ex10-4.htm


    EXHIBIT
10.4

     

    
      	
              
                RP® FINANCIAL, LC.
      

                  
      

              

              Celebrating
      20 Years of Financial Advisory Services

            	
              

            


    

     

     

     

    April 16,
2008

     

     

     

    Mr. Joe
Adams

    Chief Executive
Officer

    1st
Security Bank of Washington

    6920 220th Street
SW, Suite 300

    Mountlake Terrace,
Washington  98043-2172

     

    Dear Mr.
Adams:

     

    This letter sets
forth the agreement between
1st
Security Bank of Washington, Mountlake Terrace, Washington (the “Bank”), and
RP®
Financial, LC (“RP Financial”) for independent appraisal services in connection
with the stock to be issued concurrent with the mutual to stock conversion
transaction.  The specific appraisal services to be rendered by RP
Financial are described below.

     

    Description of Appraisal
Services

     

    Prior to preparing
the valuation report, RP Financial will conduct a financial due diligence,
including on-site interviews of senior management and reviews of financial and
other documents and records, to gain insight into the Bank’s operations,
financial condition, profitability, market area, risks and various internal and
external factors which impact the pro forma value of the Bank.

     

    RP Financial will
prepare a written detailed valuation report of the Bank that will be fully
consistent with applicable regulatory guidelines and standard pro forma
valuation practices.  In this regard, the applicable regulatory
guidelines are those set forth in the Office of Thrift Supervision’s (“OTS”)
October 21, 1994 “Guidelines for Appraisal Reports for the Valuation of Savings
and Loan Associations Converting from Mutual to Stock Form of Organization,”
which have been endorsed by the Federal Deposit Insurance Corporation (“FDIC”)
and various state banking agencies.

     

    The appraisal
report will include an in-depth analysis of the Bank’s financial condition and
operating results, as well as an assessment of the Bank’s interest rate risk,
credit risk and liquidity risk.  The appraisal report will describe
the Bank’s business strategies, market area, prospects for the future and the
intended use of proceeds both in the short term and over the longer
term.  A peer group analysis relative to publicly-traded savings
institutions will be conducted for the purpose of determining appropriate
valuation adjustments relative to the group.

     

     

    
    

     

    
      	
              Washington
      Headquarters

              1700 North
      Moore Street, Suite 2210

              Arlington, VA  22209

              www.rpfinancial.com

              
                E-Mail:  rriggins@rpfinancial.com 

              

            	
              Direct:  (703) 647-6543

              Telephone:  (703)
      528-1700

              Fax No.:  (703)
      528-1788

              Toll-Free
      No.:  (866)
723-0594 

            


    

     

     

    
      
         


      

      
         


         


      

      
         


        
          Mr.
Joe Adams

          April
16, 2008

          Page
2

        

      

    


     

    We will review
pertinent sections of the applications and offering documents to obtain
necessary data and information for the appraisal, including the impact of key
deal elements on the appraised value, such as dividend policy, use of proceeds
and reinvestment rate, tax rate, offering expenses, characteristics of stock
plans and charitable foundation contribution (if applicable).  The
appraisal report will conclude with a midpoint pro forma market value that will
establish the range of value, and reflect the offering price per share
determined by the Bank’s Board of Directors.  The appraisal report may
be periodically updated prior to the commencement of the offering and the
appraisal is required to be updated just prior to the closing of the
offering.

     

    RP Financial agrees
to deliver the valuation appraisal and subsequent updates, in writing, to the
Bank at the above address in conjunction with the filing of the regulatory
application.  Subsequent updates will be filed promptly as certain
events occur which would warrant the preparation and filing of such valuation
updates.  Further, RP Financial agrees to perform such other services
as are necessary or required in connection with the regulatory review of the
appraisal and respond to the regulatory comments, if any, regarding the
valuation appraisal and subsequent updates.  RP Financial will also
prepare the pro forma presentations for inclusion in the prospectus, reflecting
the original appraisal and subsequent updates, as appropriate.

     

    Fee Structure and Payment
Schedule

     

    The Bank agrees to
pay RP Financial a fixed fee of $35,000 for preparation and delivery of the
original appraisal report, plus reimbursable expenses.  Payment of
these fees shall be made according to the following schedule:

     

    
      	
              ·  

            	
              $5,000 upon
      execution of the letter of agreement engaging RP Financial’s appraisal
      services;

            


    

     

    
      	
              ·  

            	
              $30,000 upon
      delivery of the completed original appraisal report;
  and

            


    

     

    
      	
              ·  

            	
              $3,500 for
      each valuation update that may be required, provided that the transaction
      is not delayed for reasons described
below.

            


    

     

     

    The Bank will
reimburse RP Financial for out-of-pocket expenses incurred in preparation of the
valuation.  Such out-of-pocket expenses will likely include travel,
printing, shipping, computer and data services.  RP Financial will
agree to limit reimbursable expenses to $7,500 in connection with this
engagement, subject to written authorization from the Bank to exceed such
level.

     

    In the event the
Bank shall, for any reason, discontinue the proposed stock offering prior to
delivery of the completed documents set forth above and payment of the
respective progress payment fees, the Bank agrees to compensate RP Financial
according to RP Financial’s standard billing rates for consulting services based
on accumulated and verifiable time expenses, not to exceed the respective fee
caps noted above, after giving full credit to the initial retainer
fee.  RP Financial’s standard billing rates range from $75 per hour
for research associates to $350 per hour for managing directors.

     

    
       

      
        
           


        

        
           


           


        

        
           


          
            Mr.
Joe Adams

            April
16, 2008

            Page
3

          

        

      


       

    

    If during the
course of the proposed transaction, unforeseen events occur so as to materially
change the nature or the work content of the services described in this
contract, the terms of said contract shall be subject to renegotiation by the
Bank and RP Financial.  Such unforeseen events shall include, but not
be limited to, major changes in the conversion regulations, appraisal guidelines
or processing procedures as they relate to appraisals, major changes in
management or procedures, operating policies or philosophies, and excessive
delays or suspension of processing of applications by the regulators such that
completion of the transaction requires the preparation by RP Financial of a new
appraisal.

     

    Representations and
Warranties

     

    The Bank and RP
Financial agree to the following:

     

    1.     The
Bank agrees to make available or to supply to RP Financial such information with
respect to its business and financial condition as RP Financial may reasonably
request in order to provide the aforesaid valuation.  Such information
heretofore or hereafter supplied or made available to RP Financial shall
include:  annual financial statements, periodic regulatory filings and
material agreements, debt instruments, off balance sheet assets or liabilities,
commitments and contingencies, unrealized gains or losses and corporate books
and records.  All information provided by the Bank to RP Financial
shall remain strictly confidential (unless such information is otherwise made
available to the public), and if the stock offering is not consummated or the
services of RP Financial are terminated hereunder, RP Financial shall upon
request promptly return to the Bank the original and any copies of such
information.

     

    2.     The
Bank hereby represents and warrants to RP Financial that any information
provided to RP Financial does not and will not, to the best of the Bank’s
knowledge, at the times it is provided to RP Financial, contain any untrue
statement of a material fact or fail to state a material fact necessary to make
the statements therein not false or misleading in light of the circumstances
under which they were made.

     

    3.     (a)  The
Bank agrees that it will indemnify and hold harmless RP Financial, any
affiliates of RP Financial, the respective directors, officers, agents and
employees of RP Financial or their successors and assigns who act for or on
behalf of RP Financial in connection with the services called for under this
agreement (hereinafter referred to as “RP Financial”), from and against any and
all losses, claims, damages and liabilities (including, but not limited to, all
losses and expenses in connection with claims under the federal securities laws)
attributable to (i) any untrue statement or alleged untrue statement of a
material fact contained in the financial statements or other information
furnished or otherwise provided by the Bank to RP Financial, either orally or in
writing; (ii) the omission or alleged omission of a material fact from the
financial statements or other information furnished or otherwise made available
by the Bank to RP Financial; or (iii) any action or omission to act by the Bank,
or the Bank’s respective officers, Directors, employees or agents which action
or omission is willful or negligent.  The Bank will be under no
obligation to indemnify RP Financial hereunder if a court determines that RP
Financial was negligent or acted in bad faith with respect to any actions or
omissions of RP Financial related to a matter for which indemnification is
sought hereunder.  Any time devoted by employees of RP Financial to
situations for which indemnification is provided hereunder, shall be an
indemnifiable cost payable by the Bank at the normal hourly professional rate
chargeable by such employee.

    
      
         

        
          
             


          

          
             


             


          

          
             


            
              Mr.
Joe Adams

              April
16, 2008

              Page
4

            

          

        


         

      

    

    (b)  RP Financial shall give written
notice to the Bank of such claim or facts within thirty days of the assertion of
any claim or discovery of material facts upon which RP Financial intends to base
a claim for indemnification hereunder.  In the event the Bank elects,
within ten business days of the receipt of the original notice thereof, to
contest such claim by written notice to RP Financial, RP Financial will be
entitled to be paid any amounts payable by the Bank hereunder within five days
after the final determination of such contest either by written acknowledgement
of the Bank or a final judgment (including all appeals therefrom) of a court of
competent jurisdiction.  If the Bank does not so elect, RP Financial
shall be paid promptly and in any event within thirty days after receipt by the
Bank of the notice of the claim.

     

    (c)  The Bank shall pay for or
reimburse the reasonable expenses, including attorneys’ fees, incurred by RP
Financial in advance of the final disposition of any proceeding within thirty
days of the receipt of such request if RP Financial furnishes the
Bank:  (1) a written statement of RP Financial’s good faith
belief that it is entitled to indemnification hereunder; and (2) a written
undertaking to repay the advance if it ultimately is determined in a final
adjudication of such proceeding that it or he is not entitled to such
indemnification.  The Bank may assume the defense of any claim (as to
which notice is given in accordance with 3(b)) with counsel reasonably
satisfactory to RP Financial, and after notice from the Bank to RP Financial of
its election to assume the defense thereof, the Bank will not be liable to RP
Financial for any legal or other expenses subsequently incurred by RP Financial
(other than reasonable costs of investigation and assistance in discovery and
document production matters).  Notwithstanding the foregoing, RP
Financial shall have the right to employ their own counsel in any action or
proceeding if RP Financial shall have concluded that a conflict of interest
exists between the Bank and RP Financial which would materially impact the
effective representation of RP Financial.  In the event that RP
Financial concludes that a conflict of interest exists, RP Financial shall have
the right to select counsel reasonably satisfactory to the Bank which will
represent RP Financial in any such action or proceeding and the Bank shall
reimburse RP Financial for the reasonable legal fees and expenses of such
counsel and other expenses reasonably incurred by RP Financial.  In no
event shall the Bank be liable for the fees and expenses of more than one
counsel, separate from its own counsel, for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same allegations or
circumstances.  The Bank will not be liable under the foregoing
indemnification provision in respect of any compromise or settlement of any
action or proceeding made without its consent, which consent shall not be
unreasonably withheld.

     

    (d)  In the event the Bank does not
pay any indemnified loss or make advance reimbursements of expenses in
accordance with the terms of this agreement, RP Financial shall have all
remedies available at law or in equity to enforce such obligation.

     

    It is understood
that, in connection with RP Financial’s above-mentioned engagement, RP Financial
may also be engaged to act for the Bank in one or more additional capacities,
and that the terms of the original engagement may be incorporated by reference
in one or more separate agreements.  The provisions of Paragraph 3
herein shall apply to the original engagement, any such additional engagement,
any modification of the original engagement or such additional engagement and
shall remain in full force and effect following the completion or termination of
RP Financial’s engagement(s).  This agreement constitutes the entire
understanding of the Bank and RP Financial concerning the subject matter
addressed herein, and such contract shall be governed and construed in
accordance with the laws of the Commonwealth of Virginia.  This
agreement may not be modified, supplemented or amended except by written
agreement executed by both parties.

     

    
      
         

        
          
             


          

          
             


             


          

          
             


            
              Mr.
Joe Adams

              April
16, 2008

              Page
5

            

          

        


         

      

    

    The Bank and RP
Financial are not affiliated, and neither the Bank nor RP Financial has an
economic interest in, or is held in common with, the other and has not derived a
significant portion of its gross revenues, receipts or net income for any period
from transactions with the other.

     

    *  *  *  *  *  *  *  *  *  *  *

     

    Please acknowledge
your agreement to the foregoing by signing as indicated below and returning to
RP Financial a signed copy of this letter, together with the initial retainer
fee of $5,000.

     

    
    

     

    
      	 	
              Sincerely,

               

              /s/ Ronald S. Riggins

               

              Ronald S. Riggins

              President and Managing
  Director 

            


    

     

     

     

    
       

      
        	Agreed
      To and Accepted
      By: 	 /s/
      Joe
      Adams                            
	 	
                Joe
      Adams

                Chief
      Executive
Officer 

              


      

       

    

    
       

      
        	Upon
      Authorization by the Board of Directors For: 	
                1st
      Security Bank of Washington

                Mountlake Terrace,
  Washington 

              


      

       

    

     

    Date
Executed:   4/21/08