Exhibit 10.10
EXECUTIVE EMPLOYMENT AGREEMENT
(Amended and Restated)
     This Amended and Restated EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is
dated as of January 1, 2008. The effective date of this Agreement is January 1,
2002 (the “Effective Date”). The parties to this Agreement (“Parties”) are
INTERMOUNTAIN COMMUNITY BANCORP, an Idaho corporation (“IMCB”), PANHANDLE STATE
BANK, an Idaho state-chartered bank (“PSB”) (IMCB and PSB individually and
collectively being “Employer”) and JERROLD B. SMITH (“Executive”).
Recitals
     A. Executive is employed by Employer in an executive management capacity,
presently holding the position of President of Panhandle State Bank, a wholly
owned subsidiary of Intermountain Community Bancorp, Executive Vice President,
Intermountain Community Bancorp, and member of the Board of Directors of both
Panhandle State Bank and Intermountain Community Bancorp. The Parties wish to
continue Executive’s employment in that capacity under the terms and conditions
of this Agreement.
     B. Executive previously entered into (i) an Executive Employment Agreement
with Employer dated as of January 1, 2002, and (ii) an Executive Severance
Agreement dated as of September 15, 1999, as amended, with Panhandle Bancorp,
the predecessor name of IMCB (the “Change in Control Agreement”), which provided
for certain severance payments to Executive in the event of a change in control
of IMCB. The Executive Employment Agreement was amended and restated
December 17, 2003 and the Executive Severance Agreement was merged therein
thereby terminating a separate Executive Severance Agreement.
     C. The December 17, 2003 amended and restated Executive Employment
Agreement was amended on March 24, 2004 by a First Amendment and again on
March 4, 2005 by a Second Amendment. This amendment and restatement of Executive
Employment Agreement is intended to incorporate, restate and replace all prior
Executive Employment Agreements and amendments.
     D. This amendment and restatement of Executive Employment 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.
Agreement

1)   Term of Agreement. The term of this employment agreement is three
(3) years, commencing on the Effective Date (the “Term”). The agreement will
automatically

 

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    renew every three years unless cancelled by the Board of Directors within
60 days of the expiration of the term. 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)   Employment.
Employer will continue Executive’s employment during the Term, and Executive
accepts employment by Employer on the terms and conditions set forth in this
Agreement. Executive’s titles will continue to be “Executive Vice President for
IMCB, “President” for PSB, and Board of Director for both IMCB and PSB.   3)  
Duties of Executive. Executive will report directly to the Chief Executive
Officer of PSB and President & CEO of IMCB, who is one in the same. Executive
will be responsible for the following duties:

  a)   Functions as administrative head of staff in absence of CEO     b)  
Assisting in the developing of and compliance with all bank policies     c)  
Responsible for the strategic planning, development and production of the bank’s
loan and deposit portfolio and revenue enhancement growth     d)   Responsible
for management of PSB and its divisions as follows: Intermountain Community Bank
of Idaho, Intermountain Community Bank of Washington, Magic Valley Bank, and the
Revenue Enhancement Groups. The Revenue Enhancement Groups include the
following: Small Business Administration Division, Bank’s Mortgage Division
(Home Loan Centers), Business Advantage Department, Relationship Services
Officers, and Real Estate Services Department     e)   Responsible for
development and production of bank’s non-interest Income, and control over the
bank’s non-interest expense     f)   Calling on the most important existing and
potential corporate customers     g)   Responsible for expansion into new
markets and recruitment of employees     h)   Monitoring all bank progress
relative to the financial plan. Directs management to take action accordingly.
Reports variances to the CEO.     i)   Responsible for the development and
implementation of the products and services of the Home Loan Center. Oversees
staffing requirements and administration.     j)   Serves on board committees
such as: Loan Review, Compliance, Audit, and Strategic Planning; and bank
committees such as: Executive Management, Human Resources, Loan, ALCO, Risk
Management and other committees assigned by the CEO     k)   Represents the bank
at civic and community activities.     l)   Oversees operations of bank and
revenue enhancement departments. Responsible for efficient operation, adequate
staffing, financial planning, goals, marketing within their respective areas,
and establishing market share. Monitors progress through financial reports,
communication and coordination with each Division President and SVP of revenue
enhancement groups.

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      Recommends operational improvements, policy changes, and strategies
relative to financial planning and annual budgeting.     m)   Conducts regular
meetings with Presidents and Senior Management to analyze and discuss overall
bank production, effectiveness, goals, and strategies. Promotes and encourages a
“sales and service” culture throughout the bank system.     n)   Interviews,
hires, trains, supervises and evaluates all production staff. Performs
terminations if necessary after all other options have been exhausted.     o)  
Assists Presidents and Senior management with recruiting branch personnel.

4)   Commitment of Executive. (a) Executive will faithfully and diligently
perform the duties set forth in Section 3 and such other duties as may be
assigned to Executive from time to time by IMCB’s board of directors (the
“Board”). Executive will use his best efforts to perform his duties and will
devote full time and attention to these duties during working hours. Executive
may engage in non-IMCB business activities with prior Board approval, which
approval will not be unreasonably withheld.

(b) 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 Employer’s request, assist Employer 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 Employer
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.

5)   Salary. Executive will receive an annual base salary of $182,640 to be paid
in accordance with PSB’s regular payroll schedule. The Executive Committee of
the Board will review Executive’s salary in connection with its performance
review on an annual basis.   6)   Other Compensation. Executive will participate
in both the Long-Term Incentive Plan and Executive Incentive Plan administered
by the Human Resource Committee.

     a) Executive is eligible to participate in PSB’s 401K retirement plan with
employer match of 50% of first 8% of salary contributed.
     b) Executive may receive stock grants annually, based on performance
evaluation at the discretion of the Board of Directors.

7)   Salary Continuation Plan. In consideration of this agreement, IMCB has
entered into a Salary Continuation Agreement with Executive, substantially in
the form approved by IMCB’s board of directors on October 22, 2003 (the “Salary
Continuation Agreement”).

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8)   Vacation and Benefits. Executive is eligible for four (4) weeks of paid
vacation per year. Unused vacation time will not be carried over. Additional
benefits include life insurance of $100,000 for Executive and $2,000 for
Executive’s spouse and $2,000 for each dependent, and miscellaneous firm-wide
benefits such as free checking account, safe deposit box, no fee investments,
etc. Executive shall also be entitled to use of a company automobile with gas
card.   9)   Termination and Severance Provisions. If, during the Term,
Executive’s employment with Employer is involuntarily terminated without Cause
or if Employee voluntarily terminates employment with Employer either with Good
Reason or without Good Reason, and provided that such termination does not
otherwise entitle Executive to receive a Severance Payment (as defined below)
under Section 10 of this Agreement, Executive will be entitled to receive a
termination payment equal to two (2) times the average of the total base
compensation received by Executive for each of the two most recent calendar
years (“Termination Payment”). The Termination Payment shall be paid in one lump
sum payment, payable on the first day of the seventh month after the month in
which the Executive’s termination of employment occurs. Notwithstanding the
preceding, in the event that a definitive agreement providing for a Change in
Control (each as defined below) is entered into within twelve (12) months after
Executive’s involuntary termination without Cause or voluntary termination with
or without Good Reason, Executive shall be entitled to receive the difference
between the Severance Payment and the Termination Payment. Such difference shall
be paid to the Executive 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 occurred.   10)  
Change in Control/Severance Payment.

  a)   Payment Events. Subject to the requirements of Section 4(b) of this
Agreement, in the event of involuntary termination of Executive’s employment
with Employer, 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, Employer 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.

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  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.

11)   Excise Tax Under Internal Revenue Code Sections 280G and 4999.

  a)   Partial Reimbursement of Excise Tax. 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 10 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 Section 11 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 Section 11. The partial reimbursement of the excise tax
under this Section 11 shall be made in addition to the amount set forth in
Section 10.     (b)   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

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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.

  (c)   Assumed Marginal Income Tax Rate. For purposes of determining the amount
of the partial Excise Tax reimbursement payment to be made under this Section
11, 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 this Section 11 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 otherwise be deductible by the Executive, and
applicable federal FICA and Medicare withholding taxes).     (d)   Accounting
Firm’s Determinations Are Final and Binding. All determinations made by the
Accounting Firm under this Section 11 shall be final and binding on PSB, IMCB,
and the Executive. All determinations required to be made under this Section 11
– 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.

12)   Definitions

  a)   Termination for Cause and Cause. “Involuntary Termination for Cause” and
“Cause” 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;

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  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     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.

  b)   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

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      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.

  c)   Change in Control Proposal. “Change in Control Proposal” has the meaning
assigned in Section 4(b) of this Agreement.     d)   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 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.     e)  
Retirement. “Retirement” shall mean voluntary termination by Executive in
accordance with PSB’s retirement policies, including early retirement, if
applicable to their salaried employees.     f)   Good Reason. “Voluntary
Termination with 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;

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  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 (material change in geographic location means a change of more
than 60 miles (one way) in the Executive’s commute if the Executive does not
agree to move), 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.

13)   Confidentiality. Executive will not, after signing this Agreement,
including during and after its Term, use for his own purposes or disclose to any
other person or entity any confidential information concerning Employer or its
business operations or customers, unless (1) Employer consents to the use or
disclosure of its confidential information, (2) the use or disclosure is
consistent with Executive’s duties under this Agreement, or (3) disclosure is
required by law or court order. Confidential information includes, but is not
limited to, financial information, customer lists, marketing strategies, and
business plans.   14)   Return of Employer Property. If and when Executive
ceases, for any reason, to be employed by Employer, Executive must return to
Employer all keys, pass cards, identification cards and any other property of
Employer. At the same time, Executive also must return to Employer all originals
and copies (whether in hard copy, electronic or other form) of any documents,
notes, memoranda, designs, devices, diskettes, tapes, manuals, and
specifications which constitute proprietary information or material of Employer.
The obligations in this Section include the return of documents and other
materials which may be in Executive’s desk at work, in Executive’s car or place
of residence, or in any other location under Executive’s control.   15)  
Non-Solicitation. Executive shall not solicit or cause to be solicited for
employment any employee of Employer for a period of two (2) years following
Executive’s termination; nor solicit or cause to be solicited the business
and/or accounts of customers of Employer for a period of two years following
Executive’s termination. Executive’s obligations under this Section 15 terminate
immediately upon a Change in Control.   16)   Non-competition. Except as
otherwise expressly provided in this Agreement, while Executive is employed by
Employer and for two years following termination of Executive’s employment for
any reason, , Executive will not become involved with a Competing Business or
serve, directly or indirectly, a Competing Business in any manner, including,
without limitation, as a shareholder, member, partner, director,

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  officer, manager, investor, organizer, “founder,” employee, consultant, or
agent; provided, however, that Executive may acquire and passively own an
interest not exceeding 2% of the total equity interest in a Competing Business.
Executive’s obligations under this Section 16 terminate immediately upon a
Change in Control. For purposes of this Agreement, the term “Competing Business”
means any financial service institutions, including without limitation banks,
insurance companies, leasing companies, mortgage companies, and brokerage firms
that engage in business in the State of Idaho, or southeastern Oregon, or
eastern Washington.   17)   Enforcement.

  a)   Employer and Executive stipulate that, in light of all of the facts and
circumstances of the relationship between Executive and Employer, the agreements
referred to in Sections 15 and 16 (including without limitation their scope,
duration and geographic extent) are fair and reasonably necessary for the
protection of Employer’s goodwill and other protectable interests. If a court of
competent jurisdiction should decline to enforce any of those covenants and
agreements, Executive and Employer request the court to reform these provisions
to restrict Executive’s ability to compete with Employer to the maximum extent,
in time, scope of activities, and geography, the court finds enforceable.     b)
  Executive acknowledges that Employer will suffer immediate and irreparable
harm that will not be compensable by damages alone, if Executive repudiates or
breaches any of the provisions of Sections 15 and 16 or threatens or attempts to
do so. For this reason, under these circumstances, Employer, in addition to and
without limitation of any other rights, remedies or damages available to it at
law or in equity, will be entitled to obtain temporary, preliminary, and
permanent injunctions in order to prevent or restrain the breach, and Employer
will not be required to post a bond as a condition for the granting of this
relief.

18)   Adequate Consideration. Executive specifically acknowledges the receipt of
adequate consideration, including without limitation the Termination Payment,
identified in Section 9, if due and owing, for the covenants contained in
Sections 15 and 16 and that Employer is entitled to require him to comply with
those Sections regardless of the reason(s) for Executive’s separation of
employment with Employer. Sections 15 and 16 will survive termination of this
Agreement, but will expire no later than two years from the date of the
termination of employment or the maturity of this agreement, whichever is later.
Executive represents that if his employment is terminated, whether voluntarily
or involuntarily, Executive has experience and capabilities sufficient to enable
Executive to obtain employment in areas which do not violate this Agreement and
that Employer’s enforcement of a remedy by way of injunction will not prevent
Executive from earning a livelihood.   19)   Entire Agreement. This agreement
constitutes the entire understanding between the parties concerning its subject
matter and supersedes all prior agreements,

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    including that certain employment agreement between Executive and Employer
effective January 1, 2002 and the Change in Control Agreement. Accordingly,
Executive specifically waives the terms of and all of Executive’s rights under
any severance provisions of any employment and/or change-in-control agreements,
whether written or oral, previously entered into with PSB and/or IMCB.
Notwithstanding the preceding, the terms of this agreement are separate from and
do not supercede the terms of the Salary Continuation Agreement.   20)   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 Articles 9, 10 or 11 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 Articles 9, 10 or 11 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, the Employer shall reform the provision. However, the Employer
shall maintain to the maximum extent practicable the original intent of the
applicable provision without subjecting the Executive to additional tax or
interest, and the Employer shall not be required to incur any additional
compensation expense as a result of the reformed provision.   21)  
Miscellaneous 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. Employer is aware that after a Change in Control
management could cause or attempt to cause Employer to refuse to comply with the
obligations under this Agreement, or could institute or cause or attempt to
cause Employer to institute litigation seeking to have this Agreement declared
unenforceable, or could take or attempt to take other action to deny Executive
the benefits intended under this Agreement. In these circumstances the purpose
of this Agreement would be frustrated. It is Employer’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 Employer’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) Employer has
failed to comply with any of its obligations under this Agreement, or (b)
Employer or any other person has taken any action to declare this Agreement void
or unenforceable, or

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      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, Employer irrevocably authorize the Executive from
time to time to retain counsel of his choice, at Employer’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 Employer or any director, officer, stockholder, or other person
affiliated with Employer, in any jurisdiction. Notwithstanding any existing or
previous attorney-client relationship between Employer and any counsel chosen by
the Executive under this paragraph (b), Employer irrevocably consents to the
Executive entering into an attorney-client relationship with that counsel, and
Employer 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 Employer 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 $500,000, whether suit be brought or not, and whether or not
incurred in trial, bankruptcy, or appellate proceedings. Employer’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
Employer 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, Employer 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.    
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.     f)   Counsel Review. Executive acknowledges that he has had the
opportunity to consult with independent counsel with respect to the negotiation,
preparation, and execution of this Agreement.

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  g)   Severability. The provisions of this Agreement are severable. The
invalidity of any provision will not affect the validity of other provisions of
this Agreement.

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

             
IMCB
      EXECUTIVE    
Intermountain Community Bancorp,
      Jerrold B. Smith    
an Idaho Corporation
      Executive Vice President of IMCB and    
 
      President of Panhandle State Bank    
 
           
/s/
 
Curt Hecker
      /s/
 
Jerrold B. Smith    
President & CEO
      Date:                                            
Date:                                        
           
 
           
PSB
           
Panhandle State Bank,
           
an Idaho state chartered bank
           
 
           
/s/
 
Curt Hecker
           
Chief Executive Officer
           
Date:                                        
           

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