Exhibit 10.21
EXECUTIVE SEVERANCE AGREEMENT
     This EXECUTIVE SEVERANCE AGREEMENT (“Agreement”) is dated as of March 14,
2007 (the “Effective Date”). The parties to this Agreement (“Parties”) are
PANHANDLE STATE BANK (“PSB”), and Pamela Rasmussen (“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 Operating 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.

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.   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

 

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      Period after a Change in Control, or (ii) within twelve (12) months before
a definitive agreement providing for a Change in Control is entered into, 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 or the effective date of the Change in Control. 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)   Limitation on Payment. Notwithstanding anything in this Agreement to the
contrary, the Severance Payment shall not exceed an amount equal to One Dollar
($1.00) less than the amount which would cause the payment, together with any
other payments received from PSB and/or IMCB to be a “parachute payment” as
defined in Section 280G(b)(2)(A) of the Internal Revenue Code of 1986, as
amended.

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 means any one or more of the following:

  1)   Willful misfeasance or gross negligence in the performance of Executive’s
duties;

  2)   Conviction of a crime in connection with such duties; or

  3)   Conduct demonstrably and significantly harmful to the financial condition
of the PSB and/or IMCB.

  c)   Change in Control. “Change in Control” shall mean any of the following:

  1)   Merger. IMCB merges into or consolidates with another corporation, or
merges another corporation into IMCB, and as a result less than 50% of the
combined voting power of the resulting corporation immediately after the merger
or consolidation is held by persons who were the holders of IMCB’s voting
securities immediately before the merger or consolidation;

  2)   Acquisition of Significant Share Ownership. A report on Schedule 13D or
another form or schedule (other than Schedule 13G) is filed or is required to be
filed under sections 13(d) or 14(d) of the Securities Exchange Act of 1934, if
the schedule discloses that the filing person or persons acting in concert has
or have become the beneficial owner of 25% or more of a class

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      of IMCB’s voting securities, or if IMCB does not then have equity
securities registered under section 12 of the Securities Exchange Act of 1934 a
person or group acting in concert has or have become the beneficial owner of 25%
or more of a class of IMCB’s voting securities, but this paragraph (2) shall not
apply to beneficial ownership of voting shares of IMCB held in a fiduciary
capacity by an entity in which IMCB directly or indirectly beneficially owns 50%
or more of the outstanding voting securities;

  3)   Change in Board Composition. During any period of two consecutive years,
individuals who constitute IMCB’s board of directors at the beginning of the
two-year period cease for any reason to constitute at least a majority thereof;
provided, however, that — for purposes of this paragraph (c) — each director who
is first elected by the board (or first nominated by the board for election by
stockholders) by a vote of at least two-thirds (2/3) of the directors who were
directors at the beginning of the period shall be deemed to have been a director
at the beginning of the two-year period; or

  4)   Sale of Assets. IMCB sells to a third party all or substantially all of
IMCB’s assets. For this purpose, sale of all or substantially all of IMCB’s
assets includes sale of the shares or assets of the PSB alone.

  d)   Change in Control Proposal. “Change in Control Proposal” has the meaning
assigned in Section 2 of this Agreement.     e)   Disability. “Disability” means
a physical or mental impairment which renders Executive incapable of
substantially performing the essential functions of such Executive’s position,
and which is expected to continue rendering Executive so incapable for the
reasonably foreseeable future, with or without reasonable accommodation.     f)
  Retirement. “Retirement” shall mean voluntary termination by Executive in
accordance with PSB’s retirement policies, including early retirement, if
applicable to their salaried employees.     g)   Good Reason. “Good Reason”
shall mean any of the following:

  1)   Substantial diminution of the Executive’s duties compared to the
Executive’s duties prior to the Change in Control;

  2)   Substantial diminution of the Executive’s compensation compared to the
Executive’s compensation prior to the Change in Control;

  3)   Significant relocation, where Significant means a change of more than 60
miles (one way) in the Executive’s commute if the Executive does not agree to
move.

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

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    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 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 that certain agreement between Executive and PSB dated
November 9, 2004. 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.   9.   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 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.

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      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 $250,000, 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.

  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.

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

          PSB   Executive Panhandle State Bank   Exec, Vice President
 
      Chief Operating Officer
 
       
By:
  /s/ Curt Hecker                     3/14/07   /s/ Pam Rasmussen       3/14/07
 
       
 
  Chief Executive Officer          Date   Pamela Rasmussen          Date
 
        AGREED TO AND RATIFIED by:    
 
        IMCB     Intermountain Community Bancorp    
 
       
By:
  /s/ Curt Hecker           3/14/07    
 
       
 
  President & CEO          Date    

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