|SEVERANCE AGREEMENT

     This SEVERANCE AGREEMENT is
entered into this 15th day of May, 2002, by and between Centennial
Bancorp, an Oregon corporation (the Corporation), and
Steven D. Rice, Executive Vice President (the
Executive) of Centennial Bank, an Oregon state-chartered bank
and wholly owned subsidiary of the Corporation.

     WHEREAS, the Executive is
an executive of Centennial Bank, and in that capacity the Executive has made and
is expected to continue to make major contributions to the profitability, growth
and financial strength of the Corporation;

     WHEREAS, the Corporation
recognizes that, as is the case for most companies, the possibility of a Change
in Control (as defined in Section 1(c)) exists;

     WHEREAS, the Corporation
desires to assure itself of the current and future continuity of management and
desires to establish minimum severance benefits for officers and other key
employees, including the Executive, if a Change in Control occurs;

     WHEREAS, the Corporation
wishes to ensure that officers and other key employees are not practically
disabled from discharging their duties if a proposed or actual transaction
involving a Change in Control arises;

     WHEREAS, the Corporation
desires to provide additional inducement for the Executive to continue to remain
in the ongoing employ of the Corporation or its subsidiaries; and

     WHEREAS, none of the
conditions or events included in the definition of the term golden
parachute payment that is set forth in §18(k)(4)(A)(ii) of the
Federal Deposit Insurance Act [12 U.S.C. 1828(k)(4)(A)(ii)] and in Federal
Deposit Insurance Corporation Rule 359.1(f)(1)(ii) [12 CFR 359.1(f)(1)(ii)]
exists or, to the best knowledge of the Corporation, is contemplated insofar as
the Corporation is concerned.

     NOW THEREFORE, in
consideration of the foregoing premises and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

1.        CHANGE IN CONTROL COMBINED WITH EMPLOYMENT TERMINATION

     (a)       Termination of
Executive Within a Year after a Change in Control. If a Change in Control
occurs during the term of this Agreement and if either of the following occurs,
the Executive shall be entitled to the severance and termination benefits
specified in Section 2 of this Agreement:
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| | (1) | Termination by the Corporation or a Subsidiary: the
Executives employment with the Corporation or its Subsidiary(ies) is
involuntarily terminated within one year after a Change in Control, except for
termination under Section 4 of this Agreement. For purposes of this
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|
|

| |  | Agreement,
Subsidiary means an entity in which the Corporation directly or
indirectly beneficially owns 50% or more of the outstanding voting securities;
or
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| | (2) | Termination by the Executive for Good Reason: the Executive terminates his employment with the Corporation or
Subsidiary(ies) for Good Reason (as defined in Section 3) within one year after a Change in Control.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|If the Executive is removed from
office or if his employment terminates after discussions with a third party
regarding a Change in Control commence, and if those discussions ultimately
conclude with a Change in Control, then for purposes of this Agreement the
removal of the Executive or termination of his employment shall be deemed to
have occurred after the Change in Control.

     (b)        Termination by the
Executive During a 30-day Period One Year after a Change in Control. The
Executive shall also be entitled to the severance and termination benefits under
Section 2 of this Agreement if he terminates employment with the Corporation or
Subsidiary(ies) for any reason or for no reason during the 30-day period
immediately after the first anniversary of the first occurrence of a Change in
Control.

(c)        Definition of Change in Control. For purposes of this Agreement, Change in Control means any of the following
events occur:
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| | (1) | Merger: the Corporation merges into or consolidates with
another corporation, or merges another corporation into the Corporation, and as
a result less than a majority of the combined voting power of the resulting
corporation immediately after the merger or consolidation is held by persons who
were the holders of the Corporations voting securities immediately before
the merger or consolidation. For purposes of this Agreement, the term
person means an individual, corporation, partnership, trust,
association, joint venture, pool, syndicate, sole proprietorship, unincorporated
organization or other entity;
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| | (2) | Acquisition of Significant Share Ownership: a report on
Schedule 13D or Schedule TO (or any successor schedule, form or report) is filed
or is required to be filed under Sections 13(d) or 14(d) of the Securities
Exchange Act of 1934, if the schedule discloses that the filing person or
persons acting in concert has or have become the beneficial owner of 25% or more
of a class of the Corporations voting securities (but this clause (2)
shall not apply to beneficial ownership of voting shares of the Corporation held
by a Subsidiary of the Corporation in a fiduciary capacity);
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| | (3) | Change in Board Composition: during any period of two
consecutive years, individuals who constitute the Board of Directors of the
Corporation at the beginning of the two-year period cease for any reason to
constitute at least a majority thereof; provided, however, that 
for purposes of this clause (3)  each director who is first elected by the
Board (or first nominated by the Board for
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|
|

| |  | election by shareholders) by a vote
of at least two-thirds (2/3) of the directors who were directors at the
beginning of the period shall be deemed to have been a director at the beginning
of the two-year period;
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| | (4) | Sale of Assets: the Corporation sells to a third party substantially all of the Corporations assets; or
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| | (5) | Disclosure of a Change in Control: the Corporation files a
report or proxy statement with the Securities and Exchange Commission pursuant
to the Securities Act of 1933 or the Securities Exchange Act of 1934 disclosing
 in response to Rules 165 or 425, Form 8-K or Schedule 14A (or any
successor schedule, form or report or item therein)  that a change in
control of the Corporation has occurred or will occur under any existing
contract or pending transaction.
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|Notwithstanding this definition of Change in Control,
|-----------------------------------------------------

| |  | The Board May Make an Exception If It Continues to Control the Resulting
Corporations Board: if the individuals who constitute the
directors of the Corporation at the time a specific transaction described in
Section 1(c)(1) or 1(c)(4) is first presented or disclosed to the Board will
 according to the terms of the definitive agreement for the transaction
 constitute a majority of the members of the Board of Directors of the
resulting corporation or acquiring person immediately after the transaction,
then, before an event that would otherwise constitute a Change in Control, the
Board may determine by majority vote that the specific transaction does not
constitute a Change in Control under Section 1(c)(1) or 1(c)(4); and
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| |  | The Board May Make an Exception If the Corporation or Related Entities
Acquire Significant Share Ownership: unless otherwise determined
in a specific case by majority vote of the Board, a Change in
Control shall not be deemed to have occurred for purposes of Section
1(c)(2) or 1(c)(5) solely because (1) the Corporation, (2) a Subsidiary, or (3)
any employee stock ownership plan or any other employee benefit plan of the
Corporation or any Subsidiary either files or becomes obligated to file a report
or a proxy statement under or in response to Rule 165 or Rule 425 under the
Securities Act of 1933 or Schedule 13D, Schedule TO, Schedule 13E-3, Form 8-K or
Schedule 14A under the Securities Exchange Act of 1934 (or any successor
schedule, form or report or item therein) disclosing beneficial ownership by it
of voting securities of the Corporation, whether in excess of 25% or otherwise,
or because the Corporation reports that a change in control of the Corporation
has occurred or will occur in the future because of such beneficial ownership.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|2.        SEVERANCE AND TERMINATION BENEFITS

         (a)        Severance and Termination Benefits. The severance and termination benefits to which the Executive is entitled under
Section 1 are as follows:
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| | (1) | Lump Sum Payment: the Corporation shall make a lump sum
payment to the Executive in an amount in cash equal to 150% of the
Executives annual compensation. For purposes of this Agreement, annual
compensation means (a) the Executives then current base salary, plus (b)
any bonuses or incentive compensation earned for the calendar year immediately
preceding the year in which the Change in Control occurs, regardless of when the
bonus(es) or incentive compensation earned for the preceding calendar year is
paid. The amount payable to the Executive hereunder shall not be reduced to
account for the time value of money or discounted to present value. The payment
required under this Section 2(a)(1) is payable no later than 5 business days
after the date the Executives employment terminates. If the Executive
terminates employment for Good Reason, the date of termination shall be the date
specified by the Executive in his notice of termination.
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| | (2) | Benefit Plans: the Corporation shall cause the
Executive to become fully vested in any qualified and nonqualified plans,
programs or arrangements in which the Executive participated, notwithstanding
any provisions contained in the respective agreement of the plan, program or
arrangement. The Corporation also shall contribute or cause a Subsidiary to
contribute to the Executives 401(k) Plan account and his Centennial Bank
Employee Savings and Profit Sharing Plan account the matching and profit sharing
contribution, if any, that would have been paid had the Executives
employment not terminated before the end of the plan year.
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|(b)        No Mitigation
Required. The Corporation hereby acknowledges that it will be difficult and
could be impossible (1) for the Executive to find reasonably comparable
employment after his employment terminates, and (2) to measure the amount of
damages the Executive may suffer as a result of termination. Additionally, the
Corporation acknowledges that its general severance pay plans do not provide for
mitigation, offset or reduction of any severance payment received thereunder.
Accordingly, the Corporation further acknowledges that the payment of severance
and termination benefits by the Corporation under this Agreement is reasonable
and will be liquidated damages, and the Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or
any other obligation on the part of the Executive hereunder or otherwise.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3.        GOOD REASON

     (a)        Definition of Good
Reason. For purposes of this Agreement, Good Reason means the
occurrence of any of the events or conditions described in clauses (1) through
(6) hereof without the Executives express written consent:
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|
|

| | (1) | Change in Office or Position or Termination as a Director:
failure to elect or reelect or otherwise to maintain the Executive in the office
or position, or a substantially equivalent office or position, of or with the
Corporation or a Subsidiary that the Executive held immediately before the
Change in Control, or the removal or failure to nominate the Executive as a
director of the Corporation (or any successor thereto) if the Executive shall
have been a director of the Corporation immediately before the Change in
Control;
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| | (2) | Adverse Change in the Scope of His Duties or Compensation and Benefits:
| | --- | -----------------------------------------------------------------------

| | (a) | a significant adverse
change in the nature or scope of the authorities, powers, functions,
responsibilities or duties associated with the Executives position with
the Corporation or a Subsidiary compared to the nature or scope of the
authorities, powers, functions, responsibilities or duties associated with the
position immediately before the Change in Control;
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| | (b) | a reduction in the aggregate of the Executives annual compensation received from the Corporation or a Subsidiary; or
| | --- | ---------------------------------------------------------------------------------------------------------------------

| | (c) | the termination or
denial of the Executives rights to benefits under the Corporations
or a Subsidiarys benefit, compensation and incentive plans and
arrangements or a reduction in the scope or value thereof, which situation is
not remedied within 10 calendar days after written notice to the Corporation
from the Executive;
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| | (3) | Adverse Change in Circumstances: the Executive
determines that a change in circumstances has occurred after a Change in
Control, including without limitation a change in the scope of the business or
other activities for which the Executive is responsible compared to his
responsibilities immediately before the Change in Control, (a) which renders the
Executive substantially unable to carry out, substantially hinders the
Executives performance of, or causes the Executive to suffer a substantial
reduction in, any of the authorities, powers, functions, responsibilities or
duties associated with the office or position held by the Executive immediately
before the Change in Control, and (b) which situation is not remedied within 10
calendar days after written notice to the Corporation from the Executive of such
determination. Provided his determination is made in good faith, the
Executives determination will be conclusive and binding upon the parties
hereto. The Executives determination will be presumed to have been made in
good faith, unless the Corporation establishes by clear and convincing evidence
that it was not made in good faith;
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| | (4) | Liquidation and Merger of the Corporation or a
Subsidiary: the liquidation, dissolution, merger, consolidation
or reorganization of the Corporation or Centennial Bank or transfer of all or
substantially all of the business or assets of either the Corporation or
Centennial Bank, unless the successor or successors (by
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|
|

| |  | liquidation, merger,
consolidation, reorganization, transfer or otherwise) to which all or
substantially all of the business or assets have been transferred (directly or
by operation of law) assumes all duties and obligations of the Corporation under
this Agreement;
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| | (5) | Relocation of the Executive: the Corporation or
Centennial Bank relocates its principal executive offices, or requires the
Executive to have his principal location of work changed, to any location that
is more than 25 miles from the location thereof immediately before the Change in
Control, or requires the Executive to travel away from his office in the course
of discharging his responsibilities or duties hereunder at least 20% more (in
terms of aggregate days in any calendar year or in any calendar quarter when
annualized for purposes of comparison to any prior year) than was required of
Executive in any of the three full years immediately before the Change in
Control; or
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| | (6) | Breach of this Agreement: without limiting the generality or effect of the foregoing, any material breach of this
Agreement by the Corporation or any successor thereto.
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|(b)        No Effect on
Employee Benefits. Termination by the Corporation under Section 1(a)(1)
(termination within one year after a Change in Control), termination by the
Executive under Section 1(a)(2) (termination for Good Reason) and termination by
the Executive under Section 1(b) (termination during the 30-day period after the
first anniversary of a Change in Control) will not affect any rights the
Executive may have under any benefit, compensation or incentive agreement,
policy, plan, program or arrangement of the Corporation or a Subsidiary, which
rights shall be governed by the terms thereof.
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|4. | TERMINATION FOR WHICH NO SEVERANCE OR TERMINATION
BENEFITS ARE PAYABLE
|-- | ----------------------------------------------------------------------

|(a)        No Severance for Termination
for Cause. Anything in this Agreement to the contrary notwithstanding, under no
circumstance shall the Executive be entitled to severance or termination benefits if his employment terminates for Cause.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1) | Cause Means Commission of Any of the Following Acts: For purposes of this Agreement, Cause means the Executive
shall have committed any of the following acts:
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| | (a) | Fraud, Embezzlement or Theft: an intentional act of fraud, embezzlement or theft in connection with his
duties or in the course of his employment with the Corporation or a Subsidiary;
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (b) | Intentional Harm: intentional wrongful damage to property of the Corporation or a Subsidiary, causing
material harm to the Corporation or a Subsidiary;                                

|
|

| | (c) | Disclosure of Trade Secrets: intentional wrongful disclosure of secret processes or confidential
information of the Corporation or a Subsidiary, causing material
harm to the Corporation or a Subsidiary;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
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| | (d) | Competing with the Corporation or a Subsidiary: intentional wrongful engagement
in any competitive activity during the term of the Executives employment.
For purposes of this Agreement, competitive activity means the Executives
participation, without the written consent of an officer of the Corporation, in
the management of any business enterprise if (1) the enterprise engages in
substantial and direct competition with the Corporation or a Subsidiary, (2) the
enterprises revenues derived from any product or service competitive with
any product or service of the Corporation or a Subsidiary amounted to 10% or
more of such enterprises revenues for its most recently completed fiscal
year, and (3) the Corporations revenues from the product or service
amounted to 10% of the Corporations revenues for its most recently
completed fiscal year, or a Subsidiarys revenues from the product or
service amounted to 10% of a Subsidiarys revenues for its most recently
completed fiscal year. A competitive activity does not include mere ownership of
securities in any such enterprise and the exercise of rights appurtenant
thereto, provided the Executives share ownership does not give him
practical or legal control of the enterprise. For this purpose, ownership of
less than 5% of the enterprises outstanding voting securities shall
conclusively be presumed to be insufficient for practical or legal control, and
ownership of more than 50% shall conclusively be presumed to constitute
practical and legal control.
| |     | If the Executive is now or
hereafter becomes subject to an agreement not to compete with the Corporation or
a Subsidiary, a breach by the Executive of that other noncompetition agreement
shall be grounds for denial of severance and termination benefits for Cause
under this clause (d) of Section 4(a)(1). But if the Executive engages in a
competitive activity under circumstances justifying denial of severance or
termination benefits for Cause under this clause (d), that shall not necessarily
be grounds for concluding that the Executive has also breached the other
noncompetition agreement to which he is or may become subject. This clause (d)
is not intended to and shall not be construed to supersede or amend any
provision of an employment or noncompetition agreement to which the Executive is
or may become subject. This clause (d) does not grant to the Executive any right
or privilege to engage in other activities or enterprises, whether in
competition with the Corporation or a Subsidiary or otherwise; or                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (e) | Termination for Cause under an Employment Agreement: any actions that have caused
the Executive to be terminated for cause under any                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            

|
|

| |  | employment agreement existing
on the date hereof or hereafter entered into between the Executive and the
Corporation or a Subsidiary.
| |  | -------------------------------------------------------------------------------------------------------------------------------------

| | (2) | Definition of Intentional: For purposes of
this Agreement, no act or failure to act on the part of the Executive shall be
deemed to have been intentional if it was due primarily to an error in judgment
or negligence. An act or failure to act on the Executives part shall be
considered intentional if it is not in good faith and if it is without a
reasonable belief that the action or failure to act is in the best interests of
the Corporation.
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| | (3) | Termination for Cause Can Occur Solely by Formal Board
Action. The Executive shall not be deemed to have been terminated
for Cause under this Agreement unless and until there shall have been delivered
to the Executive a copy of a resolution duly adopted by the affirmative vote of
at least three-fourths (3⁄4) of the directors of the Corporation then in
office at a meeting of the Board of Directors called and held for such purpose,
which resolution shall (a) contain findings that, in the good faith opinion of
the Board, the Executive has committed an act constituting Cause and (b) specify
the particulars thereof in detail. Notice of that meeting and the proposed
termination for Cause shall be given to the Executive a reasonable amount of
time before the Boards meeting. The Executive and his counsel (if the
Executive chooses to have counsel present) shall have a reasonable opportunity
to be heard by the Board at the meeting. Nothing in this Agreement limits the
Executives or his beneficiaries right to contest the validity or
propriety of the Boards determination of Cause, and they shall have the
right to contest the validity or propriety of the Boards determination of
Cause even if that right does not exist under any employment agreement of the
Executive.
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|(b)        No Severance under this Agreement for the Executives Death or
Disability. Anything in this Agreement to the
contrary notwithstanding, under no circumstance shall the Executive be entitled to severance payments or termination benefits if
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (1) | Death: the Executive dies while actively employed by the Corporation or a Subsidiary; or
| | --- | ----------------------------------------------------------------------------------------

| | (2) | Disability: the Executive becomes totally disabled while actively employed by the Corporation or a Subsidiary. For
purposes of this agreement, the term totally disabled means that because of injury or sickness the Executive is
unable to perform his duties.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|The benefits, if any, payable to
the Executive or his beneficiary(ies) or estate relating to his death or
disability shall be determined solely by such benefit plans or arrangements as
the Corporation or a Subsidiary may have with the Executive relating to death or
disability, not this Agreement.
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5.        TERM OF AGREEMENT
|---------------------------

|
|

|The initial term of this Agreement
shall be for a period of three years, commencing May 15, 2002. On the first
anniversary of the May 15, 2002 effective date of this Agreement, and on each
anniversary thereafter, the Agreement shall be extended automatically for one
additional year, but only if the Board of Directors determines (a) that the
Executives performance has met the Boards requirements and standards
and (b) that the term shall be extended. If the Board of Directors determines
not to extend the term, it shall promptly notify the Executive. References
herein to the term of this Agreement shall refer to the initial term, as the
same may be extended. Unless sooner terminated, this Agreement shall terminate
when the Executive reaches age 65. If the Board decides not to extend the term
of this Agreement, this Agreement shall nevertheless remain in force until its
term expires. The Boards decision not to extend the term of this Agreement
shall not  by itself  give the Executive any rights under this
Agreement to claim an adverse change in his position, compensation or
circumstances or otherwise to claim entitlement to severance or termination
benefits under this Agreement.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6.        THIS AGREEMENT IS NOT AN EMPLOYMENT CONTRACT
|------------------------------------------------------

|The parties hereto acknowledge and
agree that (a) this Agreement is not a management or employment agreement and
(b) nothing in this Agreement shall give the Executive any rights or impose any
obligations to continued employment by the Corporation or any Subsidiary or
successor of the Corporation, nor shall it give the Corporation any rights or
impose any obligations for the continued performance of duties by the Executive
for the Corporation or any Subsidiary or successor of the Corporation.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7.        PAYMENT OF LEGAL FEES
|-------------------------------

|(a)        The Executive May
Enforce this Agreement Through Legal Action. The Corporation irrevocably
authorizes the Executive to retain from time to time counsel of Executives
choice to advise and represent him in the interpretation, enforcement or defense
of the parties rights and responsibilities under this Agreement, if:
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| | (1) | the Executive concludes that the Corporation has failed to comply with any of its obligations under this Agreement, or
| | --- | ----------------------------------------------------------------------------------------------------------------------

| | (2) | if the Corporation or any or any other person takes or threatens to take any
action to declare this Agreement void or unenforceable, or institutes any
litigation or other action or proceeding designed to deny, or to recover from,
the Executive the benefits provided or intended to be provided to the Executive
under this Agreement,
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|including without limitation the initiation or defense of any
litigation or other legal action, whether by or against the Corporation or any
director, officer, stockholder or other person affiliated with the Corporation,
in any jurisdiction.
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b)        Fees and Expenses
Will Be Paid by the Corporation. The Corporation desires that the Executive
not be required to incur legal fees and the related costs and expenses
associated with the interpretation, enforcement or defense of Executives
rights under this Agreement by
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|litigation or otherwise, because the amounts
thereof would substantially detract from the benefits intended to be extended to
the Executive under this Agreement. Therefore, even if the Executive does not
prevail in whole or in part in the litigation or other legal action associated
with the interpretation, enforcement or defense of Executives rights under
this Agreement, the Corporation hereby agrees to pay and be solely financially
responsible for any and all attorneys and related fees, costs and expenses
incurred by the Executive in the litigation or other legal action, up to a
maximum of $50,000. The fees and expenses of counsel selected by the Executive
shall be paid or reimbursed to the Executive by the Corporation on a regular,
periodic basis, upon presentation by the Executive of a statement or statements
prepared by such counsel in accordance with counsels customary practices.
Anything herein to the contrary notwithstanding, nothing in this Agreement
authorizes the Corporation to pay or the Executive to demand payment of fees,
costs and expenses if and to the extent payment of fees, costs and expenses
constitutes a prohibited indemnification payment within the meaning
of Federal Deposit Insurance Corporation Rule 359.1(l)(1) [12 CFR 359.1(l)(1)].
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(c)        The Executive May
Choose the Corporations Counsel. Notwithstanding any existing or
previous attorney-client relationship between the Corporation and any counsel
chosen by the Executive under Section 7(a), the Corporation irrevocably consents
to the Executives entering into an attorney-client relationship with that
counsel, and the Corporation and the Executive agree that a confidential
relationship shall exist between the Executive and that counsel.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|8.        WITHHOLDING OF TAXES

     The Corporation or a Subsidiary
may withhold from any benefits payable under this Agreement all Federal, state,
local or other taxes as may be required by law, governmental regulation or
ruling.
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|9.        SUCCESSORS AND ASSIGNS
|--------------------------------

|(a)        This Agreement Is
Binding on the Corporations Successors. This Agreement shall be
binding upon the Corporation and any successor to the Corporation, including any
persons acquiring directly or indirectly all or substantially all of the
business or assets of the Corporation by purchase, merger, consolidation,
reorganization or otherwise. Any such successor shall thereafter be deemed to be
the Corporation for purposes of this Agreement. But this Agreement
and the Corporations obligations under this Agreement are not otherwise
assignable, transferable or delegable by the Corporation. By agreement in form
and substance satisfactory to the Executive, the Corporation shall require any
successor to all or substantially all of the business or assets of the
Corporation expressly to assume and agree to perform this Agreement in the same
manner and to the same extent the Corporation would be required to perform if no
such succession had occurred.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(b)        This Agreement Is Enforceable by the Executive and
His Heirs. This Agreement will inure to the benefit of and be
enforceable by the Executives personal or legal representatives, executors, administrators, successors, heirs, distributees and
legatees.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|(c)        This Agreement Is
Personal in Nature and Is Not Assignable. This Agreement is personal in
nature. Without written consent of the other party, neither party shall assign,
transfer or delegate this Agreement or any rights or obligations under this
Agreement except as expressly provided in this Section 9. Without limiting the
generality or effect of the foregoing, the Executives right to receive
payments hereunder is not assignable or transferable, whether by pledge,
creation of a security interest, or otherwise, except for a transfer by
Executives will or by the laws of descent and distribution. If the
Executive attempts an assignment or transfer that is contrary to this Section 9,
the Corporation shall have no liability to pay any amount to the assignee or
transferee.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10.      NOTICES
|----------------

|All notices, requests, demands and
other communications hereunder shall be in writing and shall be deemed to have
been duly given if delivered by hand or mailed, certified or registered mail,
return receipt requested, with postage prepaid to the following addresses or to
such other address as either party may designate by like notice.
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | If to the Corporation, to: | Centennial Bancorp
One S.W. Columbia St., Suite 900
Portland, Oregon 97258
Attn: Corporate Secretary
| | --- | -------------------------- | ----------------------------------------------------------------------------------------------------

| | (b) | If to the Executive, to: | Steven D. Rice
16482 Bridlewood Road
Poway, CA 92064
| | --- | ------------------------ | ----------------------------------------------------

|and to such other or additional person or persons as either
party shall have designated to the other party in writing by like notice.
|-------------------------------------------------------------------------------------------------------------------------------------

|11.      CAPTIONS AND COUNTERPARTS
|----------------------------------

|The headings and subheadings used
in this Agreement are included solely for convenience and shall not affect the
interpretation of this Agreement.
|--------------------------------------------------------------------------------------------------------------------------------------------------

|This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which together shall constitute one and the same agreement.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|
|

|12.      AMENDMENTS AND WAIVERS
|-------------------------------

|No provision of this Agreement may
be modified, waived or discharged unless such waiver, modification or discharge
is agreed to in a writing or writings signed by the Executive and by the
Corporation. No waiver by either party hereto at any time of any breach by the
other party hereto or compliance with any condition or provision of this
Agreement to be performed by such other party will be deemed a waiver of similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, expressed or implied
with respect to the subject matter hereof have been made by either party that
are not set forth expressly in this Agreement.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|13.      SEVERABILITY
|---------------------

|The provisions of this Agreement
shall be deemed severable. The invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions of this
Agreement. Any provision held to be invalid or unenforceable shall be reformed
to the extent (and only to the extent) necessary to make it valid and
enforceable.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14.      GOVERNING LAW
|----------------------

|The validity, interpretation,
construction and performance of this Agreement shall be governed by and
construed in accordance with the substantive laws of the State of Oregon,
without giving effect to the principles of conflict of laws of such State.
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|15.      ARBITRATION
|--------------------

|Any dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrators award in any
court having jurisdiction.
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|IN WITNESS WHEREOF, the
parties have executed this Agreement on the day and year first written above.
|-----------------------------------------------------------------------------------------------------

|CENTENNIAL BANCORP  By: /s/ Ted R. Winnowski       Ted R. Winnowski, President & CEO | EXECUTIVE  /s/ Steven D. RiceSteven D. Rice
|------------------------------------------------------------------------------------ | -------------------------------------------