Exhibit 10.12
EXECUTIVE SEVERANCE AGREEMENT
(Amended and Restated)
     This Amended and Restated EXECUTIVE SEVERANCE AGREEMENT (“Agreement”) is
dated as of January 1, 2008. The parties to this Agreement (“Parties”) are
PANHANDLE STATE BANK (“PSB”), and Doug Wright (“Executive”). This Agreement has
been ratified by INTERMOUNTAIN COMMUNITY BANCORP (“IMCB”), the parent company of
PSB.

A.   Executive is employed by PSB in a managerial capacity, presently holding
the position of Executive Vice President, Chief Financial Officer, Panhandle
State Bank.

B.   PSB wishes to ensure the continued availability of Executive’s services in
the event of a change in the control of PSB, thereby allowing PSB to maximize
the benefits obtainable from any such change. To that end, PSB desires to
provide incentive for Executive’s continued employment with PSB.

C.   This amendment and restatement of Executive Severance Agreement is intended
to incorporate and make such modifications as shall be necessary to comply with
Internal Revenue Code section 409A and rules, regulations, and guidance of
general application thereunder issued by the Department of the Treasury.

NOW THEREFORE,      PSB and Executive agree as follows:
Agreement

1.   Effective Date and Term. As of the Effective Date, this Agreement shall be
a binding obligation of the parties, not subject to revocation or amendment
except by mutual consent or in accordance with its terms. The term of this
Agreement (“Term”) shall commence as of the Effective Date and shall expire upon
Executive’s termination of employment with PSB. Notwithstanding the preceding,
if a definitive agreement providing for a Change in Control (defined below) is
entered into (i) on or before the expiration of the Term or (ii) within twelve
(12) months after Executive’s involuntary termination other than for Cause,
Disability, Retirement or death, then expiration of such Term shall be extended
through the Severance Protection Period (defined below).

2.   Commitment of Executive. In the event that any person extends any proposal
or offer which is intended to or may result in a Change in Control, defined
below (a “Change in Control Proposal”), Executive shall, at PSB’s request,
assist PSB and/or IMCB in evaluating such proposal or offer. Further, as a
condition to receipt of the Severance Payment (defined below), Executive agrees
not to voluntarily resign (including resignation for Good Reason) Executive’s
position with PSB during any period from the receipt of a specific Change in
Control Proposal up to the consummation or abandonment of the transaction
contemplated by such Proposal.

 

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3.   Severance Payment.

  a)   Payment Events. Subject to the requirements of Section 2 of this
Agreement, in the event of involuntary termination of Executive’s employment
with PSB, other than for Cause, Disability, Retirement, (each defined below) or
death, or in the event of voluntary termination for Good Reason (defined below),
(i) within the Severance Protection Period after a Change in Control,
(ii) within twelve (12) months before a definitive agreement providing for a
Change in Control is entered into or (iii) within the period between the date a
definitive agreement is executed and the effective date of the Change of
Control, PSB will pay Executive a severance payment in the amount determined
pursuant to the next section (“Severance Payment”), payable on the later of the
date of termination, the effective date of the Change in Control, or the first
day of the seventh month after the month in which the Executive’s termination of
employment occurs. The “Severance Protection Period” shall be the period
beginning on the effective date of the Change of Control and continuing
thereafter for twenty-four (24) months.     b)   Amount of Payment. The
Severance Payment shall be an amount equal to two (2) times the average of the
total base compensation and short term bonus received by Executive for each of
the two most recent calendar years.     c)   Partial Reimbursement of Excise Tax
Under IRS Code Sections 280G and 4999. If a Change in Control occurs the
Executive may become entitled to acceleration of benefits under this Agreement
or under any other plan or agreement of or with PSB or IMCB, including
accelerated vesting of stock options and acceleration of benefits under any
other benefit, compensation, or incentive plan or arrangement with PSB or IMCB
(collectively, the “Total Benefits”). If a Change in Control occurs, IMCB and
PSB shall cause the certified public accounting firm retained by IMCB as of the
date immediately before the Change in Control (the “Accounting Firm”) to
calculate the Total Benefits and any excise tax payable by the Executive under
sections 280G and 4999 based upon the Total Benefits. If the Accounting Firm
determines that an excise tax is payable, at the same time PSB pays the Change
in Control benefit under Section 3 of this Agreement, and not before, PSB shall
also pay to the Executive an amount in cash equal to the excise tax calculated
by the Accounting Firm (the “Excise Tax”). The Executive acknowledges and agrees
that this Sub-section c) provides for partial reimbursement only of the final
excise tax that may be payable by him, and that additional unreimbursed excise
taxes may be payable by him after taking into account the reimbursement payment
provided under this Sub-section c). The partial reimbursement of the excise tax
under this Sub-section c) shall be made in addition to the amount set forth in
Sub-sections a) and b).

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  d)   Calculating the Excise Tax. For purposes of determining whether any of
the Total Benefits will be subject to the Excise Tax and for purposes of
determining the amount of the Excise Tax,         1) Determination of “Parachute
Payments” Subject to the Excise Tax: any other payments or benefits received or
to be received by the Executive in connection with a Change in Control or the
Executive’s Termination of Employment (whether under the terms of this Agreement
or any other agreement, stock option plan or any other benefit plan or
arrangement with PSB or IMCB, any person whose actions result in a Change in
Control or any person affiliated with PSB, IMCB, or such person) shall be
treated as “parachute payments” within the meaning of section 280G(b)(2) of the
Internal Revenue Code, and all “excess parachute payments” within the meaning of
section 280G(b)(1) shall be treated as subject to the Excise Tax, unless in the
opinion of the Accounting Firm such other payments or benefits do not constitute
(in whole or in part) parachute payments, or such excess parachute payments
represent (in whole or in part) reasonable compensation for services actually
rendered within the meaning of section 280G(b)(4) of the Internal Revenue Code
in excess (as defined in section 280G(b)(3) of the Internal Revenue Code), or
are otherwise not subject to the Excise Tax,         2) Calculation of Benefits
Subject to Excise Tax: the amount of the Total Benefits that shall be treated as
subject to the Excise Tax shall be equal to the lesser of (a) the total amount
of the Total Benefits reduced by the amount of such Total Benefits that in the
opinion of the Accounting Firm are not parachute payments, or (b) the amount of
excess parachute payments within the meaning of section 280G(b)(1) (after
applying clause (i), above), and         3) Value of Noncash Benefits and
Deferred Payments: the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Accounting Firm in accordance with the
principles of sections 280G(d)(3) and (4) of the Internal Revenue Code.     e)  
Assumed Marginal Income Tax Rate. For purposes of determining the amount of the
partial Excise Tax reimbursement payment to be made under Sub-section c), the
Executive shall be deemed to pay federal income taxes at the highest marginal
rate of federal income taxation in the calendar year in which the partial Excise
Tax reimbursement under Sub-section c) is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive’s residence on the date of Termination of Employment, net of the
reduction in federal income taxes that can be obtained from deduction of such
state and local taxes (calculated by assuming that any reduction under section
68 of the Internal Revenue Code in the amount of itemized deductions allowable
to the Executive applies first to reduce the amount of such state and local
income taxes that would

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      otherwise be deductible by the Executive, and applicable federal FICA and
Medicare withholding taxes).

  f)   Accounting Firm’s Determinations Are Final and Binding. All
determinations made by the Accounting Firm under this Section 3 shall be final
and binding on PSB, IMCB, and the Executive. All determinations required to be
made under Sub-sections c) through f), inclusive – including the assumptions
used to calculate Total Benefits and the Excise Tax – shall be made by the
Accounting Firm, which shall provide detailed supporting calculations both to
PSB and the Executive.

4.   Definitions

  a)   IMCB. “IMCB” means Intermountain Community Bancorp.     b)   PSB. “PSB”
means Panhandle State Bank. PSB is a wholly owned subsidiary of IMCB.     c)  
Cause. “Cause” shall mean termination of the Executive’s employment for any of
the following reasons:

  1)   the Executive’s gross negligence or gross neglect of duties or
intentional and material failure to perform stated duties after written notice
thereof, or;     2)   disloyalty or dishonesty by the Executive in the
performance of the Executive’s duties, or a breach of the Executive’s fiduciary
duties for personal profit, in any case whether in the Executive’s capacity as a
director or officer, or     3)   intentional wrongful damage by the Executive to
the business or property of the Bank or its affiliates, including without
limitation the reputation of the Bank, which in the judgment of the Bank causes
material harm to the Bank or affiliates, or     4)   a willful violation by the
Executive of any applicable law or significant policy of the Bank or an
affiliate that, in the Bank’s judgment, results in an adverse effect on the Bank
or the affiliate, regardless of whether the violation leads to criminal
prosecution or conviction. For purposes of this Agreement, applicable laws
include any statute, rule, regulatory order, statement of policy, or final
cease-and-desist order of any governmental agency or body having regulatory
authority over the Bank, or     5)   the occurrence of any event that results in
the Executive being excluded from coverage, or having coverage limited for the
Executive as compared to other executives of the Bank, under the Bank’s blanket
bond or other fidelity or insurance policy covering its directors, officers, or
employees, or     6)   the Executive is removed from office or permanently
prohibited from participating in the Bank’s affairs by an order issued under
section 8(e)(4) or section 8(g)(1) of the Federal Deposit Insurance Act, 12
U.S.C. 1818(e)(4) or (g)(1), or

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  7)   conviction of the Executive for or plea of no contest to a felony or
conviction of or plea of no contest to a misdemeanor involving moral turpitude,
or the actual incarceration of the Executive for 45 consecutive days or more..

  d)   Change in Control. “Change in Control” means a change in control as
defined in Code section 409A and rules, regulations, and guidance of general
application thereunder issued by the Department of the Treasury, including:

  1)   Change in ownership: a change in ownership of Intermountain Community
Bancorp, an Idaho corporation of which the Employer is a wholly owned
subsidiary, occurs on the date any one person or group accumulates ownership of
Intermountain Community Bancorp stock constituting more than 50% of the total
fair market value or total voting power of Intermountain Community Bancorp
stock,;     2)   Change in effective control: (i) any one person, or more than
one person acting as a group, acquires within a 12-month period ownership of
Intermountain Community Bancorp stock possessing 30% or more of the total voting
power of Intermountain Community Bancorp stock, or (ii) a majority of
Intermountain Community Bancorp’s board of directors is replaced during any
12-month period by directors whose appointment or election is not endorsed in
advance by a majority of Intermountain Community Bancorp’s board of directors,
or;     3)   Change in ownership of a substantial portion of assets: a change in
ownership of a substantial portion of Intermountain Community Bancorp’s assets
occurs if in a 12-month period any one person or more than one person acting as
a group acquires from Intermountain Community Bancorp assets having a total
gross fair market value equal to or exceeding 40% of the total gross fair market
value of all of Intermountain Community Bancorp’s assets immediately before the
acquisition or acquisitions. For this purpose, gross fair market value means the
value of Intermountain Community Bancorp’s assets, or the value of the assets
being disposed of, determined without regard to any liabilities associated with
the assets.

  e)   Change in Control Proposal. “Change in Control Proposal” has the meaning
assigned in Section 2 of this Agreement.     f)   Effective Date. The “Effective
Date” shall be December 17, 2003.     g)   Disability. “Disability” means,
because of a medically determinable physical or mental impairment that can be
expected to result in death or that can be expected to last for a continuous
period of at least 12 months, (i) the Executive is unable to engage in any
substantial gainful activity, or (ii) the Executive is receiving income
replacement benefits for a period of at least three months under an accident and
health plan

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      of the employer. Medical determination of disability may be made either by
the Social Security Administration or by the provider of an accident or health
plan covering employees of the Employer. Upon request of the Plan Administrator,
the Executive must submit proof to the Plan Administrator of the Social Security
Administration’s or provider’s determination.

  h)   Retirement. “Retirement” shall mean voluntary termination by Executive in
accordance with PSB’s retirement policies, including early retirement, if
applicable to their salaried employees.     i)   Good Reason. “Voluntary
Termination for Good Reason” means a voluntary termination of employment by the
Executive if any one or more of the following conditions occur without the
Executive’s advance written consent, provided that (i) Executive shall have
given notice to the Employer of the existence of one or more of the following
conditions within ninety (90) days following the initial existence of the
condition(s), (ii) that within thirty (30) days after such notice Employer shall
have failed to remedy such condition(s) and (iii) the Executive’s voluntary
termination due to one or more of such conditions shall have occurred within
twenty-four (24) months following the initial existence of at least one of the
conditions:

  1)   a material diminution of the Executive’s base salary;     2)   a material
diminution of the Executive’s authority, duties, or responsibilities;     3)   a
material diminution in the authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report, including a requirement
that the Executive report to a corporate officer or employee instead of
reporting directly to the board of directors;     4)   a material diminution in
the budget over which the Executive retains authority;     5)   a material
change in the geographic location at which the Executive must perform services
for the Employer, or;     6)   any other action or inaction that constitutes a
material breach by the Employer of this agreement or of any other agreement
under which the Executive provides services to the Employer.

5.   Not an Employment Agreement. Nothing in this Agreement, express or implied,
is intended to confer upon Executive the right to employment with PSB.
Accordingly, except with respect to the Severance Payment, this Agreement shall
have no effect on the determination of any compensation payable by PSB to
Executive, or upon any of the other terms of Executive’s employment with PSB.
The specific arrangements referred to herein are not intended to exclude any
other benefits which may be available to Executive upon a termination of
employment with PSB pursuant to employee benefit plans of PSB or otherwise.

6.   Withholding. All payments required to be made by PSB hereunder to Executive
shall be subject to the withholding of such amounts, if any, relating

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    to tax and other payroll deductions as PSB may reasonably determine should
be withheld pursuant to any applicable law or regulation.

7.   Assignability. PSB may assign the Agreement and its rights hereunder in
whole, but not in part, to any corporation, bank or other entity with or into
which PSB may hereafter merge or consolidate or to which PSB may transfer all or
substantially all of its assets, if in any such case said corporation, bank or
other entity shall by operation of law or expressly in writing assume all
obligations of PSB hereunder as fully as if it had been originally made a party
hereto, but may not otherwise assign this Agreement or its rights hereunder.
Executive may not assign or transfer this Agreement or any rights or obligations
hereunder.

8.   Entire Agreement. This agreement constitutes the entire understanding
between the parties concerning its subject matter and supersedes all prior
agreements, including but not limited to that certain agreement between
Executive and PSB dated May 31, 2002. Accordingly, Executive specifically waives
the terms of and all of Executive’s rights under any previously executed
severance agreement, severance provisions of any employment and/or
change-in-control agreements, whether written or oral, previously entered into
with PSB and/or IMCB.

9.   Savings Clause Relating to Compliance with Code Section 409A. Despite any
contrary provision of this Agreement, if when the Executive’s employment
terminates the Executive is a specified employee, as defined in Code section
409A, and if any payments under Article 3 of this Agreement will result in
additional tax or interest to the Executive because of section 409A, the
Executive shall not be entitled to the payments under Article 3 until the
earliest of (i) the date that is at least six months after termination of the
Executive’s employment for reasons other than the Executive’s death, (ii) the
date of the Executive’s death, or (iii) any earlier date that does not result in
additional tax or interest to the Executive under section 409A. If any provision
of this Agreement would subject the Executive to additional tax or interest
under section 409A, PSB shall reform the provision. However, PSB shall maintain
to the maximum extent practicable the original intent of the applicable
provision without subjecting the Executive to additional tax or interest, and
PSB shall not be required to incur any additional compensation expense as a
result of the reformed provision.

10.   General Provisions.

  a)   Choice of Law. This Agreement is made with reference to and is intended
to be construed in accordance with the laws of the State of Idaho.     b)  
Payment of Legal Fees. PSB and IMCB are aware that after a Change in Control
management could cause or attempt to cause PSB and IMCB to refuse to comply with
the obligations under this Agreement, or could institute or cause or attempt to
cause PSB or IMCB to institute litigation seeking to have this Agreement
declared unenforceable, or could take or attempt to take other action to deny
Executive the

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      benefits intended under this Agreement. In these circumstances the purpose
of this Agreement would be frustrated. It is PSB’s and IMCB’s intention that the
Executive not be required to incur the expenses associated with the enforcement
of his rights under this Agreement, whether by litigation or other legal action,
because the cost and expense thereof would substantially detract from the
benefits intended to be granted to the Executive hereunder. It is PSB’s and
IMCB’s intention that the Executive not be forced to negotiate settlement of his
rights under this Agreement under threat of incurring expenses. Accordingly, if
after a Change in Control occurs it appears to the Executive that (a) either of
PSB or IMCB has failed to comply with any of its obligations under this
Agreement, or (b) either of PSB or IMCB or any other person has taken any action
to declare this Agreement void or unenforceable, or instituted any litigation or
other legal action designed to deny, diminish, or to recover from the Executive
the benefits intended to be provided to the Executive hereunder, PSB and IMCB
irrevocably authorize the Executive from time to time to retain counsel of his
choice, at PSB’s and IMCB’s expense as provided in this paragraph (b), to
represent the Executive in connection with the initiation or defense of any
litigation or other legal action, whether by or against PSB or IMCB or any
director, officer, stockholder, or other person affiliated with PSB or IMCB, in
any jurisdiction. Notwithstanding any existing or previous attorney-client
relationship between PSB or IMCB and any counsel chosen by the Executive under
this paragraph (b), PSB and IMCB irrevocably consent to the Executive entering
into an attorney-client relationship with that counsel, and PSB and IMCB and the
Executive agree that a confidential relationship shall exist between the
Executive and that counsel. The fees and expenses of counsel selected from time
to time by the Executive as provided in this section shall be paid or reimbursed
to the Executive by PSB or IMCB on a regular, periodic basis upon presentation
by the Executive of a statement or statements prepared by such counsel in
accordance with such counsel’s customary practices, up to a maximum aggregate
amount of $300,000, whether suit be brought or not, and whether or not incurred
in trial, bankruptcy, or appellate proceedings. PSB’s and IMCB’s obligation to
pay the Executive’s legal fees provided by this paragraph (b) operates
separately from and in addition to any legal fee reimbursement obligation PSB or
IMCB may have with the Executive under any separate severance, employment,
salary continuation, or other agreement. Anything in this paragraph (b) to the
contrary notwithstanding however, PSB and IMCB shall not be required to pay or
reimburse the Executive’s legal expenses if doing so would violate section 18(k)
of the Federal Deposit Insurance Act [12 U.S.C. 1828(k)] and Rule 359.3 of the
Federal Deposit Insurance Corporation [12 CFR 359.3].

  c)   Successors. This Agreement shall bind and inure to the benefit of the
Parties and each of their respective affiliates, legal representatives, heirs,
successors and assigns.

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  d)   Amendment. This Agreement may be amended only in a writing signed by the
Parties.     e)   Headings. The headings of sections of this Agreement have been
included for convenience of reference only. They shall not be construed to
modify or otherwise affect in any respect any of the provisions of the
Agreement.

EXECUTED by each of the Parties effective as of the date first stated above.

             
PSB
          Executive Panhandle State Bank       Executive Vice President
 
          Chief Financial Officer
 
           
By:
  /s/       /s/
 
           
 
  Chief Executive Officer                    Date       Doug Wright
                    Date
 
            AGREED TO AND RATIFIED by:        
 
           
IMCB
            Intermountain Community Bancorp        
 
           
By:
  /s/        
 
           
 
  President & CEO                    Date        

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