CENTENNIAL BANCORP

                       NONSTATUTORY STOCK OPTION AGREEMENT
                           (FOR NONEMPLOYEE DIRECTORS)

                      (RESTATED 1995 STOCK INCENTIVE PLAN)


EFFECTIVE DATE:   ____________, ____

BETWEEN:          Centennial Bancorp, an Oregon corporation      (the "Company")

AND:              _____________________________________         (the "Optionee")

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                  Street Address                  City       State      Zip Code

Number of Option Shares:            ____________________

Option Price per Share:             $___________________

Vesting Schedule:        Percentage of             Number of Years After
                         Shares Vested               Date of Agreement
                         -------------             ---------------------

                            33-1/3%                          1

                            33-1/3%                          2

                            33-1/3%                          3


          The Company has adopted a 1995 Stock Incentive Plan, as amended and
restated (the "Plan"), that provides for the grant of nonstatutory options to
purchase shares of the Company's Common Stock with a par value of $2.00 per
share (the "Stock"). The Optionee now serves as a director of the Company or a
parent or subsidiary corporation of the Company, and the Company desires to
afford the Optionee the opportunity to obtain stock ownership in the Company so
that the Optionee may have a proprietary interest in the Company's success. The
committee established pursuant to the Plan (the "Committee") has granted to the
Optionee an option to purchase shares of Stock, upon and subject to the terms
and conditions of the Plan and of this Agreement.

          NOW, THEREFORE, the parties agree as follows:

1. GRANT; TERMS OF OPTION. Subject to the terms and conditions of this Agreement
and the Plan, the Company grants to the Optionee the right and option (the
"Option") to purchase any part of an aggregate number of shares of the Company's
authorized but unissued Stock stated in the caption of this Agreement at the
price per share stated in the caption of this Agreement, this price being the
fair market value of the shares as determined pursuant to the Plan on the date
of the grant of the Option. It is the intent of the Committee that the Option is
a nonstatutory stock option and is not an "incentive stock option," as defined
in Section 422 of the Internal Revenue Code of 1986, as amended. The Option is
granted upon the following terms and conditions:

<PAGE>

(a)  TERM OF OPTION. Subject to reductions in the Option term provided in
     subparagraphs (c) and (e) below, the Option shall continue in effect
     through the tenth anniversary of the date of this Agreement.

(b)  TIMING OF RIGHT TO EXERCISE. Except as provided in subparagraph (c) hereof,
     the Option may be exercised from time to time over the term of the Option
     in the amounts specified in the vesting schedule set forth in the caption
     of this Agreement. If the Optionee does not purchase in any one year the
     full number of shares that the Optionee is then entitled to purchase, the
     Optionee's rights shall be cumulative, and, subject to the other provisions
     of this Agreement, the Optionee may purchase those shares thereafter during
     the term of the Option.

(c)  TERMINATION OF EMPLOYMENT. Except as provided in this subparagraph (c), the
     Option shall not be exercised unless at the time
     of such exercise the Optionee is serving as a director, or is in the
     employ, of the Company or a parent or subsidiary corporation of the Company
     and shall have so served continuously since the effective date of this
     Agreement. If the service or employment of the Optionee with the Company or
     a parent or subsidiary corporation of the Company terminates for any
     reason, the Option may be exercised by the Optionee at any time prior to
     the expiration date of the Option or the expiration of one year after the
     date of such termination, whichever is the shorter period, but only if and
     to the extent the Optionee was entitled to exercise the Option at the date
     of such termination. In such event, to the extent that the Option is not
     exercised within the applicable period, all further rights to purchase
     shares pursuant to the Option shall cease and terminate at the expiration
     of such period.

(d)  MANNER OF EXERCISE. Shares may be purchased pursuant to the Option only
     upon receipt by the Company of written notice from the Optionee of the
     Optionee's desire to purchase, specifying the number of shares the Optionee
     desires to purchase and the date on which the Optionee desires to complete
     the purchase. The Option may not be exercised for a fraction of a share. If
     required to comply with any applicable federal or state securities laws,
     the notice also shall contain a representation that it is the Optionee's
     intention to acquire the shares for investment and not for resale. On the
     date specified for completion of the purchase of the shares, the Optionee
     shall pay the Company the full purchase price of the shares in cash or by
     such other method of payment as shall be approved by the Committee. No
     shares shall be issued until full payment has been made, and the Optionee
     shall have none of the rights of a shareholder until shares are issued.
     Upon notification of the amount due and prior to or concurrently with
     delivery of the certificate representing the shares, the Optionee shall pay
     to the Company any amounts necessary to satisfy applicable federal, state
     and local withholding tax requirements.

<PAGE>

(e)  CHANGES IN CAPITAL STRUCTURE. Except as provided in the final sentence of
     this subparagraph (e), if the outstanding shares of Stock are increased or
     decreased or changed into or exchanged for a different number or kind of
     shares or other securities of the Company or of another corporation by
     reason of any reorganization, merger, consolidation, plan of exchange,
     recapitalization, reclassification, stock split-up, combination of shares
     or dividend payable in shares, the Committee shall make appropriate
     adjustment in the number and kind of shares as to which the Option, or
     portion thereof then unexercised, shall be exercisable, the exercise price
     of the Option and all other matters deemed appropriate by the Committee, so
     that the Optionee's proportionate interest shall be maintained as before
     the occurrence of such event. Such adjustment in the Option shall be made
     without change in the total price applicable to the unexercised portion of
     the Option and with a corresponding adjustment in the option price per
     share. Any such adjustment made by the Committee shall be conclusive. In
     the event of the dissolution of the Company or a merger, consolidation,
     plan of exchange or similar transaction affecting the Company, in lieu of
     adjusting the Option as described above or lieu of having the Option
     continue unchanged, the Committee may, in its sole discretion, provide a
     30-day period immediately prior to such event during which the Optionee
     shall have the right to exercise the Option in whole or in part without any
     limitation on exercisability and upon the expiration of such 30-day period
     any unexercised portion of the Option shall immediately terminate.

<PAGE>

2. CONDITIONS. The obligations of the Company under this Agreement shall be
subject to the approval of such state or federal authorities or agencies as may
have jurisdiction in the matter. The Company shall use its best efforts to take
such steps as may be required by state or federal law or applicable regulations,
including rules and regulations of the Securities and Exchange Commission, any
quotation system on which the Stock may then be traded and any stock exchange on
which the Stock may then be listed, in connection with any transfer of the
Option or the issuance or sale of any shares acquired pursuant to this Agreement
or the trading or listing of such shares on any such system or exchange. The
Company shall not be obligated to issue or deliver shares under this Agreement
if, upon advice of its legal counsel, such issuance or delivery would violate
state or federal securities laws.

3. PROVISIONS RELATING TO TRANSFERABILITY.

(a)  RESTRICTIONS ON TRANSFER. With the consent of the Board, which consent may
     be withheld in its sole discretion, all or any portion of the Option may be
     assigned or transferred to the Optionee's immediate family (i.e., children,
     grandchildren, spouse, parents and siblings), to trusts for the benefit of
     the Optionee's immediate family members, and pursuant to qualified domestic
     relations orders. No consideration may be paid for any permitted transfer
     of the Option and, after any permitted transfer, the Option shall continue
     to be subject to the same terms and conditions as were applicable to it
     immediately prior to its transfer, except that: (i) subsequent transfers of
     the portion of the Option that has been transferred shall be prohibited
     except by will or the laws of descent and distribution; (ii) for purposes
     of subparagraph 1(c), the term "Optionee" shall refer to the original
     Optionee and not the transferee; (iii) the events of termination of
     employment specified in subparagraph 1(c) shall continue to be applied with
     respect to the original Optionee, following which the Option shall be
     exercisable by the transferee only to the extent, and for the period
     specified in subparagraph 1(c); (iv) in the event of the Optionee's breach
     of any provision of paragraph 2, the penalties specified therein shall
     apply to the transferee; and (v) the original Optionee shall remain subject
     to withholding taxes upon exercise of the Option by the transferee. Before
     permitting any transfer, the Board may require the transferee to agree in
     writing to be bound by all other terms and conditions applicable to the
     Option prior to its transfer. Except with the consent of the Board, the
     Option shall not be transferable otherwise than by will or the laws of
     descent and distribution.

<PAGE>

(b)  EXERCISE BY LEGAL REPRESENTATIVE OR SUCCESSOR. Whenever the word "Optionee"
     is used in any provision of this Agreement under circumstances when the
     provision should logically be construed to apply to the Optionee's
     guardian, legal representative, executor, administrator, or the person or
     persons to whom the Option may be transferred by testamentary disposition
     or by the laws of descent and distribution, the word "Optionee" shall be
     deemed to include such person or persons.

4. LEGENDS. Certificates representing the shares subject to this Agreement shall
bear such legends as the Committee shall deem appropriate to reflect any
restrictions on transfer imposed by federal or applicable state securities laws.

5. CONTINUING RELATIONSHIP. Nothing in the Plan or in this Agreement shall
confer upon the Optionee any right to continue as a director or employee of the
Company or any parent or subsidiary corporation of the Company or interfere in
any way with the right of the Company or parent or subsidiary to terminate the
Optionee's service as a director in accordance with applicable law, the
Company's Restated Articles of Incorporation and the Company's Restated Bylaws,
or to terminate the Optionee's employment at any time for any reason, with or
without cause.

6. BINDING EFFECT. This Agreement shall be binding upon and shall inure to the
benefit of any successor of the Company, but, except as provided above, the
Option shall not be assigned or otherwise disposed of by the Optionee.

7. THE PLAN. The Option is subject to the terms and conditions of the Plan. In
the event of a conflict between the Plan and this Agreement, the terms of the
Plan shall control. The Optionee agrees to be bound by the rules and regulations
for the administration of the Plan, as presently prescribed or hereafter
amended, and by any amendment, construction or interpretation of the Plan
properly adopted by the Company's Board of Directors or by the Committee.

8. NOTICES. Parties to this Agreement shall give all notices to the other
parties concerning this Agreement by personal delivery, by telecopier or by
registered or certified mail, return receipt requested, addressed as follows:

     If to the Company:            Centennial Bancorp
                                   P.O. Box 1560
                                   675 Oak Street
                                   Eugene, Oregon  97440
                                   Attention:  Chief Financial Officer

     If to Optionee:               at Optionee's address stated in the caption
                                   of this Agreement, or such other address as
                                   Optionee, by notice to the Company, may
                                   designate in writing from time to time.

<PAGE>

Any party may, by written notice to the other parties, designate a new address
to which notices shall thereafter be delivered. Notice hereunder shall be deemed
effective upon the earlier of actual receipt or three days after being sent by
registered or certified mail.

          IN WITNESS WHEREOF, the parties have executed this Agreement effective
as of the date first stated above.

                                   CENTENNIAL BANCORP



                                   By:
                                      -----------------------------------------
                                      Richard C. Williams
                                      President and Chief Executive Officer


                                   OPTIONEE



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