FIRST FEDERAL SAVINGS AND LOAN ASSOCIATION OF PORT ANGELES EMPLOYEE SEVERANCE COMPENSATION PLAN

an offeror other than the Holding Company purchases shares of stock of the Holding Company or the Bank pursuant to a tender or exchange offer for such shares;

an event of a nature that results in the acquisition of control of the Holding Company or the Bank within the meaning of the Bank Holding Company Act of 1956, as amended, under 12 U.S.C. Section 1841 (or any successor statute or regulation) or requires the filing of a notice with the Federal Deposit Insurance Corporation (“FDIC”) under 12 U.S.C. Section 1817(j) (or any successor statute or regulation);

any person (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (“Exchange Act”)) is or becomes the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) directly or indirectly of securities of the Holding Company or the Bank representing 25% or more of the combined voting power of the Holding Company's or the Bank's outstanding securities;

individuals who are members of the board of directors of the Holding Company immediately following the Effective Date or who are members of the board of directors of the Bank immediately following the Effective Date (in each case, the "Incumbent Board") cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequently whose election was approved by a vote of at least three quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Holding Company's or the Bank’s stockholders was approved by the nominating committee serving under an Incumbent Board, shall be considered a member of the Incumbent Board; or

consummation of a plan of reorganization, merger, acquisition, consolidation, sale of all or substantially all of the assets of the Holding Company or a similar transaction in which the Holding Company is not the resulting entity, provided that the term "Change in Control" shall not include an acquisition of securities by an employee benefit plan of the Bank or the Holding Company.

The Employer terminates the Participant’s employment other than for Just Cause.

The Participant voluntarily terminates employment with the Employer after the Employer reduces his or her base salary rate or base wage rate (as determined by reference to the employment records of the Employer) as in effect immediately prior to the Change in Control, or as the same may have been increased thereafter. A Participant’s base salary rate or base wage rate shall be determined without regard for any other compensation received by the Participant from any Employer other than base salary or base wages.

The Participant voluntarily terminates employment with the Employer after the Employer requires the Participant to change the location of the Participant's job or office, so that such Participant will be based at a location more than thirty-five (35) miles from the location of the Participant's job or office immediately prior to the Change in Control, provided that such new location is not closer to Participant's home.

If a successor bank or company fails or refuses to assume the obligations under this Plan, as required by Article VII.

If the Bank or any successor company breaches any other provisions of the Plan.

Each Participant entitled to a Payment under this Plan shall receive from the Employer a lump sum cash payment equal to:

6 times Monthly Compensation, plus one times Monthly Compensation for each full year of Continuous Employment over three years, up to maximum of one (1) times the Participant’s Annual Compensation.

a Participant entitled to a Payment under this Plan who was a vice president and above of the Bank immediately prior to the effective date of a Change in Control shall receive a Payment equal to one (1) times the Participant's Annual Compensation;

a Participant entitled to a Payment under this Plan who, immediately prior to the effective date of a Change in Control, was an assistant vice president and had less than three (3) full years of Continuous Employment, shall receive a minimum Payment equal to one-half (½) the Participant's Annual Compensation; and

the maximum Payment to any Participant under the Plan shall not exceed one (1) times the Participant's Annual Compensation.

Notwithstanding the provisions of Section 4.3(a) above, if a Payment to a Participant who is a “disqualified individual” shall be of an amount which includes an “excess parachute payment,” the payment hereunder to that Participant shall be reduced to the maximum amount, which does not include an “excess parachute payment.” The terms "disqualified individual" and "excess parachute payment" shall have the same meaning as defined in Section 280G of the Internal Revenue Code of 1986, as amended, or any successor section of similar import.

The Participant shall not be required to mitigate damages on the amount of the Payment by seeking other employment or otherwise, nor shall the amount of such Payment be reduced by any compensation earned by the Participant as a result of employment after termination of employment with an Employer.

Notwithstanding the foregoing, payments under Section 4.3(a) that are not considered short-term deferrals within the meaning of Section 409A of the Internal Revenue Code and the regulations thereunder (“Section 409A”):

shall first be considered made under a “separation pay plan” (within the meaning of Section 409A) to the extent permitted by Section 409A. Any additional amounts due the Participant under Section 4.3(a) shall be considered deferred compensation for purposes of Section 409A, and subject to Section 4.3(d)(2) below.

Payments that are considered to be deferred compensation under Section 409A shall not be paid earlier than six months after the Participant’s separation from service (as defined in Section 409A, taking into account all rules and presumptions under the Section 409A regulations), if the Participant is a “specified employee” (within the meaning of Section 409A). Payment(s) delayed on account of the preceding sentence shall be paid on the 185th day following the Participant’s separation from service (as herein defined) or his or her death, if earlier.

a Change in Control has previously occurred,

the Bank shall have in the previous year received a bona fide written offer, which was not subsequently withdrawn, from a third party to engage in a transaction which would involve a Change in Control, or

a third party shall have disclosed in a filing with the Securities and Exchange Commission ("SEC") its intent to engage in a transaction which would result in a Change in Control and has not subsequently indicated in another SEC filing that it no longer had such intention.

Any dispute or controversy arising under or in connection with the Plan shall be settled exclusively by arbitration, conducted before a panel of three arbitrators sitting in a location selected by the Participant within fifty (50) miles from the principal office of the Bank, in accordance with rules of the American Arbitration Association then in effect. Judgment may be entered on the award of the arbitrator in any court having jurisdiction.