EXHIBIT 10.16
EXECUTIVE EMPLOYMENT AGREEMENT
This Amended and Restated EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is
dated as of DECEMBER 17, 2003. The effective date of this Agreement is JANUARY
1, 2002 (the "Effective Date"). The parties to this Agreement ("Parties") are
INTERMOUNTAIN COMMUNITY BANCORP F/K/A PANHANDLE 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 and
Intermountain Community Bank (ICB), a Division of PSB. 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 "Change in Control Agreement"), which provides for certain severance
payments to Executive in the event of a change in control of IMCB.
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 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 title will be "President" for PSB
and ICB.
3) DUTIES OF EXECUTIVE. Executive will report directly to the Chief Executive
Officer of PSB. 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 development and production of the bank's
loan and deposit portfolio
d) Responsible for management of branch NIE
e) Responsible for development and production of NII of branch
banks
f) Calling on the most important existing and potential corporate
customers
g) Responsible for expansion into new markets and recruitment of
employees
h) Monitoring PSB/ICB's branch 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 bank committees such as: Executive Management, Human
Resources, Loan, ALCO, and other committees assigned by the
CEO
k) Serves as commercial loan officer to a few of the bank's most
important business customers.
l) Represents the bank at civic and community activities
l) Oversees operations of branch offices. 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 Branch
Manager. Recommends operational improvements, policy changes,
and strategies relative to financial planning and annual
budgeting.
m) Conducts regular meetings with Branch managers to analyze and
discuss overall branch production, effectiveness, goals, and
strategies. Promotes and encourages a "sales and service"
culture throughout the branch office system.
n) Interviews, hires, trains, supervises and evaluates Branch
Managers and Senior Commercial Loan Officers. Performs
terminations if necessary after all other options have been
exhausted.
o) Assists Branch Managers 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 $147,500 beginning
January 1, 2002, to be paid in accordance with PSB's regular payroll
schedule. The
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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 6% of salary contributed.
b) Executive may receive stock options annually, based on
performance evaluation at the discretion of the Board of Directors.
c) As "Additional Consideration" for Executive entering into this
agreement, IMCB and Executive shall enter into a bonus agreement
contingent upon Executive purchasing stock, which agreement is referred to
as "Stock Purchase Agreement for Jerrold B. Smith."
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").
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 $50,000 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, either Employer
or Executive terminates Executive's employment with Employer for any
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 Executive's annual base salary the
("Termination Payment"). The Termination Payment shall be paid in one lump
sum payment, payable upon the date that Executive's employment is
terminated. 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 other than for Cause, Disability, Retirement or death,
Executive shall be entitled to receive the difference between the
Severance Payment and the Termination Payment upon the effective date of
the Change in Control.
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
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(defined below), (i) within the Severance Protection 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, 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 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 the Payment Multiple (defined below) multiplied by
one-twelfth of Executive's compensation as reported on
Executive's IRS Form W-2 for the most recent calendar year
less compensation payable to Executive that was deferred or
carried over from prior years. In the event the Executive is
not employed for a full calendar year prior to the Change in
Control, the Severance Payment shall be an amount equal to the
Payment Multiple multiplied by one-twelfth of Executive's
annual base salary. The "Payment Multiple" shall be
twenty-four (24). The Severance Payment shall be reduced by an
amount equal to any compensation which would be reported on
Executive's IRS Form W-2 for the period following the Change
in Control; provided, however, the Severance Payment shall not
be reduced by the amount of any bonus or other compensation
received in the period following the Change in Control that is
based on Executive's performance during the period prior to
the Change in Control.
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 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.
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(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 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
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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) 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 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
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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 4(b) 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.
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
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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, 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
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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 reasons(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, 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) 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) Arbitration. Any dispute, controversy or claim arising out of
or in connection with, or relating to, this Agreement or any
breach or alleged breach hereof, shall, upon the request of
any party involved, be submitted to, and settled by,
arbitration pursuant to the rules then in effect of the
American Arbitration Association (or under any other form of
arbitration mutually acceptable to the parties so involved).
Any award rendered shall be final and conclusive upon the
parties and a judgment thereon may be entered in the highest
court of the forum having jurisdiction. The arbitrator shall
render a written decision, naming the substantially prevailing
party in the action, and shall award such party all costs and
expenses incurred, including reasonable attorneys' fees.
Notwithstanding the foregoing, if Executive violates Sections
13 or 14, Employer will have the right to initiate the court
proceedings described in Section 15(b), in lieu of an
arbitration proceeding under this Section. Employer may
initiate these proceedings wherever appropriate within the
State of Idaho; but Executive will consent to venue and
jurisdiction in Bonner County, Idaho.
c) Attorney Fees. In the event of any breach of or default under
this Agreement which results in either party incurring
attorney or other fees, costs or expenses (including in
arbitration), the prevailing party shall be entitled to
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recover from the non-prevailing party any and all such fees,
costs and expenses, including attorneys' fees.
d) 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.
e) Amendment. This Agreement may be amended only in a writing
signed by the Parties.
f) 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.
g) 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.
h) 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 President
Panhandle State Bank and
Intermountain Community Bank
/s/ Curt Hecker /s/ Jerrold B. Smith
- ---------------- --------------------
Curt Hecker Jerrold B. Smith
President & CEO Date: _____________
Date: ______________
PSB
Panhandle State Bank,
an Idaho state chartered bank
/s/ Curt Hecker
- --------------------
Curt Hecker
Chief Executive Officer
Date: _____________
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FIRST AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
This First Amendment of Executive Employment Agreement (the "Amendment")
is made and entered into as of March 24, 2004. The parties to this Amendment
(the "Parties") are INTERMOUNTAIN COMMUNITY BANCORP F/K/A PANHANDLE 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. The Parties entered into an Executive Employment Agreement dated as of
December 17, 2003 and effective as of January 1, 2002 (the "Agreement"), which
Agreement governs the terms of Executive's employment with Employer.
B. Among other things, the Agreement addresses the Severance Payment to be
received by Executive in the event of a Change in Control. The Agreement sets
forth a formula for determining the amount of the Severance Payment. Since the
Employment Agreement was executed, the Parties have determined that the formula
set forth in the Agreement does not accurately reflect the Parties' intent.
C. In order to manifest the Parties' intent regarding the Severance
Payment, the Parties wish to amend the terms of the Agreement as set forth in
this Amendment. Unless otherwise defined in this Amendment, capitalized terms
used in this Amendment have the meanings assigned to them in the Agreement.
TERMS OF AMENDMENT
In consideration of the foregoing, the Parties agree as follows:
1. Section 10 of the Agreement is amended by deleting subsection (b) in
its entirety and inserting the following in its place:
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.
2. This Amendment may be executed in one or more counterparts, each of
will be deemed an original, but all of which taken together will constitute one
and the same document.
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Dated as of March 24, 2004.
IMCB EXECUTIVE
Intermountain Community Bancorp, Jerrold B. Smith
an Idaho Corporation President
Panhandle State Bank and
Intermountain Community Bank
/s/ Curt Hecker /s/ Jerrold B. Smith
- ----------------- -----------------------
Curt Hecker Jerrold B. Smith
President & CEO Date: _________________
Date: _______________
PSB
Panhandle State Bank,
an Idaho State Chartered Bank
/s/ Curt Hecker
- --------------------
Curt Hecker
Chief Executive Officer
Date: _________________
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SECOND AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT
This SECOND AMENDMENT OF EXECUTIVE EMPLOYMENT AGREEMENT (this "Amendment")
is dated as of this 4th day of March, 2005 by and among Jerrold B. Smith,
Executive Vice President (the "Executive") of Intermountain Community Bancorp,
Inc., an Idaho corporation ("Intermountain"), and President of Panhandle State
Bank, an Idaho bank and wholly owned subsidiary of Intermountain (the "Bank").
WHEREAS, the Executive, Intermountain, and the Bank entered into an
Executive Employment Agreement dated as of December 17, 2003 (as amended by the
First Amendment of Executive Employment Agreement dated as of March 24, 2004,
the "Executive Employment Agreement"), which agreement establishes the terms and
conditions of the Executive's employment with the Bank and Intermountain,
WHEREAS, the parties desire now to amend certain provisions of the
Executive Employment Agreement, consistent with the terms of section 20(e) of
that agreement, and
WHEREAS, the parties intend that the amendments of the Executive
Employment Agreement made by this Amendment shall become effective immediately,
and that the Executive Employment Agreement shall, as amended, remain in full
force and effect according to its terms.
NOW THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows.
1. DELETION OF THE ARBITRATION CLAUSE AND LEGAL FEE CLAUSE IN SECTIONS
20(b) AND 20(c); REPLACEMENT WITH A NEW LEGAL FEE REIMBURSEMENT CLAUSE.
Paragraph (b) of section 20 of the Executive Employment Agreement, captioned
"Arbitration," and paragraph (c) of section 20, captioned "Attorney Fees," shall
be deleted in their entirety and replaced by a new paragraph (b), captioned
"Payment of Legal Fees." The deleted paragraphs (b) and (c) are as follows -
b) Arbitration. Any dispute, controversy or claim arising out of or in
connection with, or relating to, this Agreement or any breach or
alleged breach hereof, shall, upon the request of any party
involved, be submitted to, and settled by, arbitration pursuant to
the rules then in effect of the American Arbitration Association (or
under any other form of arbitration mutually acceptable to the
parties so involved). Any award rendered shall be final and
conclusive upon the parties and a judgment thereon may be entered in
the highest court of the forum having jurisdiction. The arbitrator
shall render a written decision, naming the substantially prevailing
party in the action, and shall award such party all costs and
expenses incurred, including reasonable attorneys' fees.
Notwithstanding the foregoing, if Executive violates Sections 13 or
14, Employer will have the right to initiate the court proceedings
described in Section 15(b), in lieu of an arbitration proceeding
under this Section. Employer may initiate these proceedings wherever
appropriate within the State of Idaho; but Executive will consent to
venue and jurisdiction in Bonner County, Idaho.
c) Attorney Fees. In the event of any breach of or default under this
Agreement which results in either party incurring attorney or other
fees, costs or expenses (including in arbitration), the prevailing
party shall be entitled to recover from the non-prevailing party any
and all such fees, costs and expenses, including attorneys' fees.
The deleted paragraphs (b) and (c) of section 20 shall be replaced by new
paragraph (b), as follows -
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 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].
Paragraphs (d) through (h) of section 20 of the Executive Employment
Agreement shall remain in full force and effect, except that they shall be
redesignated paragraphs (c) through (g).
2. COUNTERPARTS. This Amendment may be executed in one or more
counterparts, each of will be deemed an original, but all of which taken
together will constitute one and the same document.
IN WITNESS WHEREOF, this Second Amendment of Executive Employment
Agreement has been executed by Jerrold B. Smith, Intermountain Community
Bancorp, Inc., and Panhandle State Bank as of the date first written above.
EXECUTIVE PANHANDLE STATE BANK
/s/ Jerrold B. Smith By: /s/ Curt Hecker
- ----------------------- --------------------
Jerrold B. Smith Curt Hecker
Its: Chief Executive Officer
INTERMOUNTAIN COMMUNITY BANCORP, INC.
By: /s/ Curt Hecker
-----------------------
Curt Hecker
Its: President and Chief Executive
Officer