EXHIBIT 10.2

NONQUALIFIED STOCK OPTION AGREEMENT

     This Nonqualified Stock Option Agreement is made and entered into pursuant
to the terms of the 2003 Stock Incentive Plan (the “Plan”) adopted by the Board
of Directors and Shareholders of Umpqua Holdings Corporation (the “Company”).
Unless otherwise defined herein, capitalized terms defined in this Nonqualified
Stock Option Agreement shall have the meanings as defined in the Plan.

          The “Optionee”   Raymond P. Davis  
Number of Shares of the
    75,000  
Company’s Common Stock
       
 
       
“Exercise Price” per Share
  $ 24.71  
 
       
“Date of Grant”
    1/03/2005  
 
       
“Expiration Date”
    1/03/2015  

1. Terms of the Option.

     1.1 Grant of Option. The Company hereby grants to the Optionee the right,
privilege, and option (the “Option”) to purchase up to the number of shares of
Common Stock indicated above (the “Option Shares”) at the Exercise Price
indicated above, subject to adjustment in accordance with the terms and
conditions of the Plan. The Option may only be exercised as to a whole number of
shares of Common Stock.

     1.2 Status of the Option as a Nonqualified Stock Option. The Company
intends that the Option will not qualify as an incentive stock option within the
meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

     1.3 Limited Transferability of Option. The Option may be transferred by
gift to Permitted Transferees. “Permitted Transferees” includes the Optionee’s
spouse, children or a trust for the exclusive benefit of any combination of the
Optionee, the Optionee’s spouse and the Optionee’s children. A transfer to a
Permitted Transferee will not be effective unless and until the Optionee and the
transferee of the Option execute and deliver to the Company a
Transfer/Assumption of Nonqualified Stock Option Agreement in the form requested
by the Company. Notwithstanding any transfer of the Option, the Optionee shall
remain liable to the Company for any income tax withholding amounts which the
Bank is required to withhold at the time that the transferred Option is
exercised. Other than as set forth above, the Option and the rights of the
Optionee under this Nonqualified Stock Option Agreement may only be transferred
by will or by the laws of descent and distribution upon the death of Optionee.

     1.4 Reservation of Shares. The Company agrees that at all times there will
be reserved for issuance upon exercise of the Option such number of shares of
its Common Stock as is required for such issuance.

2. Time of Exercise of Option.

     2.1 When the Option Becomes Exercisable. Except as otherwise set forth in
Section 5.2 below, the Option may only be exercised in accordance with the
vesting schedule attached hereto (the “Vesting Schedule”) and only to the extent
not previously exercised. In the event of certain changes in the capital
structure of the Company, the number of Option Shares vesting at any time as
indicated in the Vesting Schedule may be adjusted as determined appropriate by
the Committee.

     2.2 Effect of Unpaid Leaves of Absence. Unless the Committee at the time of
such leave determines otherwise, if at any time during the term of the Option,
the Optionee is on unpaid leave from the Company or any Subsidiary, the Option
may not be exercised during such unpaid leave and the dates contained in the
Vesting Schedule shall be extended by the length of such unpaid leave.

     2.3 Expiration and Termination of Option. The Option will expire upon the
close of business on the Expiration Date and may terminate earlier upon certain
events as set forth in Section 4 of this Nonqualified Stock Option Agreement. To
the extent that the Option has not been exercised prior to the Expiration Date
or any earlier termination, all further rights to purchase shares pursuant to
the Option will cease and terminate at such time.

3. Option Exercise Procedures.

     3.1 Who May Exercise the Option. Only the Optionee (or, in the case of
exercise after death of the Optionee, by the executor, administrator, heir, or
legatee of the Optionee, as the case may be) or the Permitted Transferee may
exercise the Option.

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     3.2 Notice of Exercise. A “Notice of Exercise” must be signed and delivered
to the Company’s corporate Secretary or such other person as the Company may
designate at the Company’s principal business office of the Company. A copy of
the Company’s current form of Notice of Exercise is attached hereto. The
Company, however, reserves the right to revise its form of Notice of Exercise
from time-to-time as it determines to be appropriate. If, at the time of the
exercise of the Option, the Company does not have an effective registration
statement on file with the Securities and Exchange Commission that covers the
issuance of shares upon the exercise of the Option, the Notice of Exercise will
also contain certain representations from the Optionee as required under
applicable state and federal securities laws. A copy of the then-current form of
Notice of Exercise may be obtained at any time from the Company. A notice will
only be effective if submitted on the form in effect at the time of such
exercise.

     3.3 Payment of Exercise Price. The Notice of Exercise must indicate the
manner of payment of the Exercise Price for the number of shares so purchased.
Payment shall be made by cash, by the surrender to the Company for cancellation
of shares of Common Stock or other securities of the Company, based on the Fair
Market Value of the Common Stock, (provided that the surrendered shares of
Common Stock or other securities of the Company shall have been held by the
Optionee for not less than six months), such other valid consideration as the
Committee may, in its sole discretion, permit or any combination of the
foregoing.

     3.4 Payment of Tax Withholding. The Optionee shall pay or make adequate
provision for payment of Tax Withholding upon exercise of the Option. The notice
of exercise shall indicate the method of payment of Tax Withholding, which may
be accomplished by payment in cash, the Company withholding other amounts
payable by the Company to the Optionee, by the application of shares to be
received upon exercise of the Option based on Fair Market Value of the Common
Stock, the surrender of shares of Common Stock or other securities of the
Company based on the Fair Market Value of the Common Stock (provided that the
surrendered shares of Common Stock or other securities of the Company shall have
been held by the Optionee for not less than six months) or any combination of
the foregoing.

     3.5 Delivery of Shares Following Exercise. The Company will make delivery
of a certificate representing the Option Shares purchased within a reasonable
time after it receives the Notice of Exercise, payment in full of the Exercise
Price of the Option Shares being purchased and the payment or adequate provision
for payment of Tax Withholding. However, if any law or regulation requires the
Company to take any action with respect to the issuance of the Option Shares,
including, without limitation, actions that may be required for compliance with
federal and state securities laws or the listing requirements of any stock
exchange upon which the Company’s Common Stock is then listed, then the date of
delivery of such certificate may be extended for the period necessary to take
such action. The Optionee shall only become the holder of such shares when the
issuance of the shares is reflected on the Company’s stock transfer record,
except that if the Option is exercised conditioned on the occurrence of a Change
of Control Transaction, as provided for in Section 5.3 below, the Optionee shall
be deemed a holder of such shares as of the effective date of the Change of
Control Transaction.

4. Termination of the Option

     4.1 Effect of the Death of the Optionee. If the Optionee dies while an
employee of the Company or any Subsidiary, the Option will terminate one year
after the date of such death or, if sooner, upon the Expiration Date. In such
event, the Option may be exercised only to the extent the Optionee was entitled
to exercise the Option on the date of the Optionee’s death and only by a
Permitted Transferee or the person or persons to whom the Optionee’s rights
under the Option may pass by the Optionee’s will or by the laws of descent and
distribution of the state or country of the Optionee’s domicile at the time of
death.

     4.2 Effect of the Disability of the Optionee. If the Optionee’s employment
by the Company or any Subsidiary terminates as a result of the Optionee becoming
Disabled (as defined in the Plan) while an employee of the Company or any
Subsidiary, the Option will terminate one year after the date of such
termination of employment or, if sooner, upon the Expiration Date. In such
event, the Option may be exercised only to the extent the Optionee or Permitted
Transferee was entitled to exercise the Option on the date of such termination.

     4.3 Effect of Termination of the Employment of the Optionee for Cause. If
the Optionee’s employment with the Company or any Subsidiary is terminated for
“cause,” the Option will terminate on the effective date of the termination of
the Optionee’s employment and shall no longer be exercisable as to any of the
remaining Option Shares. “Cause” shall have the definition given in the
Optionee’s employment, severance, or change in control agreement, if any, or if
the Optionee has no such agreement, “cause” shall be determined by the Company’s
Chief Executive Officer or Board of Directors in their reasonable discretion.

     4.4 Effect of any other Termination of the Employment of the Optionee. If
the Optionee’s employment with the Company or any Subsidiary terminates for any
reason other than the reasons set forth in Sections 4.1, 4.2 or 4.3 of this
Nonqualified Stock Option Agreement, the Option will terminate thirty (30) days
after the date of such termination of employment or, if sooner, upon the
Expiration Date. In such event, the Option may be exercised only to the extent
the Optionee or Permitted Transferee was entitled to exercise the Option on the
date of such termination.

     4.5 Effect of Change of Control Transaction. Notwithstanding the provisions
of Sections 2.3, 4.1, 4.2, 4.3 or 4.4, the Option may terminate upon the earlier
occurrence of a Change of Control Transaction as provided in Section 5.5 below.

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5. Effect of Change of Control Transaction

     5.1 Notice of Change of Control Transaction. The Company will provide the
Optionee with written notice of any Change of Control Transaction and will
undertake reasonable efforts to provide such notice at least fifteen (15) days
prior to the effective date of the Change of Control Transaction. Such notice
shall generally describe the expected Change of Control Transaction and the
anticipated effects of the transaction on the Optionee’s rights under this
Nonqualified Stock Option Agreement.

     5.2 Accelerated Vesting. Accelerated vesting upon the occurrence of a
Change of Control Transaction, if any, shall be as set forth in the Vesting
Schedule.

     5.3 Conditional Exercise and Deferred Payment. In anticipation of a Change
of Control Transaction, the Optionee shall be permitted to tender a notice of
exercise of the Option that is conditioned on the Change of Control Transaction
actually occurring and the Optionee shall not be required to tender payment of
the exercise price or amounts that the Company may be required to withhold for
tax purposes until after the occurrence of the Change of Control Transaction.

     5.4 Effect on Option Shares and Exercise Price. Following the occurrence of
any Change of Control Transaction, the Option shall be exercisable for the
number and kind of shares, other securities, debt instruments, cash or other
property for which the Option Shares would have been exchanged if they had been
outstanding at the time of the Change of Control Transaction. In addition, the
Exercise Price shall be adjusted such that the aggregate exercise price
following such Change of Control Transaction shall be equal to the product of
the Exercise Price per Share prior to the Change of Control Transaction
multiplied by the number of Option Shares that could be purchased under the
Option at such time without regard to the Vesting Schedule. The determination of
the Committee as to what, if any, adjustments need to be made to the Option
Shares and the Exercise Price and the extent thereof will be final and
conclusive and shall be binding upon the Optionee.

     5.5 Termination. The Option shall terminate effective as of the effective
date of a Change of Control Transaction, unless the terms and conditions of the
Change of Control Transaction provide for the assumption of the Plan and the
continuation of this Nonqualified Stock Option Agreement. Alternatively, the
terms and conditions of the Change of Control Transaction may provide for the
issuance to the Optionee by the Company’s successor of a substitute option
granted under a plan adopted by such successor and, subject to Sections 5.2 and
5.4 above, containing terms and conditions substantially equivalent to the terms
and conditions of the Option.

6. Representations, Warranties and Covenants of the Optionee.

     6.1. No Effect on Employment. The Optionee understands and agrees that
nothing contained in this Nonqualified Option Agreement will be construed to
limit or restrict the rights of the Company to terminate the employment of the
Optionee at any time, with or without cause, to change the duties of the
Optionee or to increase or decrease the Optionee’s compensation. Without
limiting the foregoing, the Optionee understands and agrees that the vesting of
shares under this Nonqualified Stock Option Agreement is subject to and is
conditioned upon the continued employment of the Optionee by the Company or a
Subsidiary and that such employment can be terminated at any time by the Company
or its Subsidiary prior to some or all of the Option Shares vesting. In the
event of any such termination, the Optionee understands and agrees that the
Optionee shall have not right or claim, under contract, under any other legal
principle or under any equitable principle to any portion of the unvested Option
Shares.

     6.2 Rights Prior to Exercise of the Option. The Optionee understands and
agrees that the Optionee will have no rights as a shareholder in the Option
Shares, including, without limitation, the right to vote or receive dividends,
until the issuance of the shares is reflected in the Company’s stock transfer
records.

     6.3 Tax Implications. The Optionee understands that, under federal, state
and local income tax laws as they currently exist, the exercise of the Option
will result in ordinary income to the Optionee in the amount by which the Fair
Market Value (as of the date of exercise) of the shares acquired upon exercise
exceeds the Exercise Price.

     6.4 Underwriter’s Lock-up. The Optionee, by accepting the Option, agrees
that whenever the Company undertakes a firm underwritten public offering of its
securities and if requested by the managing underwriter in such offering, the
Optionee will enter into an agreement not to sell or dispose of any securities
of the Company owned or controlled by the Optionee provided that such
restriction will not extend beyond twelve (12) months from the effective date of
the registration statement filed in connection with such offering.

     6.5 Disclosures. The Optionee acknowledges receipt of a copy of the Plan
and certain related information and represents that the Optionee has fully
reviewed the terms and conditions of the Plan and this Nonqualified Stock Option
Agreement and has had the opportunity to obtain the advice of counsel prior to
executing this Nonqualified Stock Option Agreement. The Optionee represents and
warrants that the Optionee is not relying upon any representations, agreements
or understandings of or with the Company except for those set forth in this
Nonqualified Stock Option Agreement.

7. Miscellaneous Provisions

     7.1 Binding Effect. This Nonqualified Stock Option Agreement will be
binding upon and inure to the benefit of the parties hereto and their heirs,
executors, administrators, successors, and assigns.

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     7.2 Notices. All notices or other communications pursuant to this Agreement
shall be in writing and shall be deemed duly given if delivered personally or by
courier service or if mailed by certified mail, return receipt requested,
prepaid and addressed to the Company at its corporate offices to the attention
of the Corporate Secretary or, with respect to the Optionee, to the latest
address reflected on the Company’s administrative records, or such other address
as such party shall have furnished to the other party in writing.

     7.3 Governing Law and Interpretation. This Nonqualified Stock Option
Agreement and the Option granted hereunder will be governed by the laws of the
State of Oregon as to all matters, including but not limited to matters of
validity, construction, effect, and performance, without giving effect to rules
of choice of law. This Nonqualified Stock Option Agreement hereby incorporates
by reference all of the provisions of the Plan and will in all respects be
interpreted and construed in such manner as to effectuate the intent of the
Plan. In the event of a conflict between the terms of this Nonqualified Stock
Option Agreement and the Plan, the terms of the Plan will prevail. All matters
of interpretation of the Plan and this Nonqualified Stock Option Agreement,
including the applicable terms and conditions and the definitions of the words,
will be determined in the sole and final discretion of the Committee or the
Company’s Board of Directors.

     7.4. Arbitration. The parties agree to submit any dispute arising under
this Nonqualified Stock Option Agreement to final, binding, private arbitration
in Portland, Oregon. This includes not only disputes about the meaning or
performance of the Nonqualified Stock Option Agreement, but disputes about its
negotiation, drafting, or execution. The dispute will be determined by a single
arbitrator in accordance with the then-existing rules of arbitration procedure
of Multnomah County, Oregon Circuit Court, except that there shall be no right
of de novo review in Circuit Court and the arbitrator may charge his or her
standard arbitration fees rather than the fees prescribed in the Multnomah
County Circuit Court arbitration procedures. The proceeding will be commenced by
the filing of a civil complaint in Multnomah County Circuit Court and a
simultaneous request for transfer to arbitration. The parties expressly agree
that they may choose an arbitrator who is not on the list provided by the
Multnomah County Circuit Court Arbitration Department, but if they are unable to
agree upon the single arbitrator within ten days of receipt of the Arbitration
Department list, they will ask the Arbitration Department to make the selection
for them. The arbitrator will have full authority to determine all issues,
including arbitrability, to award any remedy, including permanent injunctive
relief, and to determine any request for costs and expenses in accordance with
Section 7.5 of this Agreement. The arbitrator’s award may be reduced to final
judgment in Multnomah County Circuit Court. The complaining party shall bear the
arbitration expenses and may seek their recovery if it prevails. Notwithstanding
any other provision of this Agreement, an aggrieved party may seek a temporary
restraining order or preliminary injunction in Multnomah County Circuit Court to
preserve the status quo during the arbitration proceeding.

     7.5 Attorney Fees. If any suit, action, or proceeding is instituted in
connection with any controversy arising out of this Nonqualified Stock Option
Agreement or the enforcement of any right hereunder, the prevailing party will
be entitled to recover, in addition to costs, such sums as the arbitrator or
court may adjudge reasonable as attorney fees, including fees on any appeal.

UMPQUA HOLDINGS CORPORATION

     
By:
  /s/ Daniel A. Sullivan      

  EVP/Chief Financial Officer

OPTIONEE:

      /s/ Raymond P. Davis  

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NONQUALIFIED STOCK OPTION AGREEMENT
Vesting Schedule

Under the Nonqualified Stock Option Agreement to which this Vesting Schedule is
attached, Option Shares shall vest and the Option may be exercised only as the
number of Option Shares in accordance with the following schedule:

              Number of   Aggregate Number Vesting Date   Shares Vesting   of
Vested Shares
01/03/2006
  22,500   22,500
01/03/2007
  22,500   45,000
01/03/2008
  15,000   60,000
01/03/2009
  15,000   75,000

Accelerated Vesting. Upon the occurrence of a Change of Control Transaction, all
unvested Option Shares shall vest as of the effective date of the Change of
Control Transaction notwithstanding the terms of the Vesting Schedule.