Exhibit 10.3


FORM OF

ANCHOR BANK

EMPLOYEE SEVERANCE COMPENSATION PLAN


PLAN PURPOSE


          The
purpose of the Anchor Bank Employee Severance Compensation Plan (the “Plan”) is
to assure for Anchor Bank (the “Bank”) the services of the Employees in the event
of a Change in Control of Anchor Bancorp (the “Holding Company”) or the Bank.
The benefits contemplated by the Plan recognize the value to the Bank of the
services and contributions of the eligible Employees and the effect upon the
Bank resulting from uncertainties relating to continued employment, reduced
employee benefits, management changes and employee relations that may arise if
a Change in Control occurs or is threatened. The Bank’s and the Holding
Company’s Boards of Directors believe that it is in the best interests of the
Bank and the Holding Company to provide eligible Employees with such benefits
in order to defray the costs and changes in employee status that could follow a
Change in Control. The Boards of Directors believe that the Plan will also aid
the Bank in attracting and retaining highly qualified individuals who are
essential to its success and that the Plan’s assurance of fair treatment of the
Bank’s employees will reduce the distractions and other adverse effects on
Employees’ performance if a Change in Control occurs or is threatened.


ARTICLE I

ESTABLISHMENT OF PLAN


1.1     Establishment
of Plan


          As
of the Effective Date, the Bank hereby establishes a severance compensation
plan to be known as the “Anchor Bank Employee Severance Compensation Plan.” The
purposes of the Plan are as set forth above.


1.2     Applicability
of Plan


          The
benefits provided by this Plan shall be available to all Employees, who, at or
after the Effective Date, meet the eligibility requirements of Article III. The
Plan shall not apply to any Employee whose employment was terminated prior to
the Effective Date.


1.3     Contractual
Right to Benefits


          This
Plan establishes and vests in each Participant a contractual right to the
benefits to which each Participant is entitled hereunder, enforceable by the
Participant against the Employer.






ARTICLE II

DEFINITIONS AND CONSTRUCTION


2.1     Definitions


          Whenever
used in the Plan, the following terms shall have the meanings set forth below.


          (a)          “Annual
Compensation” of a Participant means and includes all wages, salary, bonus, and
incentive compensation (other than stock based compensation), paid (including
accrued amounts) by the Employer as consideration for the Participant’s
services during the twelve (12) complete months ending on the date as of which
Annual Compensation is to be determined, which are or would (but for an
election by the Participant to defer compensation) be includable in the gross
income of the Participant receiving the same for federal income tax purposes.


          (b)          “Bank”
means Anchor Bank or any successor as provided for in Article VII hereof.


          (c)          “Change
in Control” means (1) 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 (2) 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); (3) 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; (4) 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 (5)
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.


          (d)          “Continuous
Employment” means the absence of any interruption or termination of service as
an Employee of the Bank or an affiliate. Service shall not be considered
interrupted in the case of sick leave, military leave or any other leave of absence approved by the Bank or in the case


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of transfers between payroll locations of the Bank or between the Bank,
its Parent, its Subsidiary or its successor.


          (e)          “Effective
Date,” as to Employees of an Employer, means the date the Plan is approved by
the Board of Directors of the Bank, or such other date as the Board shall
designate in its resolution approving the Plan.


          (f)          “Employee”
means an individual employed by the Employer on a full-time basis, excluding
any executive officer of the Employer who is covered by an employment contract
or a change in control severance agreement with the Employer.


          (g)          “Employer”
means the Bank or a Subsidiary or a Parent which has adopted the Plan pursuant
to Article VI hereof.


          (h)          “Expiration
Date” means the date fifteen (15) years from the Effective Date unless earlier
terminated pursuant to Section 8.2 or extended pursuant to Section 8.1.


          (i)          “Holding
Company” means Anchor Bancorp, the Parent of the Bank.


          (j)          “Just
Cause,” with respect to termination of employment, means an act or acts of
personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty
involving personal profit, intentional failure to perform stated duties,
willful violation of any law, rule, or regulation (other than traffic
violations or similar offenses) or final cease-and-desist order. In determining
incompetence, acts or omissions shall be measured against standards generally
prevailing in the financial services industry.


          (k)          “Parent”
means any corporation which holds a majority of the voting power of the
outstanding shares of the Bank’s common stock.


          (l)          “Participant”
means an Employee who meets the eligibility requirements of Article III.


          (m)          “Payment”
means the payment of severance compensation as provided in Article IV hereof.


          (n)          “Plan”
means the Anchor Bank Employee Severance Compensation Plan.


          (o)          “Subsidiary”
means any corporation in which the Bank, directly or indirectly, holds a
majority of the voting power of its outstanding shares of capital stock.


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2.2     Applicable
Law


          To
the extent not preempted by the laws of the United States as now or hereafter
in effect, the laws of the State of Washington shall be the controlling law in
all matters relating to the Plan.


          The
Plan neither requires nor establishes an ongoing administrative system for its
effect or operation. Payments under the Plan are precipitated by a single
event, a Change in Control, which event is the sole focus of the Plan.
Consequently, it is intended that the Plan shall not be covered by or be
subject to the Employee Retirement Income Security Act of 1974, as amended
(“ERISA”).


2.3     Severability


          If
a provision of this Plan shall be held illegal or invalid, the illegality or
invalidity shall not affect the remaining parts of the Plan, and the Plan shall
be construed and enforced as if the illegal or invalid provision had not been
included.


ARTICLE III

ELIGIBILITY


3.1     Participation


          Each
Employee who has completed at least one (1) year of Continuous Employment as of
the Effective Date shall become a Participant on the Effective Date.
Thereafter, each Employee shall become a Participant on the day on which he or
she completes one (1) year of Continuous Employment. Notwithstanding the
foregoing, persons who have entered into and continue to be covered by an
employment or change in control severance agreement with the Employer shall not
be entitled to participate in the Plan.


3.2     Duration
of Participation


          A
Participant shall cease to be a Participant in the Plan when the Participant
ceases to be an Employee of the Employer unless such Participant is entitled to
a Payment as provided in the Plan. Furthermore, an Employee shall cease to be a
Participant upon entering into an employment or change in control severance
agreement with the Employer. A Participant entitled to receipt of a Payment
shall remain a Participant in this Plan until the full amount of such Payment
has been paid to the Participant.


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ARTICLE IV

PAYMENTS


4.1     Right
to Payment


          A
Participant shall be entitled to receive from his or her respective Employer a
Payment in the amount provided in Section 4.3 if there has been a Change in
Control of the Bank or the Holding Company and if, within one (1) year
thereafter, the Participant’s employment by an Employer shall terminate for any
reason specified in Section 4.2, whether the termination is voluntary or
involuntary. A Participant shall not be entitled to a Payment if termination
occurs by reason of death, voluntary retirement, voluntary termination other
than for reasons specified in Section 4.2, total and permanent disability, or
for Just Cause.


4.2     Reasons
for Termination


          Following
a Change in Control, a Participant shall be entitled to a Payment if his or her
employment with an Employer is terminated, voluntarily or involuntarily, within
one (1) year following such Change in Control, for any one or more of the
following reasons:


          (a)          The
Employer reduces the Participant’s base salary or rate of compensation as in
effect immediately prior to the Change in Control, or as the same may have been
increased thereafter.


          (b)          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.


          (c)          The
Employer materially reduces the benefits and perquisites, taken as a whole,
available to the Participant immediately prior to the Change in Control;
provided, however, that a material reduction or change on a nondiscriminatory
basis in the benefits and perquisites generally provided to all employees of
the Bank that does not reduce a Participant’s taxable Annual Compensation shall
not trigger a Payment.


          (d)          A
successor bank or company fails or refuses to assume the Bank’s obligations
under this Plan, as required by Article VII.


          (e)          The
Bank or any successor company breaches any other provisions of the Plan.


          (f)          The
Employer terminates the employment of a Participant at or after a Change in
Control other than for Just Cause.


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4.3     Amount
of Payment


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


	
 

	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
Participant’s

 Years of Continuous Employment

	
 

	
Amount of Monthly Compensation

 Payment to be Paid to the Participant

	
 


	
 

	


	
 

	


	
 


	
 

	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
0 to 1 year
 of service

	
 

	
 

	
0


	
 

	
 

	
Over 1 year
 to 2 years

	
 

	
 

	
3 months


	
 

	
 

	
Over 2 years
 to 3 years

	
 

	
 

	
6 months


	
 

	
 

	
Over 3 years

	
 

	
 

	
6 months
 plus one month for each year

 of Continuous Employment over three

 years





          For
purposes of this Section 4.3(a): (i) the Participant’s years of service
(including partial years rounded up to the nearest full month) are computed
from the Employee’s date of hire through the date of termination and (ii)
“Monthly Compensation” of a Participant means such Participant’s Annual
Compensation (determined on the date of his or her termination of employment)
divided by twelve (12).


          Notwithstanding
anything herein to the contrary, the following rules shall apply to the
determination of any Payment due a Participant under this Plan: (i) 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 minimum Payment equal to one (1) times the Participant’s
Annual Compensation; (ii) a Participant entitled to a Payment under this Plan
who was an assistant vice president immediately prior to the effective date of
a Change in Control shall receive a minimum Payment equal to one-half (1⁄2) the
Participant’s Annual Compensation; and (iii) the maximum Payment to any
Participant under the Plan shall not exceed one and one-half (1-1/2) times the
Participant’s Annual Compensation. 


          (b)          Notwithstanding
the provisions of (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.


          (c)          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.


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          (d)          Notwithstanding
the foregoing, payments under Section 4.3(a): 


	
 

	
 

	
 


	
 

	
 

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


	
 

	
 

	
 


	
 

	
 

	
(2)          that
 are considered to be deferred compensation under Section 409A shall not be
 paid earlier than six months after the Employee’s separation from service (as
 defined in Section 409A, taking into account all rules and presumptions under
 the Section 409A regulations), if the Employee 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
 Employee’s separation from service (as herein defined) or his or her death,
 if earlier.





          The
purpose of this Section 4.3(d) is to cause this Plan to comply with Section
409A, and these provisions (and the Plan) shall be administered and interpreted
accordingly.


4.4     Time
of Payment


          The
Payment to which a Participant is entitled shall be paid to the Participant by
the Employer or the successor to the Employer, in cash and in full, not later
than twenty-five (25) business days after the termination of the Participant’s
employment. If any Participant should die after termination of employment but
before all amounts have been paid, such unpaid amounts shall be paid to the
Participant’s surviving spouse, or if none, to the Participant’s named
beneficiary, if living, otherwise to the personal representative on behalf of
or for the benefit of the Participant’s estate.


ARTICLE V

OTHER RIGHTS AND BENEFITS NOT AFFECTED


5.1     Other
Benefits


          Neither
the provisions of the Plan nor the Payment provided for hereunder shall reduce
any amounts otherwise payable, or in any way diminish the Participant’s rights
as an Employee of the Employer, whether existing now or hereafter, under any
benefit, incentive, retirement, stock option, stock bonus, stock ownership or
any employment agreement or other plan or arrangement.


5.2     Employment
Status


          This Plan does
not constitute a contract of employment or impose on the Participant or the
Participant’s Employer any obligation to retain the Participant as an Employee,
to change the status


7






of the
Participant’s employment, or to change the Employer’s policies regarding
termination of employment.


ARTICLE VI

PARTICIPATING EMPLOYERS


          Upon
approval by the Board of Directors of the Bank, this Plan may be adopted by any
Subsidiary or Parent of the Bank. Upon such adoption, the Subsidiary or Parent
shall become an Employer hereunder and the provisions of the Plan shall be
fully applicable to the Employees of that Subsidiary or Parent.


ARTICLE VII

SUCCESSOR TO THE BANK


          The
Bank shall require any successor to or assignee of, whether direct or indirect,
by purchase, merger, consolidation or otherwise, all or substantially all the
business or assets of the Bank, expressly and unconditionally to assume and
agree to perform the Bank’s obligations under the Plan.


ARTICLE VIII

DURATION, AMENDMENT AND TERMINATION


8.1     Duration


          If
a Change in Control has not occurred, the Plan shall expire fifteen (15) years
from the Effective Date, unless sooner terminated as provided in Section 8.2,
or unless extended for an additional period or periods by resolution adopted by
the Board of Directors of the Bank.


          Notwithstanding
the foregoing, if a Change in Control occurs, the Plan shall continue in full
force and effect, and shall not terminate or expire until such date as all
Participants who become entitled to Payments hereunder shall have received such
Payments in full.


8.2     Amendment
and Termination


          The
Plan may be terminated or amended in any respect by resolution adopted by a
majority of the Board of Directors of the Bank, unless (i) a Change in Control
has previously occurred, (ii) 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
(iii) 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. For so long as any of the events
listed in paragraphs (i), (ii) and (iii) persist, the Plan shall not be subject
to amendment, change, substitution, deletion, revocation or termination in any
respect whatsoever


8






unless any
acquiror of the Bank shall agree in writing to provide benefits to covered
employees which are at least as substantial as those set forth herein if such
employees are terminated without cause within one year of a Change in Control
of the Bank.


8.3     Form
of Amendment


          The
form of any proper amendment or termination of the Plan shall be a written
instrument signed by the duly authorized officer or officers of the Bank,
certifying that the amendment or termination has been approved by the Board of
Directors. A proper amendment of the Plan automatically shall effect a
corresponding amendment to all Participant’s rights hereunder, regardless of
whether the Participants receive notice of such action. A proper termination of
the Plan automatically shall effect a termination of all Participants’ rights
and benefits hereunder, regardless of whether the Participants receive notice
of such action.


ARTICLE IX

LEGAL FEES AND EXPENSES


          9.1      Subject
to the notice provision in Section 9.2 hereof, the Bank shall pay all
reasonable legal fees, costs of litigation, and other expenses incurred by each
Participant as a result of the Bank’s refusal to make the Payment to which the
Participant becomes entitled under this Plan as a result of a final
determination by a court or pursuant to arbitration, or as a result of the
Bank’s unsuccessfully contesting the validity, enforceability or interpretation
of the Plan.


          9.2      A
Participant must provide the Bank with thirty (30) days notice of a complaint
of entitlement under the Plan, and provide adequate documentation of the
requested reimbursements, before the Bank shall be liable for the payment of
any legal fees, costs of litigation or other expenses referred to in Section
9.1 hereof.


ARTICLE X

ARBITRATION


          10.1     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 location 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. 


*******






          Having
been adopted by its Board of Directors on _______ __, 2008, the Plan is
executed by its duly authorized officers as of the ______ day of
_______________, 2008.


	
 

	
 

	
 

	
 

	
 


	
Attest

	
 

	
ANCHOR
 BANCORP

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
By

	
 

	
 


	


	
 

	
 

	


	
 


	
Cheryl L.
 Dill

	
 

	
 

	
Jerald L.
 Shaw

	
 


	
Secretary

	
 

	
 

	
President
 and Chief Executive Officer

	
 


	
 

	
 

	
 

	
 

	
 


	
          Having
 been adopted by its Board of Directors on ____________ __, 2008, the Plan is
 executed by its duly authorized officers this _______ day of
 __________________, 2008.


	
 

	
 

	
 

	
 

	
 


	
Attest

	
 

	
ANCHOR BANK

	
 


	
 

	
 

	
 

	
 


	
 

	
 

	
By

	
 

	
 


	


	
 

	
 

	


	
 


	
Cheryl L.
 Dill

	
 

	
 

	
Jerald L.
 Shaw

	
 


	
Secretary

	
 

	
 

	
President
 and Chief Executive Officer

	
 





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