Exhibit 10.1




AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT, is entered into as of June 17, 2008,
by and between Peoples State Bank, Wausau, Wisconsin, a Wisconsin banking
corporation, (“the Bank”), and Peter W. Knitt (“Mr. Knitt”).

WITNESSETH:

WHEREAS,
the Bank and Mr. Knitt initially entered into an employment agreement dated June
30, 2006.

WHEREAS,
the Company and Mr. Knitt now desire to amend and restate the employment
agreement in its entirety by setting forth the terms and conditions of their
agreements and understandings in this Amended and Restated Employment Agreement
(“Agreement”), which shall replace and supercede the initial employment
agreement effective as of the date first written above.

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

1.

Employment.
 Subject to the earlier termination of this agreement pursuant to the terms
hereof, Mr. Knitt is hereby employed on the Commencement Date (as defined below)
as the President and CEO of the Bank; provided, however, that,
prior to a Change of Control, Mr. Knitt 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. Knitt agrees to serve in such capacity or
capacities on the terms and conditions hereinafter set forth.

2.

Term.
 The term of this agreement commenced on July 1, 2006 (the “Commencement
Date”) and shall end at midnight on the Expiration Date, except as otherwise
provided in paragraph 8(a) hereof.  The term “Expiration Date” shall mean
the first to occur of (a) the date of Mr. Knitt’s death, or (b) the later of (i)
the third anniversary of the Commencement Date and (ii) the date to which the
term of this agreement has most recently been extended pursuant to the following
sentence.  On the third and each subsequent anniversary of the Commencement
Date the term of this agreement shall automatically be extended for one calendar
year; provided, however, that automatic extensions of the term of
this agreement (and, consequently, the Expiration Date) pursuant to this
sentence shall cease on the first to occur of (x) either the Bank or Mr. Knitt
giving to the other, at any time on or after the Commencement Date, a written
notice that no, or no further, as the case may be, automatic extensions of the
term of this agreement shall thereafter occur, but the giving of such a notice
shall not affect any previous extensions, or (y) Mr. Knitt’s 64th birthday.
 For all purposes of this Agreement other than as provided in paragraph
8(a) hereof, 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. Knitt’s employment is terminated hereunder.




3.

Extent
of Services.  Mr. Knitt 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(g)) to the duties of any office held by
him during the Term of Employment; provided, however, that Mr. Knitt’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.

4.

Compensation
and Reimbursement.

(a)

Salary.
 The Bank shall pay to Mr. Knitt a salary based on an annual amount of
$218,400.  The Bank may increase Mr. Knitt’s salary from the amount
specified herein during the Term of Employment, but may not decrease Mr. Knitt’s
salary from any previously established amount.  Mr. Knitt’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. Knitt shall be
entitled to receive such additional compensation from the Bank as may be
provided for officers under the terms of any incentive program from time to time
maintained and in effect at the Bank for the President and CEO.

(c)

Automobile.
 The Bank shall furnish an automobile for Mr. Knitt’s business use during
the Term of Employment.  The Bank shall have sole discretion of the model
and year of such automobile, but such automobile shall be at least commensurate
with other automobiles provided to other executive officers of the Bank and, for
the initial term of this agreement, shall be comparable to a vehicle provided
for his immediate predecessor in office as President and CEO of the Bank

(d)

Club
Memberships.  During the Term of Employment, the Bank shall provide Mr.
Knitt with a social membership at the Wausau Country Club.

(e)

[INTENTIONALLY
LEFT BLANK]. 

(f)

Deferred
Compensation.  The Bank will not terminate, with respect to future
deferrals or Bank contributions, that certain Amended and Restated Executive
Deferred Compensation Agreement dated as of December 31, 2007 and entered into
by the Bank and Mr. Knitt, prior to January 1, 2009.

(g)

Other
Benefits.  During the Term of Employment, Mr. Knitt shall be

entitled to receive all benefits and perquisites ordinarily provided to
executive officers of 
the Bank including coverage under an officer’s and
director’s liability insurance policy, 
and Mr. Knitt 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, except to the extent Mr. Knitt is then
participating in a separately negotiated plan or program.  Mr. Knitt shall
be entitled to participate in all 
plans or programs maintained by the Bank
on terms no less favorable than those 

2






generally
available to officers of the Bank and at a level of participation commensurate
with his office.

(h)

Expenses.
 The Bank shall pay or reimburse Mr. Knitt, upon submission of receipts 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. Knitt’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. Knitt’s employment by the Bank shall consist only of one or more of (i) the
commission of an act or acts by Mr. Knitt which results in a payment to the Bank
or to PSB Holdings, Inc., the parent company of the Bank (“PSB”) of a claim
filed by the Bank or PSB under a 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. Knitt by the Board which specifically identifies the manner
in which the Board believes that Mr. Knitt has not substantially performed his
duties; (iii) the commission by Mr. Knitt 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. Knitt which
results in the violation by Mr. Knitt of any policy established by the Bank
which is designed to insure compliance with applicable banking, securities,
employment discrimination, or other laws or which causes or results in the
Bank’s violation of such laws, or any violation of an employment policy
maintained by the Bank and 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, except any act
done by Mr. Knitt 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; or (v) Mr. Knitt’s physical or mental disability, if such disability
either results in Mr. Knitt receiving permanent disability payments pursuant to
any group disability insurance policy or prevents Mr. Knitt 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. Knitt’s employment prior to the Expiration Date,
the Bank shall provide written notice to Mr. Knitt, which shall state the good
cause for termination, and Mr. Knitt’s termination of employment shall be
effective as of the date specified in such notice.  In the event of
termination of Mr. Knitt’s employment in accordance with the conditions of this
paragraph (a), on the effective date of Mr. Knitt’s termination of employment,
the Term of Employment shall end, all of Mr. Knitt’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. Knitt
pursuant to paragraph 4 shall end.

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(b)

Termination
by the Bank Other Than for Good Cause.  The Bank may terminate Mr.
Knitt’s employment prior to the Expiration Date for any reason other than good
cause (as defined in paragraph 5(a)) upon providing written notice to Mr. Knitt
specifying the effective date of Mr. Knitt’s termination of employment.  If
the Bank terminates Mr. Knitt’s employment other than for good cause under
paragraph 5(a), the Term of Employment and all of Mr. Knitt’s obligations
pursuant to this agreement (except for those provided in paragraphs 6 and 7)
shall end on the effective date of Mr. Knitt’s termination of employment
and the Bank shall provide, for a period beginning on the effective date of Mr.
Knitt’s termination of employment, as a severance benefit to Mr. Knitt and as
liquidated damages for breach by the Bank of its otherwise applicable
obligations hereunder, (i) for a period of 12 months beginning on the first day
of the first month following Mr. Knitt’s termination of employment a monthly
cash payment equal to 110% of the amount which would, except for Mr. Knitt’s
termination of employment, have been paid to Mr. Knitt, if then living, as
salary under paragraph 4(a) and (ii) until Mr. Knitt becomes eligible for
coverage under the health insurance plan of another employer of Mr. Knitt,
coverage for Mr. Knitt, under the same terms then available to executive
officers of the Bank, under any group health insurance program in which Mr.
Knitt was a participant on the effective date of Mr. Knitt’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. Knitt 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 the right of any unsecured general creditor of the
Bank.  Despite any other provision of this agreement, Mr. Knitt 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. Knitt violates the
provisions of paragraph 6 or 7.

(c)

Termination
by Mr. Knitt.  Mr. Knitt 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.
Knitt under this agreement and all obligations of Mr. Knitt 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. Knitt’s termination of employment.

(d)

Section
409A Considerations.  This paragraph 5(d) shall apply in the event the
Bank determines, in good faith, that payment of severance benefits pursuant to
this paragraph or paragraph 8(d) are subject to the provisions of Section 409A
of the Internal Revenue Code of 1986, as amended (the “Code”).  For
purposes of Mr. Knitt’s 
entitlement to any severance benefit pursuant to
paragraph 5(b) or 8(b), Mr. Knitt shall be deemed to have incurred a termination
of employment with the Bank only on such date on which his employment has been
terminated by the Bank, each other member of the 
controlled group of
corporations of which the Bank is a member, and each other entity 
under
common control with the Bank, and has thereby incurred a separation from service

(a “Separation from Service”) within the meaning of Code Section
409A(a)(2)(A) and the applicable regulations promulgated thereunder.
 Notwithstanding any other provision of 
this agreement to the contrary,
in no event shall the severance benefit to which Mr. Knitt 

4







may
become entitled under the terms of paragraph 5(b) or 8(d) be paid to Mr. Knitt
until the date on which he has incurred a Separation from Service;
provided, however, that in the event Mr. Knitt was a Key Employee
as of the date of his Separation from Service, no severance benefit shall be
paid to him earlier than the first day of the seventh month after the date of
such Separation from Service to the extent required by Code Section 409A and the
applicable regulations.  For purposes of this agreement, the term “Key
Employee” means each person who is a “key employee” within the meaning of Code
Section 416(i) and the applicable authority under such Code section and Code
Section 409A.  Any such delayed payments shall bear interest at the
short-term applicable federal rate compounded semi-annually as in effect for the
month in which Mr. Knitt’s employment terminates.  

6.

Restrictive
Covenant.  Mr. Knitt 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. Knitt’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
at which, or on behalf of, Mr. Knitt provided services during the 12 months
preceding the effective date of Mr. Knitt’s termination of employment, directly
or indirectly, perform services similar to those that Mr. Knitt provided to the
Bank during the one year preceding the effective date of Mr. Knitt’s termination
of employment, for any depository institution, doing business as a bank, savings
and loan association, or otherwise or as a mortgage broker, or on behalf of any
other entity, which competes for the Bank’s retail or commercial loan business
(each a “Financial Institution”); 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 who was a
customer with whom/which Mr. Knitt had direct contact during the one year period
preceding the effective date of his termination of employment (“Restricted
Customer”);

(c)

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

For
purposes of this paragraph 6, the term “directly or indirectly” includes (a) any
solicitation or 
sale through any medium and (b) the direct or indirect
ownership, 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. Knitt by the
provisions of 
this paragraph 6 and Mr. Knitt’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. Knitt 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. Knitt further
agrees that the 

5



restrictions
set forth in this agreement are reasonably necessary to protect the reasonable
interests of the Bank.

7.

Confidential
Information.  Mr. Knitt 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. Knitt 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)

Notwithstanding
anything contained in this Agreement to the contrary, upon a Change of Control,
the “Term of Employment” for purposes of this Agreement shall in all cases be 24
months starting on the date of the Change of Control, and the “Expiration Date”
shall mean the first to occur of (i) Mr. Knitt’s death, (ii) his termination
pursuant to paragraph 5, (iii) his termination pursuant to paragraph 8(b), or
(iv) the expiration of the 24-month Term of Employment.
 Notwithstanding any other provision of this Agreement or any incentive
compensation plan then in effect, Mr. Knitt shall be awarded, for each
fiscal year ending during the Term of Employment following the Change of
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
of Control (or such shorter period that Mr. Knitt was employed by the Bank),
regardless of when such bonus was actually paid (the “Recent Annual Bonus”) and
each such Annual Bonus shall be paid in the period beginning on January
1st and ending on March 15th of the calendar year next
following the fiscal year for which the Annual Bonus is awarded.  Such
bonus amount shall be reduced by any amount paid to Mr. Knitt under any other
annual incentive compensation plan maintained after the Change of Control.

(b)

Termination
of Employment by Mr. Knitt for Good Reason.  Mr. Knitt’s employment may
be terminated by Mr. Knitt during the Term of Employment for Good Reason if, (i)
within 60 days of the date of occurrence of a triggering event, Mr. Knitt
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 expiration of the 30-day period described in (ii), Mr. Knitt
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 a Change of
Control, or prior to a Change of Control at the request of a person acquiring,
directly or indirectly, an interest in the Bank in a Change of Control
transaction (each of which shall be a “triggering event”):

6







(i)

the
assignment to Mr. Knitt of any duties inconsistent in any respect with the
duties or responsibilities then held by Mr. Knitt (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. Knitt;

(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. Knitt, unless the Bank agrees to fully compensate
Mr. Knitt for any such reduction;

(iii)

Mr.
Knitt is required to locate his office more than 25 miles from the current
location of the Bank’s 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. Knitt’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 assume and agree to perform this Agreement
(either expressly or by operation of law) 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. Knitt perform an illegal, or wrongful act in
violation of the Bank’s code of conduct policies.

(d)

Severance
Benefit on Termination by Mr. Knitt for Good Reason or by the Bank Without Good
Cause.  Upon termination of Mr. Knitt’s employment by Mr. Knitt
pursuant to paragraph 8(b) or by the Bank for a reason other than good cause or
Mr. Knitt’s death, after a Change of Control or prior to a Change of Control at
the request of a person acquiring, directly or indirectly, an interest in the
Bank in a Change of Control transaction, all obligations of Mr. Knitt to the
Bank (except those provided for in paragraph 7) shall cease and the Term of
Employment shall end (the “Date of Termination”) and:

(i)

subject
to paragraphs 5(d) and 8(f), the Bank shall pay to Mr. Knitt 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. Knitt’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. Knitt for the most 

7



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 300% of the sum of (1) Mr. Knitt’s annual salary as most
recently in effect pursuant to paragraph 4(a) and   (2) the average
incentive compensation earned by Mr. Knitt in the three most recently completed
fiscal years during the Term of Employment;

(ii)

until
Mr. Knitt becomes eligible for coverage under the health insurance plan of
another employer of Mr. Knitt, coverage for Mr. Knitt for a maximum period of 36
months beginning on the Date of Termination, under the same terms then available
to executive officers of the Bank, under any group health insurance program in
which Mr. Knitt was a participant on the effective date of Mr. Knitt’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. Knitt 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 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 
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 

8






(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 by 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 Code Section 280G, and any regulations promulgated
thereunder), together with the present value of all other benefits payable by
the Bank or PSB to Mr. Knitt under any other plans which would also constitute
“parachute payments,” shall in no event equal or exceed an amount (the “Testing
Amount”) equal to three times Mr. Knitt’s “base amount” (as such term is defined
in Code Section 280G and any regulations promulgated thereunder);
provided, however, that notwithstanding anything contained to the
contrary in Code Section 280G and any regulations promulgated thereunder, such
“base amount” shall, for all purposes of this Agreement, also include the
average of amounts which Mr. Knitt has deferred into the Executive Deferred
Compensation Agreement for the prior five (5) taxable years or such shorter
period as Mr. Knitt was employed by the Bank, annualized consistently with any
base salary for the first year of employment.  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, 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 one-dollar less than the Testing Amount.
 For purposes of this paragraph 8, present value shall be determined in the
manner provided in Code Section 280G and the regulations promulgated
thereunder.

(ii)

If
any payment, as calculated under paragraph (8)(f)(i) above, constitutes an
“excess parachute payment” (as such term is defined in Code 
Section 280G,
and any regulations promulgated thereunder) and is thereby subject to an excise
tax under Code Section 4999, then Mr. Knitt shall receive a Gross-up Payment (as
hereinafter defined).  The Gross-up Payment shall be a payment 
equal to
the product of (A) the excise tax on any “excess parachute payment” (as
calculated under Code Section 4999 and defined in Code Section 280G, and any


9






regulations
promulgated thereunder) multiplied by (B) the 280G Gross-up Multiple (as
hereinafter defined).  The “280G Gross-up Multiple” shall equal a fraction,
the numerator of which is one and the denominator of which is one minus the sum,
expressed as a decimal fraction, of the rates of all excise taxes and federal
and state income and employment taxes applicable to the Gross-up Payment after
taking into account the deductibility of state, local, and other taxes.
 For purposes of determining the amount of the Gross-up Payment, it shall
be assumed that (x) Mr. Knitt is subject to federal and state income tax at the
highest marginal statutory rates in effect for the relevant period after taking
into account any deduction and any limitations on the use thereof available in
respect of any such tax and (y) the deduction available for state and local
income taxes in computing federal income taxes is subject to the maximum
adjusted gross income limitations.

(iii)

In
the event the provisions of this paragraph 8 require any reduction in the amount
to be paid to Mr. Knitt under this paragraph 8, the Bank shall deliver to Mr.
Knitt concurrently with such payment a statement setting forth the basis for and
computation of such reduction.

9.

Payment
Obligations Absolute.  Upon a Change of Control the obligations of the
Bank to pay the benefits provided for under this Agreement shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any set-off, counterclaim, recoupment, defense, or other right which
the Bank or any of its subsidiaries may have against Mr. Knitt; provided,
however, that this paragraph 9 shall not limit the rights of the Bank
under any noncompetition agreement to which Mr. Knitt is a party.  In no
event shall Mr. Knitt be obligated to seek other employment or take any other
action by way of mitigation of the amounts payable to Mr. Knitt under any of the
provisions of this Agreement, nor shall the amount of any payment hereunder be
reduced by any compensation earned by Mr. Knitt as a result of employment by
another employer.

10.

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. Knitt, 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. Knitt, his heirs, assigns, or legal representatives;
provided, however, that the obligations of Mr. Knitt contained
herein may not be delegated or assigned.

(c)

Entire
Agreement; Amendment.  This agreement supersedes all prior agreements
between the parties relating to Mr. Knitt’s employment by the Bank and

constitutes the entire agreement between the parties with respect to the
subject matter 

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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
of law principles.

(g)

Captions.
 The captions contained in this agreement are for the convenience of the
Bank and Mr. Knitt 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. Knitt have caused this instrument to be
executed as of the date first written above.

PEOPLES STATE
BANK







By:

/s/
Patrick L. Crooks_______________

   Patrick
L. Crooks

   As
its Chairman of the Board













/s/
Peter W.
Knitt                                                                   

   Peter
W. Knitt











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