<INTEREST-DEPOSIT> 30
<INTEREST-EXPENSE> 42
<INTEREST-INCOME-NET> 172
<LOAN-LOSSES> 16
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 391<F1>
<INCOME-PRETAX> (230)
<INCOME-PRE-EXTRAORDINARY> (143)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (143)
<EPS-BASIC> (.37)
<EPS-DILUTED> (.37)
<YIELD-ACTUAL> 4.9
<LOANS-NON> 0
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 0
<CHARGE-OFFS> 0
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 16
<ALLOWANCE-DOMESTIC> 16
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Other expense includes: salaries and employee benefits fo $237, occupancy of
$44, professional fees of $20, office supplies of $15, telephone of $8 and
other expenses which totaled $67.
</FN>
</TABLE>
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
