EXECUTIVE
      SUPPLEMENTAL COMPENSATION AGREEMENT

    


    This
      Executive Supplemental Compensation Agreement (hereinafter “Agreement”) is made
      and entered into effective as of January 1, 2007 by and between Bank of the
      Pacific, with its principal offices located in the Aberdeen, Washington ("the
      Bank" or “Employer”) and, Denise J. Portmann, an individual residing in the
      State of Washington ("the Executive"). 

    


    RECITALS

    


    WHEREAS,
      the Executive is an employee of the Employer, serving since February 2001,
      

    


    WHEREAS,
      the Employer desires to establish a compensation benefit program as a fringe
      benefit for executive officers of the Employer in order to attract and retain
      individuals with extensive and valuable experience in the banking
      industry;

    


    WHEREAS,
      the Executive's experience and knowledge of the affairs of the Employer and
      the
      banking industry are extensive and valuable;

    


    WHEREAS,
      it is deemed to be in the best interests of the Employer to provide the
      Executive with certain fringe benefits, on the terms and conditions set forth
      herein, in order to reasonably induce the Executive to remain in the Employer's
      employment; and

    


    WHEREAS,
      the Executive and the Employer wish to specify in writing the terms and
      conditions upon which this additional compensatory incentive will be provided
      to
      the Executive;

    


    NOW,
      THEREFORE, in consideration of the services to be performed by the Executive
      in
      the future, as well as the mutual promises and covenants contained herein,
      the
      Executive and the Employer agree as follows:

    


    AGREEMENT

    


    1. Terms
      and Definitions.

    


    1.1 Accrued
      Liability Balance.
      For the
      purposes of this Agreement, means the liability that should be accrued by the
      Company, under Generally Accepted Accounting Principles (“GAAP”), for the
      Company’s obligation to the Executive under this Agreement, by applying
      Accounting Principles Board Opinion Number 12 (“APB 12”) as amended by Statement
      of Financial Accounting Standards Number 106 (“FAS 106”) and the Discount Rate.
      Any one of a variety of amortization methods may be used to determine the
      Accrual Balance. However, once chosen, the method must be consistently applied.
      

     

    1.2 Administrator.
      The
      Bank
      shall be the "Administrator" and, solely for the purposes of ERISA as defined
      in
      paragraph 1.9 below, the "fiduciary" of this Agreement where a fiduciary is
      required by ERISA.

     

    
      
        
        

      

      
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    1.3 Applicable
      Percentage.
      The
      term
“Applicable Percentage” is the percentage of the Executive Benefit to which
      Executive shall be entitled based on (a) the date on which the Executive
      Separates From Service or Terminates Employment with the Bank or (b) the greater
      of fifty percent (50%) or the actual Applicable Percentage, as stipulated herein
      for certain described events (such as Involuntary Termination within two years
      following a Change in Control, or the Executive's Disability). Subject to the
      forgoing, the Applicable Percentage shall be as follows:

    

      
        	
                DATE OF SEPARATION FROM SERVICE

              	 	
                APPLICABLE PERCENTAGE

              	 
	
                January
                  1, 2007-December 31, 2009

              	 	 	
                0

              	
                %

              
	
                January
                  1, 2010-December 31, 2010

              	 	 	
                30

              	
                %

              
	
                January
                  1, 2011-December 31, 2011

              	 	 	
                40

              	
                %

              
	
                January
                  1, 2012-December 31, 2012

              	 	 	
                50

              	
                %

              
	
                January
                  1, 2013-December 31, 2013

              	 	 	
                60

              	
                %

              
	
                January
                  1, 2014-December 31, 2014

              	 	 	
                70

              	
                %

              
	
                January
                  1, 2015-December 31, 2015

              	 	 	
                80

              	
                %

              
	
                January
                  1, 2016-December 31, 2016

              	 	 	
                90

              	
                %

              
	
                January
                  1, 2017 and beyond:

              	 	 	
                100

              	
                %

              


      

    

     

    1.4
       Beneficiary.
      Beneficiary
      (ies)” shall refer to the person, persons or entity designated in writing by the
      Executive on forms provided by the Administrator to receive the benefits payable
      under this Agreement/Plan. An Executive may change his Beneficiary from time
      to
      time, so long as permissible, by filing a new written designation with the
      Administrator, and such designation shall be effective upon receipt by the
      Administrator. If an Executive has not validly designated a beneficiary, or
      if a
      designated Beneficiary predeceases the Executive, then any benefit owed pursuant
      to this plan Agreement shall be made to Executive’s estate. 

    


    1.5 Board
      of Directors. The
      Board
      of Directors shall mean the Board of Directors for The Bank, hereinafter “the
      Board”. 

    


    1.6 Change
      in Control.
      For
      the
      purpose of this Agreement, a Change in Control means the occurrence of any
      of
      the following events:

    


    A. A
      Change in the Ownership of a Corporation.
      A
      change in the ownership of a corporation occurs on the date that any one person
      or persons acting as a group (as defined in IRC 409A), acquires ownership of
      stock of the corporation that, together with stock held by such person or group,
      constitutes more than fifty percent (50%) of the total fair market value or
      total voting power of the stock of such corporation. The acquisition of
      additional stock by the same person or group is not considered to cause a change
      in the ownership of the corporation.

     

    
      
        
        

      

      
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    B.
       Change
      in the Effective Control of a Corporation.
      A change
      in the effective control of the corporation shall be deemed to occur on either
      of the following dates: 

    


    (i)
      The
      date any one person, or persons acting as a group acquires (or has acquired
      during the twelve (12) month period ending on the date of the most recent
      acquisition by such person or group) ownership of stock of the corporation
      possessing thirty percent (30%) or more of the total voting power of the stock
      of such corporation; or

    (ii)
      The
      date a majority of members of the corporation’s board of directors is replaced
      during any twelve (12) month period by directors whose appointment or election
      is not endorsed by a majority of the members of the corporation’s board of
      directors before the date of the appointment or election. 

    


    C.
       Change
      in the Ownership of a Substantial Portion of a Corporation’s
      Assets.
      A
      change in the ownership of a substantial portion of a corporation’s assets shall
      be deemed to occur on the date that any one person or group acquires (or has
      acquired during the twelve (12) month period ending on the date of the most
      recent acquisition by such person or persons) assets from the corporation that
      have a total gross fair market value equal to or more than forty percent (40%)
      of the total gross fair market value of all of the assets of the corporation
      immediately before such acquisition or acquisitions. No Change in Control shall
      result if the assets are transferred to certain entities controlled directly
      or
      indirectly by the shareholders of the transferring corporation. 

    


    1.7 The
      Code.
      The
      "Code" shall mean the Internal Revenue Code of 1986, as amended (the
“Code").

    


    1.8 Disability/Disabled.
      For
      the
      purposes of this Agreement, Executive will be considered Disabled
      if:

    (A)
       The
      Executive is unable to engage in any substantial gainful activity by reason
      of
      any medically determinable physical or mental impairment that can be expected
      to
      result in death or can be expected to last for a continuous period of not less
      than twelve (12) months; or 

    (B)
       The
      Executive is, by reason of any medically determinable physical or mental
      impairment that can be expected to result in death or can be expected to last
      for a continuous period of not less than twelve (12) months, receiving income
      replacement benefits for a period of not less than three (3) months under an
      accident and health plan covering employees of the Employee’s employer.


    


    The
      determination of whether an Executive is Disabled shall be determined by a
      physician mutually agreed on by the parties subject to the provisions of IRC
      409A.

    


    1.9 Effective
      Date.
      The
      term
      "Effective Date" shall mean the date first written above.

     

    
      
        
        

      

      
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    1.10 ERISA.
      The
      term
      "ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
      amended.

    


    1.11 Executive
      Benefit.
      The
      term
      "Executive Benefit” shall mean the annual benefit amounts determined pursuant to
      Paragraphs 1 through 4 (including sub-paragraphs, as applicable), subject to
      forfeiture, reduction or adjustment as (a) required under the other provisions
      of this Agreement; (b) required by reason of the lawful order of any regulatory
      agency or body having jurisdiction over the Employer; or (c) required in order
      for the Employer to comply with any and all applicable state and federal laws,
      including, but not limited to, income, employment and disability income tax
      laws
      (e.g.,
      FICA,
      FUTA, SDI). 

    


    Subject
      to the forgoing, in the event the Executive obtains an Applicable Percentage
      of
      one hundred percent (100%), then the annual Executive Benefit paid by the Bank
      to the Employee pursuant to this Agreement shall be the lesser of forty percent
      (40%) of the average of the Executive’s three final years of base salary or an
      amount equal to One Hundred Thirty Nine Thousand Four Hundred Nine Dollars
      ($139,409.00). This Executive Benefit shall be paid in twelve (12) substantially
      equal monthly installments, for a period of fifteen (15) years (180 months).
      

    


    1.12 Involuntary
      Separation From Service.
      In
      accordance with IRC 409A, the term “Involuntary Separation from Service” shall
      mean a Separation From Service due to the independent exercise of the unilateral
      authority of the Bank to terminate the Executive’s services, other than due to
      the Executive’s implicit or explicit request, where the Executive was willing
      and able to continue performing services.

    


    1.13 IRC
      409A.
      The term
“IRC 409A” shall refer to the final regulations issued by the IRS and the
      Treasury Department under Section 409A of the Code. 

    


       1.14 Normal
      Retirement Date Normal Retirement Age .
      The
      term
      "Normal Retirement Date" shall mean the Retirement (as defined below) of the
      Executive on or after the attainment of age Fifty-Five (55).

    


    1.15 Retirement.
      The
      Term
      "Retirement" or "Retires" shall refer to the date on which the Executive
      voluntarily Separates From Service (other than due to a Termination for Cause)
      on or after attaining the Normal Retirement Age.

    


    1.17 Separation
      From Service/ Termination of Employment.
      The
      terms Separation From Service (Separates From Service) and Termination of
      Employment shall be used interchangeably for the purposes of this Agreement
      and
      shall be interpreted in accordance with the provisions of IRC 409A. Whether
      a
      termination of employment has occurred is determined based on whether the facts
      and circumstances indicate that the Bank and the Executive reasonably anticipate
      that no further services will be performed after a certain date or that the
      level of bona fide services the employee will perform after such date (whether
      as an employee or as an independent contractor) will permanently decrease to
      no
      more than twenty (20%) percent of the average level of bona fide services
      performed (as an employee or an independent contractor) over the immediately
      preceding 36-month period (or the full period of services to the employer if
      the
      employee has been providing services to the employer less than 36 months).
      There
      shall be no Separation From Service while the Executive is on military leave,
      sick leave or other bona fide leave of absence, as long as such leave does
      not
      exceed six months, or if longer, so long as the individual retains a right
      to
      re-employment with the service recipient under an applicable statute or by
      contract.

     

    
      
        
        

      

      
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    1.18 Specified
      Employee.
      The term
“Specified Employee” means an employee who, as of the date of the employee’s
      Separation from Service, is a key employee of an employer of which any stock
      is
      publicly traded on an established securities market or otherwise. An employee
      is
      a key employee if the employee meets the requirements of section
      416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations
      thereunder and disregarding section 416(i)(5)) at any time during the twelve
      (12) month period ending on a specified employee identification date. If
      Executive is a key employee as of a specified employee identification date,
      then
      Executive shall be treated as a key employee for the entire twelve (12) month
      period beginning on the specified employee effective date. 

    


    1.19 Termination
      for Cause.
      The
      term
“Termination for Cause” shall mean a written termination of Employment of the
      Executive by the Employer, adopted in advance by resolution of a majority of
      the
      Board of Directors of the Employer (the “Resolution”), for any one or more of
      the following reasons, which reasons shall be cited in the Resolution and
      presented promptly to the Executive: 

    


    (a)
       the
      Executive’s willful and material breach of duty in the course of his Employment,
      such breach having a material adverse effect on the Bank;

    


    (b) the
      Executive's willful violation of any laws, rules or regulations of any
      regulatory agency or governmental authority having jurisdiction over the
      Employer, or of any Bank policies or resolutions adopted by the Board of
      Directors of the Bank, which violation has a material adverse effect on the
      Bank;

    


    (c) the
      Executive is convicted of any felony or a crime involving moral turpitude or
      commits a fraudulent or dishonest act, which conviction or act has a material
      adverse effect on the Bank;

    


    1.20
       Termination
      for Good Reason.
      For the
      purposes of this Agreement, a voluntary termination by the Executive within
      two
      (2) years following a Change in Control Event shall be deemed “for Good Reason”
if one or more of the following conditions arise without the consent of the
      Executive:

    


    (A)
      A
      material diminution in the Executive’s base compensation;

    (B)
      A
      material diminution in the Executive’s authority, duties, or
      responsibilities;

    (C)
      A
      material diminution in the authority, duties, or responsibilities of the
      supervisor to whom the Executive is required to report, including a requirement
      that an Executive report to a corporate officer or employee instead of reporting
      directly to the board of directors of a corporation (or similar governing body
      with respect to an entity other than a corporation);

    (D)
      A
      material diminution in the budget over which the Executive retains
      authority;

    (E)
      A
      material change in the geographic location at which the Executive must perform
      the services;

    (F)
      Any
      other action or inaction that constitutes a material breach by the Employer
      of
      the agreement under which the Executive provides services.

     

    
      
        
        

      

      
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    2. Scope,
      Purpose and Effect.

    


    2.1 Contract
      of Employment.
      Although
      this Agreement is intended to provide the Executive with an additional incentive
      to remain in the employ of the Employer, this Agreement shall not be deemed
      to
      constitute a contract of employment between the Executive and the Employer
      nor
      shall any provision of this Agreement restrict or expand the right of the
      Employer to terminate the Executive's employment. This Agreement shall have
      no
      impact or effect upon any separate written Employment Agreement which the
      Executive may have with the Employer, it being the parties' intention and
      agreement that unless this Agreement is specifically referenced in said
      Employment Agreement (or any modification thereto), this Agreement (and the
      Employer's obligations hereunder) shall stand separate and apart and shall
      have
      no effect on or be affected by, the terms and provisions of said Employment
      Agreement.

    


    2.2 Fringe
      Benefit.
      The
      benefits provided by this Agreement are granted by the Bank as a fringe benefit
      to the Executive and are not a part of any salary reduction plan or any
      arrangement deferring a bonus or a salary increase. The Executive has no option
      to take any current payments or bonus in lieu of the benefits provided by this
      Agreement.

    


    2.3 Prohibited
      Payments. Notwithstanding
      anything in this Agreement to the contrary, if any payment made under this
      Agreement is a “golden parachute payment” as defined in Section 28(k) of the
      Federal Deposit Insurance Act (12 U.S.C. section 1828(k) and Part 359 of the
      Rules and Regulations of the Federal Deposit Insurance Corporation
      (collectively, the “FDIC Rules”) or is otherwise prohibited, restricted or
      subject to the prior approval of a Bank Regulator, no payment shall be made
      hereunder without complying with said FDIC Rules.

    


    3. Delay
      in Payments for Specified Employee in the Event of a Separation From
      Service.
      

    


    In
      the
      case of any Employee who is a Specified Employee as of the date of a Separation
      from Service, then a payment conditioned upon a Separation from Service may
      not
      be made before the date that is six (6) months after the date of Separation
      from
      Service (or, if earlier than the end of the six-month period, the date of death
      of the Specified Employee). 

    


    In
      the
      event payments to which the Executive would otherwise be entitled during the
      first six (6) months are subject to this six (6) month delay in payment, then
      such payments shall be accumulated and paid on the first day of the seventh
      month following the date of Separation from Service. Payments will then continue
      thereafter as called for pursuant to the terms of this Agreement. 

     

    
      
        
        

      

      
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    4. Executive
      Benefit Payments Upon Retirement.

    


    4.1 Payments
      Commence Upon Normal Retirement.
      In
      the
      event the Executive remains in the continuous employment of the Bank until
      attaining at least the Normal Retirement Age, then the Executive shall be
      entitled to be paid a one hundred percent (100%) Applicable Percentage of the
      Executive Benefit. Payments shall commence on the first day of the month
      following the month in which the Executive Retires and shall continue for a
      period of one hundred and eighty (180) months. 

    


    4.2 Payments
      in the Event of the Executive’s Death After Retirement.
      Upon the
      death of the Executive after Normal Retirement, then Executive’s designated
      Beneficiary shall be paid the remainder of any unpaid or outstanding Executive
      Benefit payments. The payments shall commence no later than thirty (30) days
      after Executive’s death and shall continue until the total one hundred and
      eighty (180) payments have been made. 

    


    5. Payments
      in the Event Executive’s Employment Terminates Prior to
      Retirement.
      As
      indicated above, the Employer reserves the right to terminate the Executive's
      employment, with or without Cause but subject to any written employment
      agreement which may then exist, at any time prior to the Executive's Retirement.
      In the event that the Executive’s Employment Terminates before Executive
      qualifies for Normal Retirement (other than by reason of a termination for
      Cause), then this Agreement shall terminate upon the date of such Termination
      of
      Employment; provided, however, that the Executive shall be entitled to the
      following benefits as may be applicable depending upon the circumstances
      surrounding the Termination: 

    


    5.1
      Payments
      in the Event Disability Occurs Prior to Normal
      Retirement.
      In the
      event the Executive becomes Disabled while actively employed by the Bank at
      any
      time after the Effective Date of this Agreement but prior to Normal Retirement,
      then Executive shall be entitled to be paid the Accrued
      Liability Balance in lump sum within thirty (30) days after the determination
      of
      Disability.

    


    5.2 Payments
      in the Event of the Executive’s Death prior to
      Retirement.
      Upon the
      death of the Executive prior to electing Normal Retirement, then Executive’s
      designated Beneficiary shall be paid death benefit in the amount of One Hundred
      Thirty Nine Thousand Four Hundred Nine Dollars ($139,409.00) per year. The
      payments shall commence no later than thirty (30) days after Executive’s death.
      These payments shall be made in twelve (12) substantially equal monthly
      installments, for a period of fifteen (15) years (180 months). 

    


    5.3 Termination
      Without Cause.
      If
      the
      Executive's employment is terminated by the Employer without cause prior to
      qualifying for Normal Retirement, and such termination is not subject to the
      provisions of paragraph 5.5 below, then the Executive shall be entitled to
      be
      paid the Applicable Percentage of the Executive Benefit, in substantially equal
      monthly installments on the first day of each month, beginning with the month
      following the month in which the Executive attains the Normal Retirement
      Age.

     

    
      
        
        

      

      
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    5.4 Voluntary
      Termination by the Executive.
      In
      the
      event the Executive voluntarily Terminates Employment with the Bank prior to
      qualifying for Normal Retirement, then the Executive Benefit shall be determined
      in accordance with the following:

    


      (A)
      If the Applicable Percentage is one hundred percent (100%), the Executive shall
      be entitled to be paid the Applicable Percentage of the Executive Benefit,
      in
      substantially equal monthly installments on the first day of each month,
      beginning with the month following the month in which the Executive attains
      the
      Normal Retirement Age.

    


      (B)
      If the Executive voluntarily Terminates Employment with the Bank prior to the
      date specified in Paragraph 1.3 which corresponds to an Applicable Percentage
      of
      one hundred percent (100%), and such termination is not subject to the
      provisions of paragraph 5.5 below, the Executive shall forfeit any and all
      rights and benefits he may have under the terms of this Agreement and shall
      have
      no right to be paid any of the amounts which would otherwise be due or paid
      to
      the Executive by the Bank pursuant to the terms of this Agreement.

     

    5.5 Involuntary
      Termination Within Two Years Following a Change in
      Control.
      In
      the
      event the Executive is Involuntarily Terminated within two (2) years following
      a
      Change in Control Event, or in the event the Executive Terminates for Good
      Reason within two (2) years following a Change in Control Event, then Executive
      shall be entitled to receive the greater of the actual Applicable Percentage
      as
      of the termination date or 50% of the Executive Benefit. This benefit payment
      shall commence on the first day of each month, beginning with the month
      following the month in which the Executive attains the Normal Retirement
      Age.

    


    6. Termination
      for Cause.
      The
      Executive agrees that if his employment with the Bank is terminated at any
      time
      "for Cause," as defined herein, he shall forfeit any and all rights and benefits
      he may have under the terms of this Agreement and shall have no right to be
      paid
      any of the amounts which would otherwise be due or paid to the Executive by
      the
      Bank pursuant to the terms of this Agreement. Furthermore, this forfeiture
      in
      the event of a termination For Cause shall occur regardless of whether Executive
      has attained the Normal Retirement Age, and for as long as Executive remains
      employed by the Bank. 

    


    7. Change
      in Time or Form of Payment.
      The date
      on which distributions are to commence may be postponed by amendment provided
      the following conditions are satisfied (and in accordance with IRC
      409A):

    


    (A)
      The
      election to defer or postpone payment may not take effect until at least twelve
      (12) months after the date on which the election is made; 

    


    (B)
      The
      payment with respect to which such election is made must be deferred for a
      period of not less than five (5) years from the date such payment would
      otherwise have been paid.

     

    
      
        
        

      

      
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    (C)
      Any
      election relating to a payment to be made a specified time or pursuant to a
      fixed schedule must be made at least twelve (12) months before the date the
      payment is scheduled to be paid .

    


    8. Right
      To Determine Funding Methods.
      The Bank
      reserves the right to determine, in its sole and absolute discretion, whether,
      to what extent and by what method, if any, to provide for the payment of the
      amounts which may be payable to the Executive, under the terms of this
      Agreement. In the event that the Bank elects to fund this Agreement, in whole
      or
      in part, through the use of life insurance or annuities, or both, the Bank
      shall
      determine the ownership and beneficial interests of any such policy of life
      insurance or annuity. The Bank further reserves the right, in its sole and
      absolute discretion, to terminate any such policy, and any other devise used
      to
      fund its obligations under this Agreement, at any time, in whole or in part.
      The
      Executive shall have no right, title or interest in or to any funding source
      or
      amount utilized by the Bank pursuant to this Agreement, and any such funding
      source or amount shall not constitute security for the performance of the Bank's
      obligations pursuant to this Agreement. In connection with the foregoing, the
      Executive agrees to execute such documents and undergo such medical examinations
      or tests which the Bank may request and which may be reasonably necessary to
      facilitate any funding for this Agreement including, without limitation, the
      Bank's acquisition of any policy of insurance or annuity.

    


    9. Administrative
      and Claims Provision. 

    


    9.1
       Named
      Fiduciary and Plan Administrator. The
      “Named Fiduciary and Plan Administrator” of this executive plan shall be the
      Bank until its resignation or removal by the Board of Directors. As Named
      Fiduciary and Plan Administrator, the Bank shall be responsible for the
      management, control and administration of this executive plan. The Named
      Fiduciary may delegate to others certain aspects of the management and operation
      responsibilities of the plan, including employment of advisors and the
      delegation of ministerial duties to qualified individuals.

    


    9.2
       Claims
      Procedure.
      In the
      event a dispute arises over the benefits under this executive plan and benefits
      are not paid to the Executive (or to the Executive’s beneficiary[ies], if
      applicable) and such claimants feel they are entitled to receive such benefits,
      then a written claim must be made to the Named Fiduciary and Plan Administrator
      named above within forty-five (45) days from the date payments are refused.
      The
      Named Fiduciary and Plan Administrator shall review the written claim and if
      the
      claim is denied, in whole or in part, they shall provide in writing within
      forty-five (45) days of receipt of such claim the specific reasons for such
      denial, reference to the provision of the plan agreement upon which the denial
      is based and any additional material or information necessary to perfect the
      claim. Such written notice shall further indicate the additional steps to be
      taken by claimants if further review of the claim denial is desired. Any
      decision by the Bank denying a claim by the Executive for benefits under this
      Agreement shall be stated in writing and delivered or mailed, via registered
      or
      certified mail, to the Executive, the Executive's spouse or the Executive's
      beneficiaries, as the case may be. Furthermore, a claim shall be deemed denied
      if the Named Fiduciary and Plan Administrator fail to take any action within
      the
      aforesaid forty-five (45) day period.

     

    
      
        
        

      

      
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    If
      claimants desire a second review, they shall notify the Named Fiduciary and
      Plan
      Administrator in writing within forty-five (45) days of the first claim denial.
      Claimants may review this Executive Plan or any documents relating thereto
      and
      submit any written issues and comments they may feel appropriate. In their
      sole
      discretion, the Named Fiduciary and Plan Administrator shall then review the
      second claim and provide a written decision within forty-five (45) days of
      receipt of such claim. This decision shall likewise state the specific reasons
      for the decision and shall include reference to specific provisions of the
      plan
      agreement upon which the decision is based.

    


    9.3
       Arbitration
      of Disputes.
      All
      claims, disputes and other matters in question arising out of or relating to
      this Agreement or the breach or interpretation thereof, other than those matters
      which are to be determined by the Bank in its sole and absolute discretion,
      shall be resolved by binding arbitration before a representative member,
      selected by the mutual agreement of the parties, of the Judicial Arbitration
      and
      Mediation Services, Inc. ("JAMS"), located in Seattle, Washington. Notice of
      the
      demand for arbitration shall be filed in writing with the other party to this
      Agreement and with JAMS. In no event shall the demand for arbitration be made
      after the date when institution of legal or equitable proceedings based on
      such
      claim, dispute or other matter in question would be barred by the applicable
      statute of limitations. The arbitration shall be subject to such rules of
      procedure used or established by JAMS. Any award rendered by JAMS shall be
      final
      and binding upon the parties, and as applicable, their respective heirs,
      beneficiaries, legal representatives, agents, successors and assigns, and may
      be
      entered in any court having jurisdiction thereof. Any arbitration hereunder
      shall be conducted in Aberdeen, Washington, unless otherwise agreed to by the
      parties.

     

    9.4
       Attorneys'
      Fees.
      In the
      event of any arbitration or litigation concerning any controversy, claim or
      dispute between the parties hereto, arising out of or relating to this Agreement
      or the breach hereof, or the interpretation hereof, (a) each party shall pay
      his
      own attorneys’ arbitration fees incurred (pursuant to paragraph 9.3); (b) the
      prevailing party shall be entitled to recover from the other party reasonable
      expenses, attorneys' fees and costs incurred in the enforcement or collection
      of
      any judgment or award rendered. The "prevailing party" means any party (one
      party or both parties, as the case may be) determined by the arbitrator(s)
      or
      court to be entitled to money payments from the other, not necessarily the
      party
      in whose favor a judgment is rendered.

    


    10. Status
      as an Unsecured General Creditor and Rabbi Trust.
      Notwithstanding
      anything contained herein to the contrary: (i) the Executive shall have no
      legal
      or equitable rights, interests or claims in or to any specific property or
      assets of the Employer as a result of this Agreement; (ii) none of the Bank’s
      assets shall be held in or under any trust for the benefit of the Executive
      or
      held in any way as security for the fulfillment of the obligations of the Bank
      under this Agreement; (iii) all of the Bank’s assets shall be and remain the
      general unpledged and unrestricted assets of the Bank; (iv) the Bank’s
      obligation under this Agreement shall be that of an unfunded and unsecured
      promise by the Bank to pay money in the future; and (v) the Executive shall
      be
      an unsecured general creditor with respect to any benefits which may be payable
      under the terms of this Agreement.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Notwithstanding
      subparagraphs (i) through (v) above, the Bank and the Executive acknowledge
      and
      agree that, in the event of a Change in Control, upon request of the Executive,
      or in the Bank’s discretion if the Executive does not so request and the Bank
      nonetheless deems it appropriate, the Bank shall establish, not later than
      the
      effective date of the Change in Control, a Rabbi Trust or multiple Rabbi Trusts
      (the "Trust" or "Trusts") upon such terms and conditions as the Bank, in its
      sole discretion, deems appropriate and in compliance with applicable provisions
      of the Code, in order to permit the Bank to make contributions and/or transfer
      assets to the Trust or Trusts to discharge its obligations pursuant to this
      Agreement. The principal of the Trust or Trusts and any earnings thereon shall
      be held separate and apart from other funds of the Bank to be used exclusively
      for discharge of the Bank’s obligations pursuant to this Agreement and shall
      continue to be subject to the claims of the Bank’s general creditors until paid
      to the Executive in such manner and at such times as specified in this
      Agreement.

    


    11. Miscellaneous.

    


    11.1 Opportunity
      To Consult With Independent Advisors.
      The
      Executive acknowledges that he has been afforded the opportunity to consult
      with
      independent advisors of his choosing including, without limitation, accountants
      or tax advisors and counsel regarding both the benefits granted to him under
      the
      terms of this Agreement and the (i) terms and conditions which may affect the
      Executive's right to these benefits and (ii) personal tax effects of such
      benefits including, without limitation, the effects of any federal or state
      taxes, Section 280G of the Code, and any other taxes, costs, expenses or
      liabilities whatsoever related to such benefits, which in any of the foregoing
      instances the Executive acknowledges and agrees shall be the sole responsibility
      of the Executive notwithstanding any other term or provision of this Agreement.
      The Executive further acknowledges and agrees that the Bank shall have no
      liability whatsoever related to any such personal tax effects or other personal
      costs, expenses, or liabilities applicable to the Executive and further
      specifically waives any right for himself or herself, and his or her heirs,
      beneficiaries, legal representatives, agents, successor and assign to claim
      or
      assert liability on the part of the Bank related to the matters described above
      in this paragraph 11.1. The Executive further acknowledges that he has read,
      understands and consents to all of the terms and conditions of this Agreement,
      and that he enters into this Agreement with a full understanding of its terms
      and conditions.

    


    11.2 Notice.
      Any
      notice required or permitted of either the Executive or the Bank under this
      Agreement shall be deemed to have been duly given, if by personal delivery,
      upon
      the date received by the party or its authorized representative; if by
      facsimile, upon transmission to a telephone number previously provided by the
      party to whom the facsimile is transmitted as reflected in the records of the
      party transmitting the facsimile and upon reasonable confirmation of such
      transmission; and if by mail, on the third day after mailing via U.S. first
      class mail, registered or certified, postage prepaid and return receipt
      requested, and addressed to the party at the address given below for the receipt
      of notices, or such changed address as may be requested in writing by a
      party.

     

    
      
        	
                If to the Bank:

              	
                Bank of the Pacific

              
	 	
                Attention: President and CEO

              
	 	
                300 East Market Street

              
	 	
                98520

              
	 	 
	
                If to the Executive:

              	
                Denise J. Portmann

              
	 	
                2012 State Route 6

              
	 	
                Raymond, WA 98577

              


      

    

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    11.3 Assignment.
      The
      Executive shall have no power or right to transfer, assign, anticipate,
      hypothecate, modify or otherwise encumber any part or all of the amounts payable
      hereunder, nor, prior to payment in accordance with the terms of this Agreement,
      shall any portion of such amounts be: (i) subject to seizure by any creditor
      of
      the Executive, by a proceeding at law or in equity, for the payment of any
      debts, judgments, alimony or separate maintenance obligations which may be
      owed
      by the Executive; or (ii) transferable by operation of law in the event of
      bankruptcy, insolvency or otherwise. Any such attempted assignment or transfer
      shall be void.

    


    11.4 IRS
      Section 280G Issues.
      If
      all or
      any portion of the amounts payable to the Executive under this Agreement, either
      alone or together with other payments which the Executive has the right to
      receive from the Employer, constitute "excess parachute payments" within the
      meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the
      "Code"), that are subject to the excise tax imposed by Section 4999 of the
      Code
      (or similar tax and/or assessment), Executive shall be responsible for the
      payment of such excise tax and Employer (and its successor) shall be responsible
      for any loss of deductibility related thereto; provided, however, that Employer
      and Executive shall cooperate with each other and use all reasonable efforts
      to
      minimize to the fullest extent possible the amount of excise tax imposed by
      Section 4999 of the Code. If, at a later date, it is determined (pursuant to
      final regulations or published rulings of the Internal Revenue Service, final
      judgment of a court of competent jurisdiction, or otherwise) that the amount
      of
      excise taxes payable by the Executive is greater than the amount initially
      so
      determined, then the Executive shall pay an amount equal to the sum of such
      additional excise taxes and any interest, fines and penalties resulting from
      such underpayment. The determination of the amount of any such excise taxes
      shall be made by the independent accounting firm employed by the Employer
      immediately prior to the change in control or such other independent accounting
      firm or advisor as may be mutually agreeable to Employer and Executive in the
      exercise of their reasonable good faith judgment.

    


    11.5 Binding
      Effect/Merger or Reorganization.
      This
      Agreement shall be binding upon and inure to the benefit of the Executive and
      the Bank. Accordingly, the Bank shall not merge or consolidate into or with
      another corporation, or reorganize or sell substantially all of its assets
      to
      another corporation, firm or person, unless and until such succeeding or
      continuing corporation, firm or person agrees to assume and discharge the
      obligations of the Bank under this Agreement. In the alternative, the Holding
      Company may agree to assume and discharge the obligation of the Bank under
      this
      Agreement. Upon the occurrence of such event, the term "Bank" as used in this
      Agreement shall be deemed to refer to such surviving or successor firm, person,
      entity or corporation, or the Holding Company, as the case may be.

     

    11.6 Nonwaiver.
      The
      failure of either party to enforce at any time or for any period of time any
      one
      or more of the terms or conditions of this Agreement shall not be a waiver
      of
      such term(s) or condition(s) or of that party's right thereafter to enforce
      each
      and every term and condition of this Agreement.

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

     

    11.7 Partial
      Invalidity.
      If any
      terms, provision, covenant, or condition of this Agreement is determined by
      an
      arbitrator or a court, as the case may be, to be invalid, void, or
      unenforceable, such determination shall not render any other term, provision,
      covenant or condition invalid, void or unenforceable, and the Agreement shall
      remain in full force and effect notwithstanding such partial
      invalidity.

    


    11.8 Entire
      Agreement.
      This
      Agreement supersedes any and all other agreements, either oral or in writing,
      between the parties with respect to the subject matter of this Agreement and
      contains all of the covenants and agreements between the parties with respect
      thereto. Each party to this Agreement acknowledges that no other
      representations, inducements, promises, or agreements, oral or otherwise, have
      been made by any party, or anyone acting on behalf of any party, which are
      not
      set forth herein, and that no other agreement, statement, or promise not
      contained in this Agreement shall be valid or binding on either
      party.

    


    11.9 Modifications.
      Any
      modification of this Agreement shall be effective only if it is in writing
      and
      signed by each party or such party's authorized representative, and only to
      the
      extent that it is compliant with all applicable codes and statutes, including
      but not limited to IRS Code Section 409A.

    


    11.10 Paragraph
      Headings.
      The
      paragraph headings used in this Agreement are included solely for the
      convenience of the parties and shall not affect or be used in connection with
      the interpretation of this Agreement.

    


    11.11 No
      Strict Construction.
      The
      language used in this Agreement shall be deemed to be the language chosen by
      the
      parties hereto to express their mutual intent, and no rule of strict
      construction will be applied against any person.

    


    11.12 Governing
      Law.
      The laws
      of the State of Washington, other than those laws denominated choice of law
      rules, and where applicable, the rules and regulations of the Board of Governors
      of the Federal Reserve System, Federal Deposit Insurance Corporation, Office
      of
      the Comptroller of the Currency, or any other regulatory agency or governmental
      authority having jurisdiction over the Bank or the Holding Company, shall govern
      the validity, interpretation, construction and effect of this
      Agreement.

    


    IN
      WITNESS WHEREOF, the Bank and the Executive have executed this Agreement on
      the
      date first above-written in the City of Aberdeen, Washington.

     

    
      
        
        

      

      
        -13-

        
          

        

      

      
        
        

      

    

    



    
      	
              BANK

            	 	
              EXECUTIVE

            
	 	 	 
	 	 	 
	
              By:

            	
              /s/
                Dennis Archer

            	 	
              /s/
                Denise J. Portmann

            
	
              Dennis
                Archer

            	 	
              Denise
                J. Portmann

            
	
              Vice
                Chairman of the Board of Directors

            	 	 
	
              Chairman
                of the Compensation Committee

            	 	 
	 	 	 


    

    

      
        	
                Date:

              	11/6/2007	 	 	
                Date:

              	10/9/2007	 


      

    

     

    
      
        
        

      

      
        -14-

        
          

        

      

      
        
        

      

    

     

    BENEFICIARY DESIGNATION
      FORM

    FOR
      THE EXECUTIVE
      SUPPLEMENTAL COMPENSATION AGREEMENT

     

    PRIMARY
      DESIGNATION

    (You
      may refer to the beneficiary designation information prior to completion of
      this
      form.)

     

    A.      Person(s)
      as a Primary
      Designation:

          
(Please indicate
      the
      percentage for each beneficiary.)

     

    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    B. Estate
      as a Primary Designation:

    


    My
      Primary Beneficiary is The Estate of ______________________________________
      as
      set forth in the last will and testament dated the _____ day of _____________,
      _____ and any codicils thereto.

    


    C. Trust
      as a Primary Designation:

    


    Name
      of
      the Trust:
      ____________________________________________________________

    Execution
      Date of the Trust:
      _____ /
      _____ / _________

    Name
      of
      the Trustee:
      __________________________________________________________

    Beneficiary(ies)
      of the Trust (please indicate the percentage for each beneficiary):

    ___________________________________________________________________________

    ___________________________________________________________________________

    Is
      this
      an Irrevocable Life Insurance Trust? ________ Yes 
      ________
      No

    (If
      yes
      and this designation is for a Split Dollar agreement, an Assignment of Rights
      form should be completed.)

     

    
      
        
        

      

      
        -15-

        
          

        

      

      
        
        

      

    

    
II.
      SECONDARY
      (CONTINGENT) DESIGNATION

    


    A.           Person(s)
      as a Secondary (Contingent) Designation:

          (Please
      indicate the percentage for each beneficiary.)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    Name___________________________________
      Relationship___________________ / _______%

    


    Address:_______________________________________________________________________

    (Street)    (City)  (State)  (Zip)

    


    B. Estate
      as a Secondary (Contingent) Designation:

    


    My
      Secondary Beneficiary is The Estate of _____________________________________
      as
      set forth in my last will and testament dated the _____ day of ___________,
      _____ and any codicils thereto.

    


    C. Trust
      as a Secondary (Contingent) Designation:

    


    Name
      of
      the Trust:
      ____________________________________________________________

    


    Execution
      Date of the Trust:
      _____ /
      _____ / _________

    


    Name
      of
      the Trustee:
      __________________________________________________________

    Beneficiary(ies)
      of the Trust (please indicate the percentage for each beneficiary):

    ___________________________________________________________________________

    ___________________________________________________________________________

     

    
      All
        sums
        payable under the Executive Supplemental Compensation Agreement by reason
        of my
        death shall be paid to the Primary Beneficiary(ies), if he or she survives
        me,
        and if no Primary Beneficiary(ies) shall survive me, then to the Secondary
        (Contingent) Beneficiary(ies). This beneficiary designation is valid until
        the
        participant notifies the bank in writing.

    

    


    
      
        	 	 	 	 
	
                Insured

              	 	
                Date

              	 


      

    

    


    NOTE***
      IF YOU RESIDE IN A COMMUNITY PROPERTY STATE (ARIZONA, CALIFORNIA, IDAHO,
      LOUISIANA, NEVADA, NEW MEXICO, TEXAS, WASHINGTON OR WISCONSIN), AND YOU ARE
      DESIGNATING A BENEFICIARY OTHER
      THAN YOUR SPOUSE, THEN YOUR SPOUSE MUST ALSO SIGN THE BENEFICIARY DESIGNATION
      FORM. 

     

    
      
        
        

      

      
        -16-

        
          

        

      

      
        
        

      

    

     

    
      I
        am
        aware that my spouse, the above named Insured has designated someone other
        than
        me to be the beneficiary and waive any rights I may have to the proceeds
        of such
        insurance under applicable community property laws. I understand that this
        consent and waiver supersedes any prior spousal consent or waiver under this
        plan.

    

     

    
      
        	
                Spouse
                  Signature:

              	 	 	
                Date:

              	 


      

    

    
      

        
          	
                  Witness
                    (other than insured) : 

                	 


        

         

        
          
            
            

          

          
            -17-