PSB Financial, Inc 8-K, filed Jul 17, 2026
PSB Financial, Inc. (PNSB)
About this 8-K
PSB Financial, Inc filed this 8-K on July 17, 2026, reporting on events of July 14, 2026.
Items reported
- Item 5.02: Director or officer change, or executive pay
- Item 9.01: Financial statements and exhibits
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
| Date of report (Date of earliest event reported): | ||
| (Exact name of registrant as specified in its charter) | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) | (IRS Employer Identification No.) |
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| (Address of principal executive offices, including zip code) | ||
| (Registrant’s telephone number, including area code) | ||
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth
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If an emerging
growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any
new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
| Item 5.02 | Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers. |
On July 14, 2026, Pioneer State Bank (“Pioneer”) entered into employment and compensation arrangements with its President and CEO, Phillip K. Willett, in connection with his continued employment. Pioneer and Mr. Willett entered into the Employment Agreement, Change of Control Agreement, Supplemental Executive Retirement Plan Agreement (the “SERP”), and Restrictive Covenant Agreement.
Pursuant to the Employment Agreement, Mr. Willett’s term of employment as President and CEO continues through July 14, 2029, subject to earlier termination as set forth in the agreement. Mr. Willett is entitled to the following compensation and benefits under the Employment Agreement:
| · | An annual base salary of $170,155, subject to increase; |
| · | Eligibility to participate in a bonus pool to be determined by the Board of Directors of PSB Financial, Inc. (“PSB Financial”), the parent company of Pioneer, and to be based on individual performance and company performance; |
| · | Certain payout of benefits upon termination of employment without cause and termination of employment by Mr. Willett for good reason, which benefits include a severance payment equal to nine months of base salary; |
| · | Eligibility to participate in any equity plans adopted by PSB Financial; and |
| · | Eligibility to participate in Pioneer’s retirement plans and/or welfare benefit plans that are generally applicable to all similarly situated employees of Pioneer. |
Under the Change of Control Agreement, Mr. Willett is entitled to certain benefits upon termination of employment during a specified time period following a change of control. In particular, if during the post-change of control period ending on the first anniversary of the change of control, Pioneer terminates Mr. Willett’s employment other than for cause or as a result of death or disability, or if Mr. Willett terminates his employment for good reason, Pioneer shall pay an amount equal to 2.99x of Mr. Willett’s total W-2 and 1099 compensation in the calendar year immediately prior to such event (subject to reduction if such amount constitutes an excess parachute payment under Section 280G of the Internal Revenue Code of 1986, as amended), plus base salary through his date of termination or good reason event, and any additional accrued benefits as of such date. If Mr. Willett is entitled to severance pursuant to any other arrangement, he is entitled only to the greater of the amount payable under the Change of Control Agreement or such other severance payment.
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Pursuant to the SERP, if Mr. Willett separates from service after reaching the normal retirement age of age 62, he would be entitled to an annual benefit equal to $150,000, to be paid in equal monthly installments for a period of 120 months following his separation from service. If Mr. Willett separates from service before reaching age 62 (other than on account of death, disability, or for cause), he would be entitled to the vested portion of his normal retirement benefit, following attainment of age 62. Mr. Willett will fully vest in his normal retirement benefit upon attaining age 60 or upon the event of a change in control. Certain accrued benefits are paid in the event of disability or death before retirement, and Mr. Willett becomes 100% vested upon death or disability. If Mr. Willett is terminated for cause, he will forfeit all benefits under the SERP. As previously disclosed, in support of the SERP, Pioneer purchased a single premium bank owned life insurance policy in the amount of $1,450,000.
Pursuant to the Restrictive Covenant Agreement, Mr. Willett is subject to certain customary restrictive covenant obligations in favor of Pioneer.
The foregoing descriptions of the Employment Agreement, Change of Control Agreement, SERP, and Restrictive Covenant Agreement do not purport to be complete and are qualified in their entirety by reference to such agreements, copies of which are attached as exhibits to this Current Report on Form 8-K and incorporated herein by reference.
| Item 9.01 | Financial Statements and Exhibits. |
(d) Exhibits
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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 hereunto duly authorized.
| PSB Financial, Inc. | ||
| Dated: July 16, 2026 | By: | /s/ Phillip K. Willett |
| Phillip K. Willett | ||
| President and Chief Executive Officer | ||
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Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (“Agreement”) is entered into effective as of July 14, 2026 (the “Effective Date”), by and between Pioneer State Bank (“Bank”), and Phillip K. Willett (“Executive”), each a “Party” or collectively the “Parties” to this Agreement.
RECITALS
WHEREAS, the Bank desires to employ Executive, and Executive desires to be employed by the Bank, on the terms and conditions set forth herein.
WHEREAS, as a result of Executive’s employment with the Bank, Executive will have access to and be entrusted with valuable information about the Bank’s business and customers, including trade secrets and confidential information; and
WHEREAS, the Parties believe it is in their best interests to make provision for certain aspects of their relationship during and after the period in which Executive is employed by the Bank.
NOW, THEREFORE, in consideration of the promises and the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Parties agree as follows:
Article I
EMPLOYMENT
1.1 Term of Employment. The Bank employs Executive, and Executive accepts employment by the Bank, under the terms of this Agreement, effective as of the Effective Date and ending on July 14, 2029 (“Employment Term”), subject to earlier termination as hereinafter set forth in Article III, below. This Agreement is intended by the Parties to be a written contract for a specific term, as defined under Montana law. Notwithstanding any statement to the contrary in this Agreement, the Restrictive Covenant Agreement (defined below), shall not be affected by the termination of this Agreement and shall survive such termination in accordance with its terms.
1.2 Position and Duties. Executive shall continue to be employed in the position of President and CEO of the Bank, shall be subject to the authority of, and shall report to the Board of Directors of the Bank (the “Board”). Executive’s duties and responsibilities shall include all those customarily attendant to the position of President and CEO and such other duties and responsibilities as may be assigned from time-to-time by the Board. Executive shall devote as much business time, attention and energies to the business interests of the Bank as the Bank deems necessary and appropriate while Executive is employed by the Bank. Nothing in this Agreement shall preclude Executive, with the prior approval of the Board, from devoting reasonable periods of time required for (a) serving as a director or member of a committee of any organization involving no conflict of interest with the Bank, or (b) engaging in charitable, religious and community activities, provided that such directorships, memberships or activities do not materially interfere with the performance of Executive’s duties hereunder. Executive shall immediately disclose any potential conflicts of interest to the Board.
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Article II
COMPENSATION AND OTHER BENEFITS
2.1 Base Salary. During the Employment Term, the Bank shall pay Executive an annual salary of One Hundred Seventy Thousand One Hundred Fifty-Five Dollars and 00/100 Dollars ($170,155) (“Base Salary”), payable in accordance with the normal payroll practices and schedule of the Bank and subject to increases in the Bank’s sole discretion and proration for partial years of service.
2.2 Bonus. During the Employment Term, Executive shall be eligible for participation in a discretionary bonus pool determined as a result of individual performance as well as the Bank’s performance (a “Performance Bonus”). The Board evaluates the operating results of the Bank at calendar year end and, if the Board decides to award a discretionary bonus, evaluates the amount of such bonus for each full-time employee, which bonus amount is paid out at the end of every calendar year. To be eligible to receive a Performance Bonus, Executive must be actively employed by the Bank on the date the Performance Bonus is payable from the Bank to Executive. Executive shall also be eligible to participate in the Bank’s Employee Stock Ownership Plan and the Bank’s equity plan (management recognition plan or similar), as determined in the Bank’s sole discretion.
2.3 Paid Time Off. Executive shall be entitled to paid-time off subject to the provisions of the Bank’s policy, as in effect from time-to-time, applicable to similarly situated employees.
2.4 Benefit Plans. Executive will be eligible to participate in the Bank’s qualified retirement plans and/or welfare benefit plans that are generally applicable to all similarly situated employees of the Bank, in accordance with the terms and conditions thereof.
Article III
TERMINATION
3.1 Right to Terminate; Automatic Termination.
(a) Termination For Cause. Subject to Section 3.2(b), below, the Bank may terminate Executive’s employment and all of the Bank’s obligations under this Agreement at any time for Cause (as defined below) upon the Bank providing written notice to Executive stating the basis for such termination, effective immediately upon giving such notice or at such other time thereafter as the Bank may designate. “Cause” shall have the meaning set forth in the Supplemental Executive Retirement Plan Agreement, dated July 14, 2026, between the Bank and Executive (the “SERP”).
(b) Termination by Death or Disability. Subject to Section 3.2(b), below, Executive’s employment and the Bank’s obligations under this Agreement shall terminate automatically, effective immediately and without any notice being necessary, upon Executive’s death or a determination of Disability (as defined below) of Executive. For purposes of this Agreement, “Disability” means the inability of Executive to perform Executive’s duties hereunder, even with any reasonable accommodation, by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months, as determined by the third party administrator or insurer of the Bank’s long-term disability plan or the Social Security Administration. Any determination of Disability under this Section 3.1(c) is not intended to alter any benefits any party may be entitled to receive under any insurance policy carried by either the Bank or Executive with respect to Executive, which benefits shall be governed solely by the terms of any such insurance policy.
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(c) Termination by Resignation. Subject to Section 3.2(b), below, during the Employment Term, Executive may terminate Executive’s employment upon the provision of a minimum of thirty (30) days’ advance written notice to the Bank or at such other time as may be mutually agreed between the Parties following the provision of such notice. The Bank reserves the right to relieve Executive of all employment duties during all or a portion of the notice period.
(d) Termination for Good Reason. Subject to Section 3.2(a), below, Executive may terminate Executive’s employment with Good Reason (as defined below). “Good Reason” shall mean: (i) a material reduction in Executive’s Base Salary, unless such reduction is similar to a reduction in compensation of similarly situated employees of the Bank or Executive consents to such change; (ii) a material and sustained reduction in Executive’s authority, duties or responsibilities with the Bank, unless Executive consents to such change; or (iii) a material breach by the Bank or its successor or assign, of this Agreement. Notwithstanding the foregoing, in order for Executive to terminate for Good Reason, Executive must provide written notice of Good Reason to the Bank within ninety (90) days of the initial existence of the condition(s) specified by Executive that constitute Good Reason and the Bank shall have thirty (30) days from the date of such notice in which to cure the condition giving rise to Good Reason, if curable. If, during such thirty (30)-day period, the Bank cures the condition giving rise to Good Reason, no Severance Payment (as defined below) shall be triggered under Section 3.2(a), below, with respect to such occurrence. If, during such thirty (30)-day period, the Bank fails or refuses to cure the condition giving rise to Good Reason, Executive shall be entitled to the Severance Payment under Section 3.2(a), below, if he terminates his employment for Good Reason within one hundred and twenty (120) days of Executive’s original written notice of Good Reason and executes the Release (as defined below).
3.2 Rights Upon Termination.
(a) No “Cause” and Section 3.1(d) Termination. If Executive’s employment is terminated by the Bank without Cause, as defined above, or Executive terminates Executive’s employment with Good Reason pursuant to Section 3.1(d), above, Executive shall have no further rights against the Bank hereunder, except for the right to receive: (i) any unpaid Base Salary with respect to the period prior to the effective date of termination; and (ii) a Severance Payment (defined below), the payment of which is contingent upon Executive’s execution of a written complete and permanent release in a form satisfactory to the Bank (the “Release”), containing, among other things, a general release of claims against the Bank and Holding Company (including, without limitation, claims under Montana’s Wrongful Discharge from Employment Act and the Montana Human Rights Act), which must be executed by Executive (and any applicable revocation period must expire) in accordance with the terms of such Release but in no event later than sixty (60) calendar days following the effective date of Executive’s termination of employment with the Bank; provided, however, that Executive’s right to the Severance Payment shall terminate in the event Executive does not comply with the Release or Executive breaches Executive’s obligations under any agreement in effect between Executive and the Bank or Holding Company.
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The Severance Payment shall be paid in nine (9) substantially equal installments over the nine (9) month severance period, payable in accordance with the Bank’s normal payroll practices then in effect, and the first payment (which shall include any accrued payments that would have otherwise been made beginning on the date of Executive’s termination of employment) shall be made to Executive on the first regular payroll date that occurs at least eight (8) business days after the applicable effective date of the Release; provided, however, if the sixty (60)-day period, described above, spans two (2) different calendar years, then the first payment shall not be made until the later of (y) the first regular payroll date that occurs at least eight (8) business days after the applicable effective date of the Release and (z) the first regular payroll date occurring in the later calendar year during such sixty (60) day period. For purposes of this Agreement, “Severance Payment” means nine (9) months of Base Salary calculated at Executive’s rate at the time of termination.
(b) Sections 3.1(a), (b) and (c) Terminations. If Executive’s employment is terminated pursuant to Sections 3.1(a) or (b), above, or if Executive resigns pursuant to Section 3.1(c), above, Executive or Executive’s estate shall have no further rights against the Bank hereunder, except for the right to receive any unpaid Base Salary with respect to the period prior to the effective date of termination.
(c) Clarification. Notwithstanding the foregoing, if Executive is entitled to a Severance Payment hereunder, and is also entitled to a severance payment from Holding Company or the Bank under any other agreement, plan or policy or any payment under the Change of Control Agreement, dated July 14, 2026, between the Bank and Executive (the “Change of Control Agreement”) (such payment, the “Other Payment”), then Executive shall only receive the greater of (a) the Severance Payment or (b) the Other Payment.
(d) Effects of Termination. Upon termination of the Agreement, as herein above provided, neither party shall have any further obligation hereunder except for (i) obligations accruing prior to the date of termination, and (ii) obligations, promises, or covenants contained herein which are expressly made to extend beyond the term of the Agreement
Article IV
RESTRICTIVE COVENANT AGREEMENT
4.1 Restrictive Covenant Agreement. As consideration for, and as a condition of, Executive’s employment with the Bank and Executive’s receipt of benefits under this Agreement, including without limitation, the promise of severance (which Executive acknowledges Executive would not otherwise be entitled), Executive hereby affirms and agrees that Executive shall comply with the provisions of the Restrictive Covenant Agreement between Executive and the Bank attached to the SERP as Exhibit A (the “Restrictive Covenant Agreement”). The Restrictive Covenant Agreement survives termination of this Agreement.
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4.2 Effect of Breach. In the event that Executive breaches any provision of this Agreement, the Restrictive Covenant Agreement or any other restrictive covenant agreement between the Bank and Executive which is entered into subsequent to this Agreement, Executive agrees that the Bank may suspend all additional payments to Executive under this Agreement (including any Severance Payment), recover from Executive any damages suffered as a result of such breach and recover from Executive any reasonable attorneys’ fees or costs it incurs as a result of such breach. Executive agrees that Bank may deduct such amounts from any wages owed. In addition, Executive agrees that the Bank may seek injunctive or other equitable relief, without the necessity of posting bond, as a result of a breach by Executive of any provision of this Agreement or the Restrictive Covenant Agreement. This provision survives termination of this Agreement.
Article V
DISCLOSURES AND ACKNOWLEDGEMENTS
5.1 Employment Policies. As an Executive of the Bank, Executive acknowledges and agrees that Executive will be subject to, and agrees to comply with, all employment policies and practices implemented by the Bank from time to time, including without limitation, the Bank’s standard of conduct and code of ethics policies and practices.
5.2 Whistleblower Protections/Retained Rights. In accordance with Rule 21F-17 under the Securities Exchange Act of 1934, this Agreement does not, and the Bank shall not, impede Executive’s ability to communicate with the Securities and Exchange Commission or other governmental agencies regarding possible federal securities law violations, and the Bank shall not enforce any provision of any policy or agreement to the extent such provision would be deemed to require the Bank’s prior approval of such communication, except to the extent otherwise permitted by Rule 21F-17. Nothing in this Agreement prohibits Executive from reporting possible violations of law to any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of federal, state, or local laws or regulations. In addition, nothing in this Agreement shall have the purpose or effect of limiting Executive’s ability to disclose or discuss information related to sexual assault or sexual harassment disputes that arise after the date Executive signs this Agreement.
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Article VI
GENERAL PROVISIONS
6.1 Notices. Any and all notices, consents, documents or communications provided for in this Agreement shall be given in writing and shall be personally delivered, mailed by registered or certified mail (return receipt requested), e-mailed, or sent by courier, confirmed by receipt, and addressed as follows (or to such other address as the addressed party may have substituted by notice pursuant to this Section 6.1):
(a) If to the Bank:
Pioneer State Bank
32 N. Washington Street
P.O. Box 1103
Dillon, MT 59725
Email: [personal information redacted]
Attention: Debbie Huber, Chair of the Board’s Compensation Committee
(b) If to Executive:
Phillip K. Willett
[personal information redacted]
Such notice, consent, document or communication shall be deemed given upon personal delivery or receipt at the address of the party stated above or at any other address specified by such party to the other party in writing, except that if delivery is refused or cannot be made for any reason, then such notice shall be deemed given on the third day after it is sent.
6.2 Entire Agreement. This Agreement contains the entire understanding and the full and complete agreement of the Parties and supersedes and replaces any prior understandings and agreements among the Parties with respect to the subject matter hereof, except the SERP, the Restrictive Covenant Agreement and Change of Control Agreement, which shall remain in full force and effect.
6.3 Injunctive Relief. The Parties agree that damages will be an inadequate remedy for breaches of this Agreement and in addition to damages and any other available relief, a court shall be empowered to grant injunctive relief.
6.4 Consideration. Execution of this Agreement is a condition of Executive’s employment with the Bank, and Executive’s employment by the Bank and benefits provided for in this Agreement including, without limitation, the promise of severance and eligibility for a bonus (which Executive acknowledges he would not otherwise be entitled), constitute the consideration for Executive’s undertakings hereunder.
6.5 Amendment. This Agreement may be altered, amended or modified only in writing, signed by both of the Parties hereto. Headings included in this Agreement are for convenience only and are not intended to limit or expand the rights of the Parties hereto. References to Sections herein shall mean sections of the text of this Agreement, unless otherwise indicated.
6.6 Assignability. This Agreement and the rights and duties set forth herein may not be assigned by Executive, but may be assigned by the Bank, in whole or in part. This Agreement shall be binding on and inure to the benefit of each party and such party’s respective heirs, legal representatives, successors, and assigns.
6.7 Severability. If any court of competent jurisdiction determines that any provision of this Agreement is invalid or unenforceable, then such invalidity or unenforceability shall have no effect on the other provisions hereof, which shall remain valid, binding and enforceable and in full force and effect.
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6.8 Third-Party Beneficiaries. Executive acknowledges that the services Executive provides to the Bank include services to any Bank affiliates. Any Bank affiliates are third-party beneficiaries with respect to Executive’s performance of Executive’s duties under this Agreement and the undertakings and covenants contained in this Agreement, and the Bank and any of its affiliates, enjoying the benefits thereof, may enforce this Agreement directly against Executive.
6.9 Waiver of Breach. The waiver by either Party of the breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by either Party.
6.10 Governing Law; Construction. This Agreement shall be governed by the internal laws of the State of Montana, without regard to any rules of construction concerning the draftsman hereof and further without regard to conflicts of law principals of such state.
6.11 Counterparts. This Agreement may be signed in counterparts, each of which will be an original, with the same effect as if the signatures thereto and hereto were on the same instrument. A facsimile, portable document format or other electronic signature of this Agreement shall be as effective as an original.
6.12 Savings Clause. The Parties acknowledge that they have each determined to the best of their ability that, as of the date of this Agreement, this Agreement complies with all applicable federal and state laws and regulations. However, if after the date of execution of this Agreement: (1) additional laws are enacted or regulations are promulgated which apply to this Agreement or Bank’s relationship with Executive and this Agreement violates any provision of those laws or regulations; (2) a federal or state agency determines that this Agreement violates any applicable laws or regulations; or (3) either of the Parties obtains an opinion of counsel that this Agreement violates any applicable laws or regulations, then the Parties agree to amend this Agreement in order to bring the Agreement into compliance with all applicable laws and regulations.
Signatures appear on next page
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IN WITNESS WHEREOF, the Parties have executed this Employment Agreement as of the day and year written above.
| BANK: | ||
| Pioneer State Bank | ||
| By: | /s/ Spencer Hegstad | |
| Spencer Hegstad, Chairman of the Board | ||
| EXECUTIVE: | ||
| By: | /s/ Phillip K. Willett | |
| Phillip K. Willett | ||
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Exhibit 10.2
CHANGE OF CONTROL AGREEMENT
THIS CHANGE OF CONTROL AGREEMENT is entered into effective as of July 14, 2026, by and between Pioneer State Bank, a Montana, a State-chartered bank (the “Bank”), and Phillip K. Willett (“Executive”).
RECITALS:
A. Executive is the President and CEO of the Bank and is key to the continued successful management of the Bank.
B. The Board (as defined herein) believes that it is in the best interests of the Bank (i) to provide assurances that the Bank will have the continued service of Executive notwithstanding the possibility, threat or occurrence of a Change of Control (as defined in Section 1.01), (ii) to diminish the distraction to Executive that may arise by virtue of the personal uncertainties and risks created by a threatened or pending Change of Control, and (iii) to encourage Executive’s full attention and dedication to the Bank currently and in the event of a threatened or pending Change of Control.
AGREEMENT:
NOW, THEREFORE, in consideration of the promises, mutual agreements and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
Article
I.
DEFINITIONS
1.01 Certain Definitions. As used in this Agreement, unless otherwise defined herein or unless the context otherwise requires, the following terms shall have the following meanings:
(a) “Affiliate” shall mean any entity which controls, is controlled by, or is under common control with the Bank. For these purposes, “control”(including the terms “controlled by” and “under common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management policies of an entity by reason of ownership of voting securities, by contract or otherwise.
(b) “Agreement” means this Change of Control Agreement as amended from time to time.
(c) “Bank” means Pioneer State Bank, and its successors and assigns.
(d) “Board” means the Board of Directors of the Bank.
(e) “Cause” means the termination of Executive’s employment pursuant to a Notice of Termination upon: (i) Executive’s breach of Executive’s fiduciary duty or commission of any material act of dishonesty or disloyalty or violation of law involving the Bank or Holding Company; (ii) Executive’s commission of a crime, the circumstances of which substantially relate to Executive’s employment duties with the Bank or Holding Company; (iii) Executive’s willful engagement in conduct which is materially injurious to the Bank or Holding Company; (iv) Executive’s failure to follow reasonable instructions from the Bank or the Board concerning the operations or business of the Bank or Holding Company or failure to satisfactorily perform Executive’s job duties; (v) Executive’s breach of any agreement between Executive and the Bank or Holding Company, including without limitation, any employment, non-disclosure, non-competition or non-solicitation agreement; (vi) Executive’s willful violation of any material written policies or procedures of the Bank or Holding Company (including without limitation any sexual harassment or misconduct policy); (vii) Executive’s misappropriation of funds or property of the Bank or Holding Company; (viii) Executive’s engagement in continuing and non-remedied substance abuse involving alcohol or drugs having an adverse effect on the performance of Executive’s services; or (ix) Executive’s attempt to obtain a personal profit from any transaction in which the Bank or Holding Company has an interest, and which constitutes a corporate opportunity of the Bank or Holding Company, or which is adverse to the interests of the Bank or Holding Company, unless the transaction was approved in writing by the Board after full disclosure of all details relating to such transaction. For purposes of this definition, no act, or failure to act, on Executive’s part will be deemed “willful” unless done, or omitted to be done, by Executive in bad faith.
(f) “Change of Control” shall be deemed to have occurred upon the occurrence of any of the following events:
(i) any “person”(as such term is used in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), other than Holding Company in the case of the Bank or any employee benefit plan sponsored or maintained by the Holding Company or the Bank, becomes, after the date hereof, the “beneficial owner”(as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or Holding Company representing fifty percent (50%) or more of the then-outstanding voting securities of the Bank or Holding Company;
(ii) when, during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board (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 (because they were directors at the beginning of such 24-month period) or by prior operation of this provision;
(iii) the purchase of substantially all of the assets or merger, consolidation of the Holding Company or Bank by an entity other than a 50% or more owned affiliate of the Holding Company, except in the case of a transaction pursuant to which, immediately after the transaction, the holding Company’s shareholders immediately prior to the transaction, either directly or indirectly, 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 in roughly the same proportions as prior to the transaction; or
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(iv) Holding Company approves a plan of complete liquidation of the Bank or Holding Company or an agreement for the sale or disposition by the Bank or Holding Company of all or substantially all of the assets of the Bank or Holding Company.
Notwithstanding the foregoing, a Change of Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Bank or Holding Company are acquired by: (1) a trustee or other fiduciary holding securities under one or more executive benefit plans maintained for executives of the Bank or Holding Company, or (2) any entity which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of Holding Company in the same proportion as their ownership of Holding Company stock immediately prior to such acquisition.
The determination as to whether a Change of Control or an agreement to effect a Change of Control has occurred shall be made by the Administrator and shall be conclusive and binding on all interested parties.
(g) “Change of Control Date” means the first date on which a Change of Control occurs during the Change of Control Period; provided, however, if (i) a Change of Control occurs, (ii) Executive’s employment is terminated by the Bank other than for Cause or Executive terminates Executive’s employment with the Bank or the Executive incurs a Good Reason Event, in either case prior to the date on which the Change of Control occurs, and (iii) such termination of employment or such action triggering Executive’s right to assert a Good Reason Event was at the request or direction of a third party who has taken steps reasonably calculated to effect the Change of Control, “Change of Control Date” shall mean the date immediately prior to the date of such termination of employment by the Bank without Cause or by Executive for Good Reason.
(h) “Change of Control Period” means the period commencing on the date hereof and ending on the second anniversary of such date; provided, however, that commencing on a date one (1) year after the date hereof, and on each annual anniversary of such date (such date and each annual anniversary thereof being hereinafter referred to as the “Renewal Date”), the Change of Control Period shall be automatically extended so as to terminate two years from such Renewal Date, unless at least ninety (90) days prior to the Renewal Date, the Bank shall give notice to Executive that the Change of Control Period shall not be so extended, in which case, as of the Renewal Date, only one (1) year shall remain of the Change in Control Period.
(i) “Date of Termination” means the date that Executive has a “separation from service” from the Bank within the meaning of Section 1.409A-1(h) of the Treasury Regulations promulgated under Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).
(j) “Disability” of Executive shall mean the inability of Executive to perform Executive’s duties hereunder, even with any reasonable accommodation, by reason of any medically determinable physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for a continuous period of not less than twelve (12) months, as determined by the third party administrator or insurer of the Bank’s long-term disability plan or the Social Security Administration.
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(k) “Good Reason Event” means any of the following:
(i) A material reduction in Executive’s base salary, unless such reduction is similar to a reduction in compensation of similarly situated employees of the Bank or Executive consents to such change;
(ii) A material and sustained reduction in Executive’s authority, title, duties or responsibilities with the Bank, unless Executive consents to such change;
(iii) Executive being required by the Bank to be based at any office or location that is more than fifty (50) miles from the location where Executive was principally employed immediately preceding the Change of Control Date by the Bank; and
(iv) A material breach by the Bank or its successor or assign, of this Agreement.
Notwithstanding the foregoing, in order for Executive to trigger benefits under the Agreement for a Good Reason Event, the Executive must give the Bank a Notice of Good Reason Event within 90 days of the initial existence of the condition(s) specified by Executive that constitute a Good Reason Event and the Bank shall have 30 days from the date of such Notice of Good Reason Event in which to cure the condition giving rise to the Good Reason Event, if curable. If, during such 30-day period, the Bank cures the condition giving rise to the Good Reason Event, no benefits shall be triggered under Section 3.01 of this Agreement with respect to such occurrence. If, during such 30-day period, the Bank fails or refuses to cure the condition giving rise to a Good Reason Event, the Executive shall be entitled to benefits under Section 3.01 of this Agreement.
(l) “Holding Company” means PSB Financial, Inc., an Maryland corporation and the parent bank holding company of the Bank.
(m) “Notice of Good Reason Event” means a written notice which (i) indicates the Good Reason Event provision in this Agreement relied upon and (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for asserting a Good Reason Event under the provision so indicated.
(n) “Notice of Termination” means a written notice of termination which (i) indicates the termination provision in this Agreement relied upon and (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.
(o) “Post-COC Period” means the period commencing on the Change of Control Date and ending on the first anniversary of such date.
Article
II.
TERMINATION OF EMPLOYMENT/GOOD REASON EVENT
DURING THE POST-COC PERIOD
2.01 Death or Disability. Executive’s employment shall terminate automatically upon Executive’s death. If the Bank determines in good faith that the Disability of Executive has occurred, it may give Executive written notice of its intention to terminate Executive’s employment. In such event, Executive’s employment with the Bank shall terminate effective on the 30th day after receipt of such notice by Executive (the “Disability Effective Date”), provided that within the thirty (30) days after such receipt Executive shall not have returned to full-time performance of Executive’s duties.
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2.02 Termination By the Bank. The Bank may terminate Executive’s employment at any time for Cause or without Cause. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause without a Notice of Termination.
2.03 Good Reason Event. Executive’s employment may be terminated at any time by Executive without regard to a Good Reason Event.
Article
III.
OBLIGATIONS OF THE BANK UPON TERMINATION/GOOD REASON EVENT
DURING THE POST-COC PERIOD
3.01 Terminations Other Than for Cause or for a Good Reason Event. If, during the Post-COC Period, the Bank terminates Executive’s employment other than for Cause, death or the Disability of Executive, or if Executive incurs an uncured Good Reason Event:
(a) The Bank shall pay to Executive cash in an amount equal to the aggregate of the following amounts, which payment shall be made in a lump sum on a date in the Bank’s sole discretion which is within sixty (60) days after Executive’s Date of Termination or uncured Good Reason Event, an amount equal to 2.99 times the Executive’s total W-2 and 1099 compensation from the Bank in the calendar year immediately prior to such uncured Good Reason Event or Date of Termination (the “COC Amount”).
(b) Subject to Section 3.07 hereof, Executive shall receive all amounts or benefits to which Executive is entitled for the period prior to the Date of Termination or Good Reason Event under any plan, program, policy, practice, contract or agreement of the Bank (excluding amounts otherwise required to be paid under this Section 3.01, at the time such amounts or benefits are due, except as provided in Section 3.05 of this Agreement).
(c) Notwithstanding anything herein contained to the contrary, the Bank’s obligation to pay the COC Amount is contingent upon Executive’s execution of a Waiver and Release of Claims, in such form satisfactory to the Bank, containing among other things, a general release of claims against the Bank and Holding Company, which must be executed by Executive (and any applicable revocation period must expire) in accordance with the terms of such Waiver and Release of Claims but in no event later than sixty (60) calendar days following Executive’s Date of Termination or Good Reason Event (the “Consideration Period”). If Executive does not return the executed Waiver and Release of Claims within the permitted Consideration Period, or if Executive revokes the Waiver and Release of Claims as set forth above, (A) Executive shall forfeit the COC Amount provided for in Section 3.01(a), and (B) the Bank shall not have any further obligation to pay such COC Amount to Executive. For clarification purposes, the payment of accrued benefits set forth in Section 3.01(c), if any, is not contingent on Executive’s execution of a Waiver and Release of Claims.
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3.02 Termination for Cause; Termination Other than for a Good Reason Event. If Executive’s employment shall be terminated for Cause during the Post-COC Period or if Executive terminates employment during the Post-COC Period other than for a Good Reason Event, this Agreement shall terminate without further obligation of the Bank to Executive other than the obligation to timely pay or provide to the Executive (i) Executive’s base salary through the Date of Termination, and (ii) all amounts or benefits to which Executive is entitled for the period prior to the Date of Termination under any plan, program, policy, practice, contract or agreement of the Bank (excluding amounts otherwise required to be paid under this Section 3.02).
3.03 Termination as a Result of Death or Disability. In the event of the termination of Executive’s employment during the Post-COC Period as a result of the death or the Disability of Executive, Executive (or Executive’s heirs) shall be entitled to (i) Executive’s base salary through the Date of Termination and (ii) all amounts or benefits to which Executive is entitled for the period prior to the Date of Termination under any plan, program, policy, practice, contract or agreement of the Bank (excluding amounts otherwise required to be paid under this Section 3.03), as well as death or disability benefits, as the case may be, as then in effect at the Bank and applicable to Executive.
3.04 Termination Outside of the Post-COC Period. For the avoidance of doubt, if Executive’s employment is terminated, for any reason, prior to the Post-COC Period or following the Post-COC Period, Executive’s termination shall be governed by the terms of Executive’s Employment Agreement with the Bank, dated as of July 14, 2026.
3.05 Excise Tax Limitation.
(a) Anything in this Agreement to the contrary notwithstanding, in the event that the receipt of all payments, distributions or benefits (including without limitation accelerated vesting of equity-based awards) in the nature of compensation to or for Executive’s benefit, whether paid or payable pursuant to this Agreement or otherwise (a “Payment”), would subject Executive to the excise tax under Section 4999 of the Code by virtue of Section 280G of the Code, an independent accounting or executive benefits consulting firm mutually selected by the Bank and Executive (the “Accounting Firm”), shall determine whether to reduce any of the Payments paid or payable pursuant to this Agreement (the “Agreement Payments”) to the Reduced Amount (as defined below). The Agreement Payments shall be reduced to the Reduced Amount only if the Accounting Firm determines that Executive would have a greater Net After-Tax Receipt (as defined below) of aggregate Payments if Executive’s Agreement Payments were reduced to the Reduced Amount. If such a determination is not made by the Accounting Firm, Executive shall receive all Agreement Payments to which Executive is entitled under this Agreement. Any determination made by the Accounting Firm shall be binding on the Bank and Executive.
(b) If the Accounting Firm determines that aggregate Agreement Payments should be reduced to the Reduced Amount, the Bank shall promptly give Executive notice to that effect and a copy of the detailed calculation thereof. All determinations made by the Accounting Firm under this Section 3.04 shall be made as soon as reasonably practicable and in no event later than fifty-five (55) days following the Date of Termination or Good Reason Event, as applicable, or such earlier date as requested by the Bank and Executive. For purposes of reducing the Agreement Payments to the Reduced Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced, in the following order: (A) any Payments otherwise payable to the Executive that are exempt from Section 409A of the Code (“Section 409A”); and (B) any Payments otherwise payable to the Executive that are not exempt from Section 409A, on a pro rata basis or such other manner that complies with Section 409A. All fees and expenses of the Accounting Firm shall be borne solely by the Bank.
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(c) As a result of the uncertainty in the application of Sections 280G and 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that amounts will have been paid or distributed by the Bank to or for the benefit of Executive pursuant to this Agreement which should not have been so paid or distributed (the “Overpayment”) or that additional amounts which were not paid or distributed by the Bank to or for the benefit of Executive pursuant to this Agreement could have been so paid or distributed (the “Underpayment”), in each case, consistent with the calculation of the Reduced Amount hereunder. In the event that the Accounting Firm, based upon the assertion of a deficiency by the Internal Revenue Service against either the Bank or Executive which the Accounting Firm believes has a high probability of success, determines that an Overpayment has been made, Executive shall pay any such Overpayment to the Bank, together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code; provided, however, that no amount shall be payable by Executive to the Bank if and to the extent such payment would not either reduce the amount on which Executive is subject to tax under Section 1 and Section 4999 of the Code or generate a refund of such taxes. In the event that the Accounting Firm, based upon controlling precedent or substantial authority, determines that an Underpayment has occurred, any such Underpayment shall be paid promptly (and in no event later than sixty (60) days following the date on which the Underpayment is determined) by the Bank to or for the benefit of Executive together with interest at the applicable federal rate provided for in Section 7872(f)(2) of the Code.
(d) For purposes hereof, the following terms have the meanings set forth below: (A) “Reduced Amount” shall mean the greatest amount of Payments that can be paid that would not result in the imposition of the excise tax under Section 4999 of the Code if the Accounting Firm determines to reduce Payments pursuant to this Section 3.04 and (B) “Net After-Tax Receipt” shall mean the present value (as determined in accordance with Section 280G(b)(2)(A)(ii) and Section 280G(d)(4) of the Code) of a Payment net of all taxes imposed on Executive with respect thereto under Section 1 and Section 4999 of the Code and under applicable state and local laws, determined by applying the highest marginal rate under Section 1 of the Code and under state and local laws which applied to Executive’s taxable income for the immediately preceding taxable year, or such other rate(s) as Executive certifies, in Executive’s sole discretion, as likely to apply to him in the relevant tax year(s).
3.06 409A Compliance.
(a) Notwithstanding any provision of this Agreement to the contrary, if on the Date of Termination the Executive is a “specified employee” as defined in Section 409A, then to the extent that any amount to which the Executive is entitled in connection with the termination of Executive’s employment is subject to Section 409A, payments of such amounts to which the Executive would otherwise be entitled during the six (6) month period following the Executive’s Date of Termination will be accumulated and paid in a lump sum on the first day of the seventh month after the month in which the Date of Termination occurs. This paragraph shall apply only to the extent required to avoid the Executive’s incurrence of any additional tax or interest under Section 409A.
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(b) Notwithstanding any other provisions of this Agreement to the contrary and to the extent applicable, it is intended that this Agreement be exempt from or otherwise comply with the requirements of Section 409A, and this Agreement shall be interpreted, construed and administered in accordance with this intent, so as to avoid the imposition of taxes and penalties on Executive pursuant to Section 409A. However, neither Holding Company nor the Bank shall have any liability to Executive, Executive’s beneficiaries or otherwise if this Agreement or any amounts paid or payable hereunder are subject to the additional tax and penalties under Section 409A. For purposes of any provision of this Agreement providing for the payment of any amounts or benefits subject to 409A of the Code, references to a “termination,” “termination of employment” or like terms shall mean “separation from service” within the meaning of Section 1.409A-1(h) of the Treasury Regulations promulgated under Section 409A.
3.07 Regulatory Prohibition on Payment. Notwithstanding anything to the contrary contained in this Agreement, any payments to Executive by the Bank under this Agreement are subject to and conditioned upon their compliance with Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. § 1828(k), and the regulations promulgated thereunder in 12 C.F.R. Part 359. The Bank covenant to Executive that it will use commercially reasonable efforts to obtain any regulatory agency approvals that may be required in order to make payments to Executive as provided herein.
3.08 Provision of Severance under Other Agreements. Notwithstanding anything herein contained to the contrary, if Executive is entitled to the COC Amount hereunder, and is also entitled to a severance payment from Holding Company or the Bank under any other agreement, plan or policy (“Other Severance Payment”), then Executive shall only receive the greater of (a) the COC Amount or (b) the Other Severance Payment.
Article
IV.
GENERAL PROVISIONS
4.01 Successors.
(a) This Agreement is personal to Executive and shall not be assignable by Executive without the prior written consent of the Bank other than by will or the laws of descent and distribution. If Executive should die while any amounts would still be payable to Executive hereunder if Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to Executive’s heirs or representatives or, if there be no such designee, to Executive’s estate.
(b) This Agreement shall inure to the benefit of and be binding upon the Bank and their respective successors and assigns, whether by contract or operation of law.
(c) The Bank will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Bank to assume expressly and agree to perform this Agreement in the same manner and to the same extent that the Bank would be required to perform it if no such succession had taken place. Failure of the Bank to require any successor to assume and agree to perform this Agreement is not a prerequisite to Section 4.01(b) applying to the parties hereto and their respective successor and assigns.
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4.02 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Montana without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto. This Agreement supersedes all previous agreements relating to the subject matter of this Agreement, written or oral, between the parties hereto and contains the entire understanding of the parties hereto.
4.03 Notices. All notices required or permitted under this Agreement must be given in writing, reference this Agreement and will be deemed delivered and given (a) upon personal delivery to the party to be notified; (b) three days after mailing by registered or certified U.S. mail, return receipt requested, postage and charges prepaid; (c) one business day after deposit with a nationally-recognized commercial overnight courier, specifying next day delivery with verification of receipt; or (d) when sent by electronic mail transmission (such email notice to be effective on the date after such email is sent), with a confirmation sent by way of one of the above methods. All communications shall be sent to the following addresses (or at such other address for a party as shall be specified by like notice):
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If to the Bank:
Chairman Pioneer State Bank 32 N. Washington Street P.O. Box 1103 Dillon, MT 59725 |
If to the Executive:
Phillip K. Willet [personal information redacted] |
4.04 Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.
4.05 Withholding. The Bank may withhold from any amounts payable under this Agreement such Federal, state or local income or employment taxes as shall be required to be withheld pursuant to any applicable law or regulation.
4.06 Waiver. The failure by the Bank or Executive to insist upon strict compliance with any provision of this Agreement or the failure to assert any right Executive or the Bank may have hereunder, including, without limitation, the right of Executive to assert a Good Reason Event, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.
4.07 Termination of Employment Prior to Change of Control Date. If prior to the Change of Control Date, Executive’s employment with the Bank terminates, then Executive shall have no further rights under this Agreement.
(Signature page follows)
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IN WITNESS WHEREOF, Executive and the Bank have executed this Agreement as of the date first above written.
| BANK: | ||
| Pioneer State Bank | ||
| By: | /s/ Spencer Hegstad | |
| Spencer Hegstad, Chairman of the Board | ||
| EXECUTIVE: | ||
| By: | /s/ Phillip K. Willett | |
| Phillip K. Willett | ||
Signature Page to Change of Control Agreement
Exhibit 10.3
PIONEER STATE BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
This Supplemental Executive Retirement Plan Agreement (“Agreement”) is made this 14th day of July 2026, by and between Pioneer State Bank, a Montana state-chartered bank, hereinafter referred to as “Bank,” and Phillip K. Willett, hereinafter referred to as “Executive.”
WHEREAS, the Executive has performed valuable services for the Bank; and
WHEREAS, the Executive currently serves as President, Chief Executive Officer of the Bank, and the Bank wishes to benefit from the Executive’s continued service to the continued profit of the Bank;
NOW, THEREFORE, in order to reward and encourage such continued loyal and valuable service, and to assist the Executive in adequately planning for the financial demands of retirement, and to provide also for the Executive’s family’s security in the event of disability or death, by providing the benefits described in Article I of the Agreement “Benefits”, the parties agree to the terms and conditions of the Agreement, as follows.
Article I
| A. | Normal Retirement Benefit. Subject to the conditions hereof, the Bank shall commence payment to the Executive of retirement benefits under the Agreement of $150,000 per year to be paid in equal monthly installments for a continuous period of ten (10) years (“Normal Retirement Benefit”), commencing on the first day of the first month immediately following the Executive’s Separation from Service with the Bank on or after the Executive attains age 62 (“Retirement” and “Normal Retirement Age”, respectively). |
| B. | Pre-Retirement Disability Benefit. If the Executive experiences a Disability prior to Retirement, the Bank shall pay to the Executive a lump sum equal to the Executive’s liability balance under the Agreement accrued and expensed by the Bank under Generally Accepted Accounting Principles (“Accrued Benefit”) on the first day of the first month immediately following the Executive’s Disability. |
| C. | Voluntary Separation or Termination without Cause prior to Retirement. If the Executive voluntarily Separates from Service with or is terminated by the Bank without Cause prior to the Executive’s Retirement, the Bank shall commence payment to the Executive of the Executive’s vested Normal Retirement Benefit commencing on the first day of the first month immediately following the Executive’s Normal Retirement Age. |
| D. | Death During Benefits Payout. In the event that the Executive should die after commencement of payment of the Executive’s Benefits under Sections I. A., B., or C., hereof, but before receiving the full Benefits thereunder, the Bank shall pay a lump sum equal to the present value of the Executive’s remaining Benefits to the Executive’s Beneficiary (calculated using a 5% discount rate), no later than December 31st of the calendar year following the year of the Executive’s death. |
| E. | Pre-Retirement Death Benefit. If the Executive dies prior to the Executive’s Retirement, the Bank shall pay a lump sum equal to the Present Value of the Executive’s Accrued Benefit to the Executive’s Beneficiary, no later than December 31st of the calendar year following the year of the Executive’s death. |
Article II
| A. | Vesting of Benefits. Subject to forfeiture of Benefits under Section II.B. hereof, the Executive shall be vested and have nonforfeitable rights to any and all Benefits, to be paid under this Agreement as follows: |
| 1. | The Executive shall vest and be entitled to 0% of Benefits hereunder until he attains age 60; |
| 2. | The Executive shall vest and be entitled to 100% of Benefits hereunder upon attainment of age 60, so long as the Executive does not experience a termination of employment with the Bank prior to such date; and |
| 3. | Death, Disability, or Change in Control. Notwithstanding the foregoing, upon the Executive’s death, Disability, or a Change in Control prior to a termination of Executive’s employment with the Bank, the Executive shall become one hundred percent (100%) vested in the Benefits under the Agreement. |
| B. | Forfeiture of Benefits Upon Termination for Cause. Notwithstanding anything to the contrary contained in the Agreement the Executive shall forfeit all rights to any and all Benefits to be paid to him under this Agreement if the Executive’s employment is terminated by the Bank for Cause as defined herein. For purposes of the Agreement, “Cause” means the termination of Executive’s employment upon (as determined by the Bank): (i) Executive’s breach of Executive’s fiduciary duty or commission of any material act of dishonesty or disloyalty or violation of law involving the Bank or PSB Financial, Inc., the parent bank holding company of the Bank (“Holding Company”); (ii) Executive’s commission of a crime, the circumstances of which substantially relate to Executive’s employment duties with the Bank or Holding Company; (iii) Executive’s willful engagement in conduct which is materially injurious to the Bank or Holding Company; (iv) Executive’s failure to follow reasonable instructions from the Bank or the Bank’s Board of Directors (the “Board”) concerning the operations or business of the Bank or Holding Company or failure to satisfactorily perform Executive’s job duties; (v) Executive’s breach of any agreement between Executive and the Bank or Holding Company, including without limitation, Executive’s Employment Agreement with the Bank, the Restrictive Covenant Agreement or any other non-disclosure, non-competition or non-solicitation agreement; (vi) Executive’s willful violation of any material written policies or procedures of the Bank or Holding Company (including without limitation any sexual harassment or misconduct policy); (vii) Executive’s misappropriation of funds or property of the Bank or Holding Company; (viii) Executive’s engagement in continuing and non-remedied substance abuse involving alcohol or drugs having an adverse effect on the performance of Executive’s services; or (ix) Executive’s attempt to obtain a personal profit from any transaction in which the Bank or Holding Company has an interest, and which constitutes a corporate opportunity of the Bank or Holding Company, or which is adverse to the interests of the Bank or Holding Company, unless the transaction was approved in writing by the Board after full disclosure of all details relating to such transaction. For purposes of this definition, no act, or failure to act, on Executive’s part will be deemed “willful” unless done, or omitted to be done, by Executive in bad faith. |
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| C. | No Acceleration of Benefits. The benefits provided for under this Agreement may not be accelerated and paid at an earlier time than specified in Article I, neither at the option of the Executive nor at the discretion of the Bank or any other person. |
Article III
| A. | Restrictive Covenant Agreement. As a condition of receiving Benefits under this Agreement, Executive agrees to execute the “Restrictive Covenant Agreement”, attached hereto as Exhibit A and incorporated herein by reference. |
| B. | Effect of Breach. In the event that Executive breaches any provision of the Restrictive Covenant Agreement or any other restrictive covenant agreement between the Bank and Executive which is entered into subsequent to this Agreement, Executive agrees that the Bank may suspend or cease all additional payment of Benefits to Executive under this Agreement, recover from Executive any damages suffered as a result of such breach and recover from Executive any reasonable attorneys’ fees or costs it incurs as a result of such breach. In addition, Executive agrees that the Bank may seek injunctive or other equitable relief, without the necessity of posting bond, as a result of a breach by Executive of any provision of the Restrictive Covenant Agreement. |
Article IV
| A. | Inalienability of Benefits. No assignment, pledge, hypothecation, collateralization, lien or attachment of any of the Benefits payable pursuant to the provisions of this Agreement shall be valid or recognized by the Bank. None of the payments provided for by this Agreement shall be subject to seizure for payment of any debts or judgments against the Executive or any beneficiary, nor shall the Executive, his personal representative, heir or any beneficiary or other successor thereto have the right to transfer, modify, anticipate, or in any way encumber any rights or benefits under this Agreement. |
| B. | Amendment. During the lifetime of the Executive, this Agreement may be altered, amended, or revoked at any time in whole or in part by written agreement of the parties. Notwithstanding the foregoing sentence, no alteration, amendment, or revocation of this Agreement may be made in a manner that would cause the benefits payable hereunder to be accelerated or to be deferred in a manner that would cause this Agreement not to comply with IRC §409A. Notwithstanding the foregoing, to the extent that any provision hereof would otherwise result in the Executive being subject to payment of the additional tax, interest and tax penalty under Section 409A of the Code, the Bank shall amend this Agreement in a manner that brings it into compliance with Section 409A of the IRC. Further, notwithstanding anything else in this Agreement to the contrary, the Bank reserves the unilateral right to terminate this Agreement in accordance with Section Treasury Regulations Section 1.409A-3(j)(4)(ix). |
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| C. | Designation of Beneficiary. The Executive may from time to time designate any person or persons (who may be designated contingently or successively and who may be an entity other than a natural person) as the “Beneficiary” or “Beneficiaries” to whom payments are to be made under the Agreement if the Executive dies before receipt of all amounts that become due hereunder. Each beneficiary designation shall be in the form prescribed by the Bank and will be effective only when filed with the Bank during the Executive’s lifetime. Each beneficiary designation filed with the Bank will cancel all beneficiary designations previously filed with the Bank. In the absence of any designation of a Beneficiary, or if no designated Beneficiary survives the Executive, the Bank shall distribute any amounts due hereunder to the Executive’s surviving spouse, or if there is no surviving spouse, to the personal representative of the Executive’s estate. |
| D. | Incapacity of Recipient. If the Bank finds that any person to whom payment is to be made hereunder is unable to care for their affairs due to illness or accident, or is a minor, any payment due may be paid to the spouse, child, parent, brother or sister, guardian, authorized agent under a durable power of attorney for financial matters, or to any person deemed by the Bank to have incurred expense for such person otherwise entitled to payment, in accordance with the applicable provisions of this Agreement. Any such payment shall be a complete discharge of the Bank’s liabilities under this Agreement. |
| E. | Unsecured Promise. The provisions of this Agreement represent the unsecured promises of the Bank. The Executive understands and acknowledges that the benefits herein are not secured by any rights to specific assets of the Bank. |
| F. | Employee Retirement Income Security Act (“ERISA”); Administration. For purposes of Title I of ERISA, the arrangement described in this Agreement is an unfunded excess benefit plan for a select highly compensated employee. The named fiduciary and “Plan Administrator” of this Agreement is the Bank. As named Fiduciary and Plan Administrator, the Bank shall be responsible for the management, control and administration of the Agreement as established herein. The Bank may delegate to others certain aspects of the management and operation responsibilities of the Agreement, including the employment of advisors and the delegation of ministerial duties to qualified individuals. The good faith interpretation and construction of any provision or action taken under this Agreement by the Bank shall be binding and conclusive on all persons for all purposes. |
| G. | Claims Procedure and Arbitration. Any claim under the Agreement should be filed in writing with the Plan Administrator, and the Plan Administrator shall respond to such claim in writing, in plain understandable language, making detailed and specific reference to material facts and to the terms of this Agreement, and explaining how and when benefits will be paid, or why they will not be paid, and outlining timely and reasonable procedures for appeal. In the event that benefits under this Agreement are not paid to the Executive (or to the Executive’s Beneficiary in the case of the Executive’s death) and the Executive or their Beneficiary believe they are entitled to receive such benefits, then a written claim must be made to the Plan Administrator within 60 days from the date payments are refused. The Plan Administrator shall review the written claim and if the claim is denied, in whole or in part, it shall provide in writing within 90 days of receipt of such claim the specific reasons for such denial, reference to the provisions of the Agreement upon which the denial is based and any additional material or information necessary to perfect the claim. Such written notice shall further indicate the additional steps to be taken by claimants if a further review of the claim denial is desired. A claim shall be deemed denied if the Plan Administrator fails to take any action within the aforesaid 90 day period. If claimants desire a second review, they shall notify the Plan Administrator in writing within 60 days of the first claim denial. Claimants may review the Agreement or any documents relating thereto and submit any written issues and comments they may feel appropriate. In its sole discretion, the Plan Administrator shall then review the second claim and provide a written decision within 60 days of receipt of such claim. This decision shall likewise state the specific reasons for the decision and shall include reference to specific provisions of the Agreement upon which the decision is based. If either party to this Agreement believes there are unresolved monetary issues regarding this Agreement, either party may submit the issues for mediation or arbitration. The rules and procedures of arbitration to be utilized are those of the American Arbitration Association. |
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| H. | Withholding. The Bank shall deduct from any payments made to the Executive or the Executive’s designated beneficiary or beneficiaries under this Agreement any federal, state, local, or other taxes, social security or charges, if any, which the Bank is required to withhold under applicable law. Further, the Bank may deduct from any payments it makes to the Executive outside of this Agreement the amount to satisfy the Bank’s Federal Insurance Contributions Act (“FICA”) tax withholding obligation in the taxable year that any portion of the Executive’s benefit under the Agreement is no longer subject to a substantial risk of forfeiture as such term is defined under the FICA Treasury Regulations. The Bank shall have the right to rely upon an opinion of legal counsel or its independent auditors as to the amount to be so withheld. If for any reason, the Bank does not withhold taxes and/or social security as required by the applicable law, by participating in the Agreement the Executive agrees that the Bank may collect any unpaid taxes or social security from any other payments (including but not limited to wages, expenses and bonuses) that may be payable hereunder, and to the extent that these are insufficient to meet the full tax or social security, the Executive agrees to indemnify the Bank for such amounts. |
| I. | IRC Section 409A. The Bank intends that any amounts payable under this Agreement comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (“IRC”), and the guidance promulgated thereunder so as not to subject the Executive to the payment of the additional tax, interest and any tax penalty which may be imposed under IRC Section 409A, and the provisions of this Agreement shall be interpreted in a manner consistent with such intent. Accordingly, the following definitions and rules shall apply to any and all Benefits under the Agreement: |
| (a) | “Change in Control” means shall mean the occurrence of any of the following events: |
(i) Any “person” (as such term is used in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), that than Holding Company in the case of the Bank or any employee benefit plan sponsored or maintained by the Holding Company or the Bank, becomes, after the date hereof, the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Bank or Holding Company representing fifty percent (50%) or more of the then-outstanding voting securities of the Bank or Holding Company;
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(ii) when any person, excluding any employee benefit plan sponsored or maintained by the Company or any Affiliate of the Company (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 the Company or the Bank representing 50% or more of the combined voting power of the Company’s or the Bank’s then outstanding securities with respect to the election of the directors of the Company or the Bank;
(iii) when, during any period of 24 consecutive months, the individuals who, at the beginning of such period, constitute the Board (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 (because they were directors at the beginning of such 24-month period) or by prior operation of this provision;
(iv) the purchase of substantially all of the assets or merger, consolidation of the Company or Bank by an entity other than a 50% or more owned Affiliate of the Company, except in the case of a transaction pursuant to which, immediately after the transaction, the Company’s shareholders immediately prior to the transaction, either directly or indirectly, 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 in roughly the same proportions as prior to the transaction; or
(v) the liquidation or dissolution of the Company or the Bank.
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company or the Bank are acquired by: (1) a trustee or other fiduciary holding securities under one or more executive benefit plans maintained for executives of the Bank or the Company, or (2) any entity which, immediately prior to such acquisition, is owned directly or indirectly by the stockholders of the Company in the same proportion as their ownership of Company stock immediately prior to such acquisition.
The determination as to whether a Change in Control or an agreement to effect a Change in Control has occurred shall be made by the Administrator and shall be conclusive and binding on all interested parties.
| (b) | “Disability” means a disability as determined by the Social Security Administration or a claims administrator of an accident and health plan covering employees of the Bank, that the Executive is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months or (ii) by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Bank. |
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| (c) | “Separation from Service” with the Bank means the date upon which the Executive and Bank reasonably anticipate that (a) no further services will be performed by the Executive for the Bank after such date (whether as an employee or as an independent contractor), or (b) the level of bona fide services the Executive will perform after such date (whether as an employee or as an independent contractor) is reduced to no more than fifty percent (50%) of the average level of bona fide services performed (whether as an employee or as an independent contractor) over the immediately preceding 36-month period. |
| (d) | Whenever Benefits under this Agreement specify a payment period with reference to a number of days or payment period that may span two calendar years, the actual date of payment within the specified period shall be within the sole discretion of the Bank. |
| J. | Binding on Heirs, etc. This Agreement is solely between the Bank and the Executive and shall be binding upon the parties to this Agreement, their heirs, assigns, successors, executors, and administrators. |
| K. | Notices. Any notice to be given by the Executive hereunder shall be sent by registered or certified mail to the Bank at 32 N. Washington St., P.O. Box 1103, Dillon, Montana 59725, and any notice from the Bank to the Executive or the Executive’s Beneficiary shall be sent by registered or certified mail to the Executive’s or the Executive’s Beneficiary’s personal address or delivered personally to the Executive or their Beneficiary. Either party may change the address to which notices are to be addressed by notice in writing given to the other in accordance with the terms hereof. |
| L. | Governing Law. This Agreement and all distributions under it shall be governed by the laws of the State of Montana without regard to provisions of conflicts of law thereunder, and all disputes arising under the Agreement shall be brought before and heard by courts having their forum within the State of Montana. |
| M. | Severability; Partial Invalidity. If any portion of this Agreement is determined by a court to be invalid or otherwise not enforceable, such determination shall not render any other term of the Agreement to be invalid, void or unenforceable, and the Agreement shall remain in full force and effect notwithstanding such partial invalidity. |
| N. | Construction. Except when otherwise indicated by context, any terminology referring to gender shall include any other gender and the definition of any term in the singular shall include the plural. |
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| O. | Headings. Headings in this Agreement are for convenience only and shall not be used to interpret or construe its provisions. |
| P. | Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. |
| Q. | Entire Agreement. This Agreement represents the final and entire agreement between the parties, and supersedes all prior or contemporaneous agreements, express or implied, written or unwritten. |
IN WITNESS WHEREOF, the parties have executed this Agreement on the day, month, and year first above written.
| BANK: | ||
| Pioneer State Bank | ||
| By: | /s/ Spencer Hegstad | |
| Spencer Hegstad, Chairman of the Board | ||
| EXECUTIVE: | ||
| By: | /s/ Phillip K. Willett | |
| Phillip K. Willett | ||
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Exhibit 10.4
RESTRICTIVE COVENANT AGREEMENT
THIS RESTRICTIVE COVENANT AGREEMENT (“Agreement”) is made and entered into by and between Phillip K. Willett (“Executive”) and Pioneer State Bank (the “Bank”). The Bank and Executive shall sometimes be referred to herein together, as the “Parties.”
RECITALS
A. During Executive’s employment with the Bank, Executive has personally generated and been entrusted with, and will continue to personally generate and be entrusted with, information, ideas and materials that are the Bank’s confidential and proprietary property, including, without limitation, trade secrets, confidential customer information and customer lists, and information related to other confidential and proprietary matters of the Bank.
B. During Executive’s employment with the Bank, the Bank has provided, and will continue to provide, Executive access to valuable, non-public information about customers and prospective customers for the purpose of creating proposals to solicit prospective customers’ business and providing services and products on behalf of the Bank. The Bank may also provide Executive formal and informal training opportunities.
C. The Bank has expended, and will continue to expend, substantial time, effort and money to protect such confidential and proprietary Bank property, to service its customers and prospective customers and to provide Executive the opportunity and the resources to extend the goodwill of the Bank.
D. Execution of this Agreement is a condition of Supplemental Executive Retirement Plan Agreement, dated July 14, 2026, between the Bank and Executive (“SERP”), under which Executive is eligible to receive Benefits (defined therein).
AGREEMENT
In consideration of the receipt of the benefits offered in the SERP and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Executive and the Bank hereby agree as follows:
1. Restricted Period. The term “Restricted Period” means the period commencing on the effective date of the SERP and continuing through the longer of: (i) the end of the period in which Executive receives Benefits as provided thereunder; or (ii) a period of two (2) years following the termination date of Executive’s employment. For the avoidance of doubt, the foregoing definition of the Restricted Period shall apply in the event Executive’s employment continues following a Change in Control (as defined in the SERP). Notwithstanding the foregoing, if Executive’s employment is terminated in connection with a Change in Control, and Executive is not offered employment with the successor (or its subsidiaries or affiliates), then the Restricted Period shall continue for a period of two (2) years following the termination date of Executive’s employment. For clarity, the restrictions set forth herein shall not apply to Executive’s conduct on behalf of the Bank during Executive’s employment with the Bank, provided such conduct is done in the interest and benefit of the Bank.
2. Confidentiality and Trade Secret Obligations.
2.1 Trade Secrets . During the Restricted Period, Executive will not, directly or indirectly, use or disclose any Trade Secret.
2.2 Confidential Information Post-Employment. During the Restricted Period, Executive will not, directly or indirectly, use or disclose any Confidential Information.
2.3 Nonpublic Personal Information. Notwithstanding Section 1.3, Executive will not, at any time, directly or indirectly, disclose or use any “nonpublic personal information” as that term is defined in the Gramm-Leach-Bliley Act.
2.4 Trade Secret Law. Nothing in this Agreement shall limit or supersede any common law, statutory or other protections of Trade Secrets where such protections provide the Bank with greater rights or protections than provided in this Agreement. With respect to the disclosure of a Trade Secret and in accordance with 18 U.S.C. § 1833, Executive shall not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a Trade Secret that is made in (i) confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, provided that the information is disclosed solely for the purpose of reporting or investigating a suspected violation of law; or (ii) a complaint or other document filed in a lawsuit or other proceeding filed under seal so that it is not disclosed to the public. Executive is further notified that if Executive files a lawsuit for retaliation by the Bank for reporting a suspected violation of law, Executive may disclose the Bank’s Trade Secrets to Executive’s attorney and use the Trade Secret information in the court proceeding, provided that Executive files any document containing the Trade Secret under seal so that it is not disclosed to the public, and Executive and Executive’s attorney do not disclose the Trade Secret, except pursuant to court order.
2.5 Confidential Information. The term “Confidential Information” means all non-Trade Secret information of, about or related to the Bank or PSB Financial, Inc., the parent bank holding company of the Bank (“Holding Company”) or provided to the Bank or Holding Company by their customers that is not known generally to the public or the Bank’s competitors. Confidential Information includes, but is not limited to: (i) financial reports or data; investment strategies; information about products and/or services under development; research; business plans; operational methods; customer lists; customer account information; information about banking orders and transactions with customers; sales and marketing strategies; plans and techniques; pricing strategies; information relating to sources of materials; purchasing and accounting information; personnel information (other than Executive’s own) and all business records; (ii) information that is marked or otherwise designated or treated as confidential or proprietary by the Bank; and (iii) information received by the Bank from others which the Bank has an obligation to treat as confidential.
2.6 Trade Secret. The term “Trade Secret” has that meaning set forth under applicable federal and state law, including but not limited to 18 U.S.C. § 1839(3). For the sake of clarity, even if the subject matter of the Trade Secret could satisfy the definition of Confidential Information in this Agreement, it will be afforded the full protection of law as a Trade Secret. The term includes, but is not limited to, all computer source code created by or for the Bank.
2.7 Exclusions. Notwithstanding the foregoing, the term “Confidential Information” does not include, and the obligations set forth in this Agreement do not apply to, any information that: (i) can be demonstrated by Executive to have been known by Executive prior to Executive’s employment by the Bank and any of its predecessors, subsidiaries and affiliates; (ii) is or becomes generally available to the public through no act or omission of Executive; (iii) is obtained by Executive in good faith from a third party who discloses such information to Executive on a non-confidential basis without violating any obligation of confidentiality or secrecy relating to the information disclosed; or (iv) is independently developed by Executive outside the scope of Executive’s employment and affiliation with the Bank without the use of Confidential Information or Trade Secrets.
2.8 Scope. Executive affirmatively acknowledges and agrees that except in the interest and for the benefit of the Bank and as authorized by Bank policy, Executive’s undertakings and obligations under this Section 1 prohibit Executive’s transfer and/or transmittal of any Confidential Information and/or Trade Secrets to or from Executive’s personal email or other personal or non-Bank platform(s), account(s) or data site(s) over which Executive has access or exercises direct or indirect control.
3. Duty of Loyalty. While Executive is employed by the Bank, Executive acknowledges and agrees that Executive has a duty of loyalty to the Bank to act in the best interests of and with allegiance to the Bank and will devote such business time, attention, and energies reasonably necessary to the diligent and faithful performance of Executive’s services to the Bank.
4. Post-Employment Restricted Customer Obligations.
4.1 Non-Solicitation of Restricted Customers. During the Restricted Period, Executive agrees not to, directly or indirectly, solicit, or attempt to solicit, any Restricted Customer for the sale of any products or services of the type marketed, sold or provided by the Bank.
4.2 Non-Interference with Restricted Customers. During the Restricted Period, Executive agrees not to, directly or indirectly, induce, or attempt to induce, any Restricted Customer to cease or to reduce its business with the Bank or adversely affect or otherwise interfere with the existing relationship between the Bank and such Restricted Customer.
4.3 Restrictions on Services to Restricted Customers. During the Restricted Period, Executive agrees not to, directly or indirectly, provide any Restricted Customer any services of the type Executive provided to the Bank or any of its predecessors, subsidiaries and affiliates. The geographic territory of this restriction shall be the state of Montana.
4.4 Restricted Customer. The term “Restricted Customer” means any individual or entity (i) for whom/which the Bank sold or provided products or services and (ii) with whom/which Executive had contact, performed services for, or bore responsibility for on behalf of the Bank or any of its predecessors, subsidiaries and affiliates, or about whom/which Executive acquired non-public or proprietary information as a result of Executive’s employment by the Bank.
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5. Post-Employment Prospective Customer Obligations.
5.1 Non-Interference with Prospective Customers. During the Restricted Period, Executive agrees not to, directly or indirectly, induce, or attempt to induce, any Prospective Customer not to do business with the Bank or adversely affect or otherwise interfere with the relationship between the Bank and such Prospective Customer.
5.2 Prospective Customer. The term “Prospective Customer” means any individual or entity (i) for whom/which the Bank has made a proposal to provide goods or services and (ii) with whom/which Executive had contact on behalf of the Bank or any of its predecessors, subsidiaries and affiliates, or about whom/which Executive acquired non-public or proprietary information as a result of Executive’s employment with the Bank.
6. Post-Employment Non-Solicitation of Employees Obligation. During the Restricted Period, Executive agrees not to, directly or indirectly, encourage any Bank employee to terminate their employment with the Bank or solicit such individual for employment outside the Bank in a manner that would end or diminish that employee’s services to the Bank.
7. Business Idea Rights.
7.1 Assignment. Executive acknowledges that the Bank will be the sole and exclusive owner of all rights, title and interest in and to all Business Ideas and all patent, trademark, trade secret, copyright, and any other intellectual property rights therein. All Business Ideas which are or form the basis for copyrightable works are considered “works made for hire” as that term is defined by United States copyright law. To the extent that all exclusive rights, title and interest in and to all Business Ideas do not automatically vest in the Bank by operation of law, Executive hereby irrevocably assigns all rights, title and interest that Executive may have in such Business Ideas to the Bank.
7.2 Disclosure. While employed by the Bank, Executive will promptly disclose all Business Ideas to the Bank.
7.3 Execution of Documentation. Executive, at any time during the Restricted Period or thereafter, will promptly execute all documents which the Bank may reasonably require to perfect its ownership and protection of and rights to such Business Ideas throughout the world or to evidence their original creation by Executive.
7.4 Business Ideas. The term “Business Ideas” means all ideas, designs, modifications, formulations, specifications, concepts, know-how, trade secrets, discoveries, inventions, data, software, source codes, developments, and copyrightable works, and all other intellectual property whether or not patentable or registrable, which are developed or originated by Executive, either alone or jointly with others, while Executive is employed by the Bank and which are (i) related to any business known to Executive to be engaged in or contemplated by the Bank; (ii) originated or developed during Executive’s working hours; or (iii) originated or developed in whole or in part using materials, labor, facilities, or equipment furnished by the Bank.
8. Post-Employment Obligations.
8.1 Return of Property. Upon the end, for whatever reason, of Executive’s employment with the Bank, or upon request by the Bank at any time, Executive shall immediately return and disclose to the Bank all passwords, codes, documents, records, computer media, information and materials, keys, access cards, computers, telephones, handheld devices, equipment, supplies, items owned or leased by the Bank or its affiliates and any other property belonging or relating to the Bank or its affiliates and their customers and all copies of all such materials and property. Upon the end of Executive’s employment with the Bank or upon request by the Bank at any time, Executive further agrees to destroy such records maintained by Executive on Executive’s own computer and/or electronic equipment, and/or any devices, equipment, or storage sites directly or indirectly owned, accessed, or controlled by Executive, and to certify in writing, at the Bank’s request, that such destruction has occurred.
9. Executive Disclosures and Acknowledgments.
9.1 Confidential Information of Others. Executive certifies that Executive has not disclosed or used, and will not disclose or use during Executive’s time as an employee of the Bank, any confidential information that Executive acquired as a result of any previous employment or under a contractual obligation of confidentiality or secrecy before Executive became an employee of the Bank.
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9.2 Prior Obligations. Executive certifies that Executive is not subject to any prior obligations (written and oral), such as non-disclosure or restrictive covenant obligations, that restrict Executive’s ability to perform any services as an employee for the Bank.
9.3 Scope of Restrictions. By entering into this Agreement, Executive acknowledges and agrees that the scope of the restrictions contained in this Agreement are appropriate, necessary and reasonable, based on: (i) the specialized knowledge Executive has gained, and will continue to gain, while employed by the Bank, for the protection of the Bank’s business, goodwill and property rights, including the protection of the Bank’s confidential and proprietary property and its customer relationships; and (ii) the generous benefits provided by the Bank to Executive under the SERP (which Executive acknowledges Executive would not otherwise be entitled to). Executive further acknowledges and agrees that the obligations contained in this Agreement shall survive following the end of Executive’s employment with the Bank. Executive also acknowledges and agrees that the restrictions imposed by this Agreement will not prevent Executive from earning a living or using general skills and knowledge gained while employed by the Bank in the event of, and after, the end, for whatever reason, of Executive’s employment with the Bank.
9.4 Prospective Employers. Executive agrees, during the term of any restriction contained in this Agreement, to disclose this Agreement to any person or entity that offers employment to Executive. Executive further agrees that the Bank may send a copy of this Agreement, or otherwise make the provisions hereof known, to any of Executive’s potential or future employers.
10. Miscellaneous.
10.1 Assignment. This Agreement is personal to Executive, and Executive may not assign or delegate any of Executive’s rights or obligations hereunder. The Bank shall have the unrestricted right to assign this Agreement and all of the Bank’s rights and obligations under this Agreement. Following such assignment, this Agreement shall be binding and inure to the benefit of any successor or assign of the Bank. For clarification purposes, upon assignment of this Agreement, all references to the Bank shall also refer to the person or entity to whom/which this Agreement is assigned.
10.2 Entire Agreement; Amendment or Waiver. This Agreement contains the entire understanding between the Parties with respect to the subject matter hereof, and all prior discussions, negotiations, agreements, correspondence, and understandings, whether oral or written, between Executive and the Bank with respect to the subject matter addressed in this Agreement are merged in it and superseded by it; provided, however, that any confidentiality and business ideas, non-solicitation and/or non-competition agreement between Executive and the Bank or Holding Company shall remain in full force and effect to the extent provided in any such agreement(s), and in the event that a provision of any such agreement shall conflict with any provision of this Agreement, Executive acknowledges and agrees that the provision which is most protective of the Bank’s and, as applicable, Holding Company’s, confidential or proprietary interests shall control. No provision of this Agreement may be amended or waived other than in writing by the party against whom enforcement of such amendment or waiver is sought. The waiver by the Bank of a breach of any provision of this Agreement shall not be deemed a waiver of any subsequent breach. Additionally, the election of one or more remedies by the Bank shall not constitute a waiver of the right to pursue other available remedies.
10.3 Injunctive Relief. The Parties agree that damages will be an inadequate remedy for breaches of this Agreement and in addition to damages and any other available relief, a court shall be empowered to grant injunctive relief (without the necessity of posting bond or other security).
10.4 Governing Law. This Agreement shall be governed by and construed in accordance with the substantive and procedural laws of the state of Montana.
10.5 Consideration. Execution of this Agreement is a condition of the SERP and Executive’s eligibility for, and receipt of, the Benefits set forth in the SERP constitutes the consideration for Executive’s undertakings hereunder.
10.6 Severability. The obligations imposed by, and the provisions of, this Agreement are severable and should be construed independently of each other. The invalidity of one provision shall not affect the validity of any other provision.
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10.7 Modification. In the event any provision of this Agreement is determined by a court of law to be overbroad, unreasonable or unenforceable, the court may, as allowed by applicable law, revise the specific terms of this Agreement to the fullest extent permitted by law to make such terms reasonable and enforceable.
10.8 Attorneys’ Fees and Costs. In the event of Executive’s breach of this Agreement, the Bank shall be entitled to the reasonable attorneys’ fees and costs incurred by the Bank as a result of such breach and the Bank’s enforcement of the Agreement.
10.9 Third-Party Beneficiaries. Executive acknowledges that the services Executive provides to the Bank include services to any Bank affiliates. Any Bank affiliates are third-party beneficiaries with respect to Executive’s performance of Executive’s duties under this Agreement and the undertakings and covenants contained in this Agreement, and the Bank and any of its affiliates, enjoying the benefits thereof, may enforce this Agreement directly against Executive. The terms Trade Secret and Confidential Information shall include materials and information of the Bank’s affiliates, predecessors and successors to which Executive has, or has had, access.
10.10 Employment Policies. As an Executive of the Bank, Executive acknowledges and agrees that Executive will be subject to, and agrees to comply with, all employment policies and practices implemented by the Bank from time to time, including without limitation, the Bank’s standard of conduct and code of ethics policies and practices.
10.11 Whistleblower Protections/Retained Rights. In accordance with Rule 21F-17 under the Securities Exchange Act of 1934, this Agreement does not, and the Bank shall not, impede Executive’s ability to communicate with the Securities and Exchange Commission or other governmental agencies regarding possible federal securities law violations, and the Bank shall not enforce any provision of any policy or agreement to the extent such provision would be deemed to require the Bank’s prior approval of such communication, except to the extent otherwise permitted by Rule 21F-17. Nothing in this Agreement prohibits Executive from reporting possible violations of law to any governmental agency or entity or making other disclosures that are protected under the whistleblower provisions of federal, state, or local laws or regulations. In addition, nothing in this Agreement shall have the purpose or effect of limiting Executive’s ability to disclose or discuss information related to sexual assault or sexual harassment disputes that arise after the date Executive signs this Agreement.
10.12 Counterparts. This Agreement may be executed in counterparts, including by facsimile or portable document format (.pdf) signature, each of which shall be deemed an original, and all counterparts so executed shall constitute one agreement binding on all of the Parties hereto notwithstanding that all of the Parties may not be a signatory to the same counterpart. Further, this Agreement may be executed by electronic signature, which shall be deemed to be the same as an original signature.
| PHILLIP K. WILLETT | ||
| By: | /s/ Phillip K. Willett | |
| Date: | July 14, 2026 | |
| PIONEER STATE BANK | ||
| By: | /s/ Spencer Hegstad | |
| Spencer Hegstad | ||
| Title: | Chairman of the Bank’s Board of Directors | |
| Date: | July 14, 2026 | |
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